M&G Global Growth Fund
Fund Questionnaire
Seeking high quality companies whose scarce assets and resources are long-term
drivers of value creation, but whose potential has been overlooked by investors
Employing investment expertise to identify and understand assets as well as market
valuations, in particular, whether value is fully reflected in the current share price
Applying a robust investment process, including unique screening approach based on
the bespoke use of HOLT, fundamental stock analysis and meeting company
management
Constructing a concentrated, but well-diversified portfolio of between 50 and 70 stocks
on an unconstrained bottom-up basis with a long-term investment view
Utilising the resources of the M&G Equities team while ensuring autonomy and
accountability of the fund manager, not delegated or committee-based decisionmaking
Contents
Fund management team ............................................................................................. 3
Investment objective and strategy ............................................................................ 7
Stock selection ............................................................................................................ 9
Portfolio construction................................................................................................. 11
Risk management ....................................................................................................... 12
Key fund facts ............................................................................................................. 13
Fund management team
The management team
Greg Aldridge is the fund manager of the M&G Global Growth Fund and Charles Anniss is the deputy
manager. Greg has managed the fund since April 2007.
Fund Manager: Greg Aldridge
Greg Aldridge was appointed fund manager of the M&G Global Growth
Fund in May 2007 after working as a senior analyst in the M&G Equities
team. As well as managing the M&G Global Growth Fund, Greg is comanager of the M&G European Fund and Pan European Fund and the
Vanguard International Growth Fund. He joined M&G in 2004 from
McKinsey & Company, where he worked with industrial and consumer
goods clients on strategy and organisational issues. Prior to this, he spent
four years in the investment banking division of Deutsche Morgan Grenfell,
specialising in utilities. Greg holds an MA in economics from Cambridge
University and an MBA from INSEAD.
Deputy Fund Manager: Charles Anniss
Charles Anniss joined M&G in 2000 as a member of the investment
communications team and became an analyst on the equities team in 2003,
focusing on European smaller companies. In 2006, he took on responsibility
for managing the M&G European Smaller Companies Fund, and in January
2011 he was appointed co-manager of the M&G Pan European Fund and
the M&G European Fund. He also became deputy manager of the M&G
Global Growth Fund in August 2013. Charles graduated with a degree in
French and Spanish from Bristol University and is a CFA charterholder.
Team structure and responsibilities
M&G Equities team
Fund Manager Greg Aldridge and Deputy Fund Manager Charles Anniss are members of the M&G
Equities team, located at M&G‟s head office in the City of London. The M&G Equities team is
organised into small groups of highly experienced professionals with complementary investment
strategies, offering a broad range of global and regional mandates. They are supported by extensive
resources including analysts, investment specialists, fund manager assistants, dealers and risk
specialists.
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M&G Equities: teams of like-minded investors
Key: FM – Fund Manager; DFM – Deputy Fund Manager; A – Analyst; IS – Investment Specialist
Source: M&G, 1 September 2013. *Susanne Grabinger is a Funds Specialist covering a range of equity funds.
** Currently on maternity leave.
Common philosophy
The M&G Equities team‟s principles are:
Active, unconstrained investment driven by bottom-up stock selection
A long-term investment horizon
Engaging with company management as long-term investors
Consistent application of each investment strategy
The team is driven by a fundamental belief that outstanding performance is generated through active,
unconstrained management. The benchmark index is not the primary concern. The team believes the
stockmarket is often wrong and that its tendency to be swayed by short-term noise creates
opportunities for long-term investors. Consequently, the team is focused on what really matters for
equities: the understanding of companies and their valuation in the stockmarket. This is M&G
Equities‟ area of expertise.
M&G promotes an open culture where investment ideas are shared and challenged before they are
implemented in portfolios. Fund managers are responsible for their own stock selection and have the
freedom to back their conviction in the construction of their portfolios. There are no house or team
views; there is full accountability for all investment decisions.
What support is available to the fund management team?
Our fund managers are ultimately responsible for all investment decisions. However, they have
access to extensive investment resources, including dedicated analysts on the team, as well as
support from sector-specific analysts in the Equity Research team.
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They are supported by the following specialist teams within M&G:
Research analysts
Investment specialists
Portfolio Construction & Risk
Dealers
Corporate governance
In addition, support is provided by front, middle and back office departments including the following:
Performance analytics
Investment marketing
Marketing
Legal & Compliance
Business management
This structure is intended to ensure that the management team is focused entirely on fund
management.
To what extent do you employ external research analysis?
