HEAD-TO-HEAD: Fidelity Strategic Bond vs M&G Optimal Income

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Despite having to endure two distinctly difficult periods – the 2008 financial crisis, when every asset class suffered, and the more recent bond yield compression, which is currently ongoing – both funds have held their own.

While the average strategic bond fund fell 16.9% between September 2008 and March 2009, the Fidelity and M&G offerings fell by just 1.9% and 4% respectively.

However, Prior explained that which fund performed better than the other is dependent on exactly which point during the crisis you are looking at.

She said: “At points in March 2009, when the IA Strategic Sector had fallen 20%, smart investors were sitting on a 1.5% gain in Richard Woolnough’s Optimal fund, and a small loss of roughly 4% from Fidelity.

“As the more active in terms of asset allocation of the two, the M&G fund has shown greater defensiveness in times of volatility.

“The same was true in 2011, though in 2014 the shorter duration positioning of the Optimal saw it lag against Fidelity like so many of the sector as the consensus expected back up in yields failed to materialise.”

“Both funds held up very well in 2008-09 when the global financial crisis hit and all assets plummeted,” added McDermott. “The M&G fund did fall in line with the sector to start with, but made the ground back very quickly, so it was a more volatile ride but the under-performance was very brief.

“They have both also help up well more recently when global bond markets wobbled, despite the M&G fund also having to deal with £1.5 billion of outflows at the same time. There have been a lot of comments around the fact that this fund is huge and liquidity could be a problem, but so far it has confounded the critics.”

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