M&G Investment Management is looking for new issuance to add to its £1 billion high-yield corporate bond fund. David Fancourt, fund manager, says there has been a reasonable flow of new issues as so-called fallen angels have thrown off the perceived stigma of having a junk bond rating and have begun to issue new bonds.
Recently, Fancourt has bought new issues from Vivendi and Rhodia the French chemical company. He also bought Safilo's new deal. That high-yield issuer is a manufacturer of eyeglass frames. He believes another fallen angel, Heidelberg Cement, will bring a new issue this year. Another potential issuer is Focus, which is a do-it-yourself store.
M&G has been avoiding airlines and autos completely and has been selling off some of its strongly performing telecom issues. After Colt Telecom's sterling issue rallied quite significantly, Fancourt began reducing his position. He has also been scaling back his allocation to mmo2, British Telecom's wireless unit after its sterling bonds went from 85 to 110.
Fancourt benchmarks the fund against a composite index consisting two-thirds of the Merrill Lynch High Yield index and the balance of the Merrill sterling non-gilts. index
