HEAD-TO-HEAD: Axa versus M&G

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Darius McDermott, Chelsea Financial Services

Introduction

Global central banks have indicated that they are now, or will soon, start to be less loose with their monetary policies. Benign reflation or the spectre of sudden price rises as economic activity recovers, is now a constant theme among economists and investment strategists.

Although policy remains extremely accommodative, which is broadly supportive for risk, the US Federal Reserve chair Jerome Powell has hinted that the time to taper the central bank’s asset purchasing programme is getting near, and the European Central Bank has upgraded the balance of risks to growth from tilting to the downside.

The Bank of England too firmed up its interest rate forecast in May, and its quantitative easing is scheduled to be completed by the end of the year.

“It’s fair to say that [central banks’] plans have already been well telegraphed; however, monetary accommodation has reached an inflection point—and we’ve entered a period in which communication errors (and potential policy errors) are no longer unthinkable,” said Frances Donald, global chief economist and global head of macroeconomic strategy at Manulife Investment Management earlier this week.

In this environment, FSA asked Darius McDermott, managing director, Chelsea Financial Services, to compare two products in the fixed income category: the Axa Sterling Credit Short Duration Bond Fund and the M&G Corporate Bond Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 16 Jul 2021)

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