The £7.5bn fund is a core holding for a huge number of advisers and private investors who want exposure to the UK market.
The fund has achieved top-quartile returns over the last decade, making 220.01 per cent.
However, standards have dropped recently. The fund has underperformed its sector average in each of the last three calendar years and is a bottom-quartile performer so far in 2013 as well.
This has translated in to bottom-quartile performance on a cumulative basis as well.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
The last 12 months have been particularly disappointing for M&G Recovery; our data shows it is up just 2.44 per cent, compared with 15.41 per cent from the IMA UK All Companies sector average and 14.27 per cent from the All Share.
Dobell makes no excuse for this underperformance, but reminds investors that his number-one priority is to deliver long-term absolute returns to investors.
"We’ve had a tough time recently but I’m pleased to note that at least the absolute unit price has continued to make good progress, which is very important to many of the core unit holders of this fund," he said.
"For the last three years we’ve been going politely nowhere or sideways, with the last year being particularly tough for us. We’ve never pretended that this job is easy and certainly at the moment it’s difficult."
"However, I’d like to reiterate that our investment strategy has been through very many different circumstances. We’re working as hard as ever to attempt to deliver returns on a long-term basis to our customers."
"I’m very sorry for the poor returns we’ve served up to people in the last 12 months or so. We’ve certainly acknowledged that we’ve lagged the market and some of our competitors on that timeframe."
"We have to try and separate our main purpose, which is to provide long-term returns from a sustainable and sensible investment platform."
"I do make apologies and say we’re not complacent, but we’re working pretty hard to make sure this is a success in the long-run," he added.
The manager has always insisted his focus is on the future rather than the past – even when his track record has looked much stronger.
In an interview with FE Trustnet last year, when asked why he had been so successful, Dobell replied: "Forget the performance, it’s in the past, it’s gone. What matters, like in cricket, is the next ball."
Dobell says stockpicking has been the biggest reason for the underperformance, but adds that this is part and parcel of his fund’s style.
"I don’t want [M&G Recovery] to move away from being a stockpicking fund. In the last 12 months, stock selection from our holdings in basic materials, oil and gas, and industrials has made the biggest contribution to underperformance against the benchmark."
"Of course we’d rather that the numbers were on the positive side of the line, not the negative."
Tullow Oil, Kenmare Resources and African Minerals have all had a tough time of late, losing the fund money over a one-year period.
The manager also pointed to his underweight in financials as a major contributor to underperformance last year. FE data shows he has just 13.8 per cent in the sector, compared with 29 per cent from the IMA UK All Companies average.
He has recently added Lloyds Banking Group to his portfolio, however.
Dobell says that his investment style is likely to come back into favour when there is a resurgence in M&A activity, which has been very muted recently.
"It’s absolutely amazing that we’ve seen so few deals in the UK," he said.
"However, boards are thinking very carefully about their plans for the next three to five years and at some point there will be a very significant increase in M&A actively, and recovery funds traditionally benefit from that."
As mentioned earlier, Dobell’s long-term record is very strong, although the Schroder Recovery fund – headed up by the duo of Nick Kirrage and Kevin Murphy – recently displaced M&G Recovery as the best-performing portfolio over 10 years.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Schroder Recovery is also a top-quartile performer in its sector over one, three and five years.
Murphy made the case for value investing in a recent FE Trustnet article.
M&G Recovery requires a minimum investment of £500 and has an ongoing charges fee (OCF) of 1.65 per cent.
Schroder Recovery is a touch cheaper, with an OCF of 1.52 per cent.