We estimate that 90% of the research utilised in the investment process for our funds is generated
internally. We believe strongly that the best decisions are made based on proprietary research. Our
research process is applied consistently across the team, enabling fund managers to compare stocks
from different sectors or countries. The team is prepared, however, to outsource part of the research
process to other experts. Our managers receive reports from brokers and other information providers
in order to obtain a fully rounded view of a company. Industry experts such as trade journalists and
scientists, as well as suppliers and customers, might also be consulted.
Are the fund managers involved in activities other than fund
management?
Our fund managers are fully committed to and focused on fund management. They have full
responsibility for the investment performance of the funds under their management. As M&G Equities
team members, they are also actively involved in the generation and discussion of investment ideas
by the team. Other activities include communication with clients invested in our funds and occasional
meetings with external consultants and rating agencies. All other activities not directly related to fund
management are undertaken by the support teams at M&G.
Provide details of the fund manager succession plan
Our succession plan relies on the strength of the investment teams and the common elements of our
investment processes. Since the fund managers work closely together and share a common
investment philosophy and language we are confident that our funds could be seamlessly managed
should a member leave. All the equity strategies – and individual portfolios within them – have a
deputy fund manager (or managers) who is/are fully aware of the way the portfolio is managed and its
key positions. The deputy fund manager(s) is/are also supported by the other fund managers and fully
qualified to take over management.
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What is the company’s remuneration policy?
M&G has a strong and integrated set of compensation practices designed to reflect the logic,
internally within M&G, of people‟s value as well as their outputs.
The objective of M&G‟s approach to remuneration is to facilitate the achievement of business
objectives. Central to this is the need to ensure that M&G can attract, retain and motivate the
necessary calibre of talent required to deliver the business objectives. This in turn requires that the
remuneration philosophy is flexible enough to respond to market changes, enhances the team-based
culture, supports M&G values and delivers fair reward commensurate with the performance achieved.
The remuneration structures and policies are designed to reward employees through the investment
cycle.
For the majority of retail fund managers, bonuses are primarily linked to one and three year
investment performance of funds within their remit. The final bonus figure will be determined on a
discretionary basis by management taking into account other factors such as net inflows over the
year, contribution to the investment floor and wider business, client servicing, risk and compliance
(both investment and business related). For a small number of senior retail fund managers there is
also a link to the profitability of their franchise.
An amount of the annual bonus will be delivered in cash. Processes then apply to ensure an
appropriate proportion of their annual award is delivered in long-term form/ deferred. This approach
ensures alignment with market and good business practice and is consistent with the direction of
remuneration regulation.
Sound risk management, appropriate alignment with business objectives and good governance are all
critical in the ongoing management of these elements. These are achieved by appropriate oversight
and review processes. M&G aims to provide individuals with the potential to earn at the upper quartile
of market practice at a total compensation level for exceptional performance.
Do the fund managers have a stake in the investment management
company?
As M&G is wholly owned by Prudential plc, our fund managers do not have a direct shareholding in
the management company. They do, however, have a stake in the ownership of the company through
M&G‟s long-term incentive plan, which combines phantom equity and options over phantom equity in
M&G. The scheme is designed to provide a meaningful stake in the future growth of the value of the
company to those who have a significant role to play in its development.
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Investment objective and strategy
Focus on companies producing high, sustainable returns, with scarce
assets and growth drivers that allow those businesses to grow their
fundamental value over the long term
Investing in companies whose assets are overlooked by the market
Our version of growth reflects how companies grow their fundamental
value over time
What is the investment objective?
The investment objective of the fund is as follows:
“The Fund aims to maximise long-term total return (the combination of capital growth and income) by
investing mainly in a wide range of global equities.”
What is the investment strategy?
Key to the M&G Global Growth Fund is the identification of attractively valued companies producing
high, sustainable returns above the cost of capital, with scarce assets and resources that are not
easily replicable. These assets should give the businesses an edge over their competitors to enable
value creation for shareholders over the long term. Accordingly, the fund manager is prepared to hold
companies with assets whose potential is not fully recognised by the market until other investors‟
assessment catches up with his own.
Scarce assets that allow companies to generate value over the long term are often difficult to identify.
The long-term value of such assets can be missed by the market because they are not looked for in
the first place, their impact on a company‟s future performance is underestimated, or investors are
focused on short-term factors.
The fund manager also identifies companies which have strong, long-term structural growth drivers
behind them, allowing them to reinvest and grow their fundamental value into the future.
By virtue of their scarce assets and growth drivers, these companies should generate returns above
the cost of capital, ie, create value, from year to year. In combination with reinvesting in the business
at attractive rates of return, the fundamental value of these companies should rise over time, thereby
rewarding long-term investors.
The fund manager thinks of this concept as „growth through quality‟ and it can be illustrated by the
„virtuous circle of value compounding‟ in the chart below.
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Virtuous circle of value compounding
Source: M&G
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Stock selection
Pure bottom-up approach to stock selection
Identification of assets and resources that best equip a company to create
long-term shareholder value
Identifying investment patterns: ‘quality’, ‘growth’ and ‘transforming’
Bottom-up stock selection
Stocks are selected for the M&G Global Growth Fund on a purely bottom-up basis. The objective is to
choose companies whose assets and resources best equip them to create value for shareholders
over the long term. We look for companies that are outcompeting their peers, delivering returns
sustainably above their cost of capital and growing profitably by reinvesting in their business. The
process for selection consists of the following:
Screening
Among other things, the screening process utilises the Credit Suisse HOLT tool, which uses the
concept of Cashflow Return on Investment (CFROI®) to gauge company economic performance.
Using the HOLT tool allows the fund manager to identify patterns in company performance that match
his investment criteria. For instance, the manager will seek to identify companies whose returns are
sustainably above the cost of capital, by looking at historical patterns of returns across a wide range
of companies.
Screening can also involve identifying scarce assets and checking on HOLT that these lead to
appropriate returns.
Once potential investment opportunities have been identified, further analysis is carried out on a
company‟s assets and resources to gauge the sustainability of the returns and growth that the
company is able to generate from them.
Identifying scarce assets and resources
The fund manager aims to identify scarce assets and resources that enable companies to generate
strong returns on their investments, thereby creating shareholder value. The scarce assets and
resources he looks for include the more traditionally tangible (eg land / property, factories, mines) and
intangible (eg brands, patents, licences) to organisational attributes (eg ability to innovate, commercial
expertise and culture).
The fund manager‟s focus on non-tangible and less frequently analysed assets gives him an
additional edge in identifying factors that may highlight an inherent long-term strength in a company
not yet recognised by the market. Once the fund manager has identified companies whose assets
and market positioning make them potentially interesting investment opportunities, he conducts
rigorous analysis to understand the market‟s valuation; in particular, whether the fundamental value of
the assets is fully reflected in the market price.
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Valuation
Valuation is an extremely important part of the process – all investment ideas are subjected to full
valuation analysis to assess their suitability for the fund. The fund manager seeks to understand to
what extent the market is giving credit for the future value creation potential of businesses and
therefore to assess whether they represent attractive investment opportunities.
Given the typically high-quality nature of the companies in which he invests, it is important not to
„overpay‟ for a company‟s sustainability of returns or future growth.
The fund manager recognises the subjectivity of valuation and integrates this into his approach. While
he will invest in companies that are very attractively valued, he is also willing to invest in companies
that are not obviously „cheap‟, recognising that a rising fundamental value is a strong tailwind for
share prices. He will, however, avoid companies that are clearly „expensive‟.
Management ability
The fund manager regards meeting a company‟s management team as an important part of the
research process, allowing him to assess his conviction in the company‟s abilities and assets. This
entails stress testing his understanding of the company‟s assets and drivers of performance, and
making sure that the management team‟s strategy for the company is in line with his view of creating
long-term shareholder value.
Decision-making
After meeting the company‟s management and assessing its ability to monetise the value of its scarce
assets, the fund manager then pulls together and analyses all the information he has gathered during
the above process. He then decides whether to initiate an investment or to move the stock to his
watch-list of companies that may be interesting in the future, but which currently fail to meet all of his
investment criteria. He could also reject the investment idea entirely and move on to look at other
opportunities.
Scarce assets give companies a competitive edge
Source: M&G
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Portfolio construction
High conviction portfolio of between 50 and 70 stocks
Portfolio construction undertaken purely on a bottom-up basis
Positions established with anticipated holding period of three to five years
No pre-determined allocation across sectors, countries or currencies
Describe the portfolio construction process
The M&G Global Growth Fund is managed as a portfolio of high-conviction international equity
positions, each of which is expected to achieve high absolute returns. The fund manager aims to hold
between 50 and 70 stocks in the portfolio, the extent of each stock‟s representation reflecting the
depth of his personal conviction in its qualities as an investment and the risk it represents.
Long-term approach
The manager‟s long-term approach is a critical factor in his investment strategy. Positions are
established with an investment horizon of generally three to five years, and he is careful to avoid
reacting to the short-term „noise‟ that can distract investors from the long-term case for a stock.
Bottom-up basis
Portfolio construction is undertaken purely on a bottom-up basis – the manager selects stocks on their
own merits and not on the basis of index weightings. Given this approach, there are no predetermined parameters for the fund‟s allocations across sectors, countries or currencies.
The fund is invested mainly in well established mid- to large-sized companies, and the manager
generally seeks to avoid very small, unproven or speculative stocks.
The fund manager believes that 2-4% is a significant absolute amount to hold in any individual stock,
and his strongest conviction views are therefore unlikely to exceed the upper end of this range.
Consistent with the manager's investment philosophy, the portfolio will have a growth bias. However,
it is important to note that the fund manager does not define growth in the traditional sense – he does
not focus on rapid growth in earnings or sales to identify short-term, momentum-oriented investment
opportunities – and the style characteristics of the portfolio will in general be reflective of this. From a
valuation perspective, it is important to emphasise that the fund manager is unwilling to overpay for
these qualities.
Style measures of the overall portfolio are driven by the combined characteristics of the individual
stocks chosen, highlighting the manager's preference for high-quality companies with attractive
scarce assets, robust cashflows and sustainable high rates of return on investment.
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Risk management
Fund manager works closely with the specialists in the M&G Portfolio
Construction & Risk team
In-depth analysis of investment approach and risk parameters
Aiming to ensure that sufficient risk of the right kind is taken to meet the
fund’s objectives
Monitoring of investment risk
Integral to the fund‟s management is the risk analysis insight provided by M&G‟s Portfolio
Construction & Risk (PCR) team. The team works closely with the fund manager to analyse in depth
the investment approach, and monitor the various dimensions of investment risk assumed. These will
include active risk and active money, investment style, liquidity and market cap analysis as well as
position analysis on various bases including countries, sectors and individual stocks.
Regular monitoring of the risks assumed by the fund and their interpretation by this team provide the
fund manager with the following key analysis:
Quantification of the portfolio‟s absolute and relative risk and how this is allocated among the
various sources of risk
Identification of unintended risks – for example, to macroeconomic factors or sector exposures –
arising from the pure bottom-up stock selection approach of the fund
Analysis of the potential impact on the risk characteristics of the portfolio of exposures to different
risk factors, both individually and in combination
Assessment of the fund‟s investment style on a variety of measures and its alignment with the
stated investment approach of the manager.
The work of the PCR team, therefore, provides crucial support to the fund manager. It also acts as a
valuable challenge to the fund manager‟s conviction in the investment positions within the portfolio
and provides an independent check on how the fund is being managed to meet its investment
objectives.
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Key fund facts
Fund name
Fund legal structure
Inception date
Investment policy/strategy
Fund currency
Compliance Regulation
NAV calculation frequency
NAV redemption frequency
Jurisdictions where the
fund is registered
Financial services regulator
Name of manager
Manager’s status
Manager's location
Custodian
Administrator
Dealing point
Dealing frequency
Pricing frequency
Countries where registered
for sale
M&G Global Growth Fund
OEIC
December 1967
The fund will invest globally (including the UK) in the equities of companies across a wide range of
geographies, sectors and market capitalisations. Income is of secondary importance to capital growth when
investments are selected.
Sterling
UCITS III
Daily
Daily
UK
Financial Conduct Authority (FCA)
Greg Aldridge
Lead manager
London, UK
State Street
IFDS Group
Noon, UK time
Daily, each business day
Daily, each business day at 12pm UK time
UK, Germany, Austria, Luxembourg, Italy, Spain, France, Switzerland, Netherlands, Sweden, Finland,
Norway, Denmark and Singapore. (Please note that the same share classes are not necessarily registered in
all jurisdictions.)
Share class
Share
Management fees
Ongoing
Sedol
type
(% pa)
charge (%)
number
Sterling A
Acc
1.50
1.67
3093803
Sterling A
Inc
1.50
1.67
3093784
Sterling X
Acc
1.50
1.67
3195613
Sterling X
Inc
1.50
1.67
3195602
Sterling I
Acc
0.75
0.92
B77HHZ6
Sterling I
Inc
0.75
0.92
B556Q87
Sterling R
Acc
1.00
1.18
B7D8K76
Sterling R
Inc
1.00
1.16
B7PW5J3
Euro A
Acc
1.75
1.92
3093814
Euro B
Acc
2.00
2.18
B3CM6P1
Euro C
Acc
0.75
0.92
3093825
USD A
Acc
1.75
1.92
B3K51G8
USD C
Acc
0.75
0.92
B3K51H9
Source: M&G, as at 31 July 2013. Ongoing charge figure as at 28 February 2013.
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ISIN
number
GB003093803
GB0030937840
GB0031956138
GB0031956021
GB00B77HHZ62
GB00B556Q879
GB00B7D8K769
GB00B7PW5J39
GB0030938145
GB00B3CM6P12
GB0030938215
GB00B3K51G86
GB00B3K5H93
Mex
ID
MGIGA
MGIG
MGAGX
MGIGX
MGJAAP
MGJAAQ
MGJAAR
MGJAAS
MGIGWA
MGGGB
MGIGWC
MGGBLG
MGGLGT
Bloomberg
ticker code
MGSINGA LN
MGSINGI LN
MGINGXA LN
MGINX1 LN
MGGGWIA
MGGGWII
MGGGWRA
MGGGWRI
MGIGEAA LN
MGSINGB LN
MGIGECA LN
MGIGUAA LN
MGIGUCALN
The value of stockmarket investments will fluctuate, which will cause Fund prices to fall as well as rise and you may not get back the
original amount you invested. For Investment Professionals only. Not for onward distribution. No other persons should rely on any
information contained within.
FOR USE IN THE UNITED KINGDOM AND THE COUNTRIES MENTIONED BELOW:
For Switzerland: Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to
Qualified Investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance
and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial
recipient (provided it is a Qualified Investor) only. In Spain the M&G Investment Funds are registered for public distribution under Art. 15 of
Act 35/2003 on Collective Investment Schemes as follows: M&G Investment Funds (1) reg. no 390, M&G Investment Funds (2) reg. no 601, M&G
Investment Funds (3) reg. no 391, M&G Investment Funds (5) reg. no 972, M&G Investment Funds (7) reg. no 541, M&G Investment Funds (8)
reg. no 1100, M&G Investment Funds (9) reg. no 930, M&G Global Dividend Fund reg. no 713 M&G Dynamic Allocation Fund reg. no 843, M&G
Global Macro Bond Fund reg. no 1056 and M&G Optimal Income Fund reg. no 522. The collective investment schemes referred to in this
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free of charge, in paper form, from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB, or one of the following:
M&G International Investments Limited, German branch, mainBuilding, Taunusanlage 19, 60325 Frankfurt am Main, the German paying agent
J.P. Morgan AG, Junghofstraße 14, D-60311 Frankfurt am Main, the Austrian paying agent, Raiffeisen Bank International A.G., Am Stadtpark 9,
A-1030 Wien, the Luxembourg paying agent, J.P. Morgan Bank Luxembourg S.A., European Bank & Business Center, 6 c route de Treves, 2633
Senningerberg, Luxembourg, the Danish paying agent, Nordea Bank Danmark A/S Issuer Services, Securities Services, Hermes Hus, Helgeshøj
Allé 33, Postbox 850, DK-0900, Copenhagen C, Denmark, Allfunds Bank, Calle Estafeta, No 6 Complejo Plaza de la Fuente, La Moraleja, 28109,
Alcobendas, Madrid, M&G International Investments Limited, the French branch, or from the French centralising agent of the Fund: RBC Dexia
Investors Services Bank France. For Switzerland: Please refer to M&G International Investments Ltd., mainBuilding, Taunusanlage 19, 60325
Frankfurt am Main or, for Sweden, from the paying agent, Skandinaviska Enskilda Banken AB (publ), Sergels Torg 2, 106 40 Stockholm, Sweden.
For Italy, they can also be obtained on the website: www.mandgitalia.it. Before subscribing you should read the Prospectus, which includes
investment risks relating to these funds. This financial promotion is issued by M&G Securities Limited and M&G International Investments Ltd.
Both are authorised and regulated by the Financial Conduct Authority in the UK and have their registered offices at Laurence Pountney Hill,
London EC4R 0HH. M&G International Investments Ltd is registered in England, No. 4134655. It also has a branch located in France, 34 avenue
Matignon, Paris 75008, registered on the Trade Register of Paris, No 499 832 400 and is also registered with the CNMV in Spain.
FOR USE IN ALL OTHER JURISDICTIONS NOT MENTIONED ABOVE (EXCLUDING THE USA):
This financial promotion is issued by M&G International Investments Ltd. Registered Office: Laurence Pountney Hill, London EC4R 0HH,
authorised and regulated in the United Kingdom by the Financial Conduct Authority. For Hong Kong only: The Funds referred to in this document
may not be authorised by the Securities & Futures Commission of Hong Kong („the SFC‟) and may not be registered for public distribution in
Hong Kong. The Funds may only be offered to Professional Investors (as defined in the Securities and Futures Ordinance). For Singapore only:
The Funds referred to in this document are not authorised by the Monetary Authority of Singapore (MAS) and are not registered for public
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regulated by the local regulator in your jurisdiction. This information is not an offer or solicitation of an offer for the purchase or sale of investment
shares in one of the Funds referred to herein. S651.
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