M&G Global Basics, which is in the top decile of the entire IMA universe for size, has 4.7 per cent in G4S, meaning its holding is worth £243m.
With the company’s shares down 9 per cent since it announced it could not fulfil the terms of its Olympics contract, this amounts to a loss of £21.84m for the fund.
M&G Managed Growth, however, not only has a 4 per cent holding in the firm but also has 35 per cent in M&G Global Basics, meaning it is doubly exposed to the stricken firm.
Last week, FE Trustnet research highlighted M&G Managed Growth's large exposure to M&G Basics, and the crisis at G4S illustrates the risks involved with such a situation.
Given the total amount held in the company by the M&G Managed Growth fund, the £1.08bn portfolio is currently down £5.45m on the stock at the time of writing, according to FE data.
G4S has suffered since it announced it would not be able to supply the full contracted number of security guards for the Olympic Games.
The Government was forced to assign 3,500 soldiers to the roles that would have been filled by G4S’ staff, while the company admitted it stood to lose £50m on the deal.
Chief executive Nick Buckles is believed to be under pressure after lukewarm comments from chairman John Connolly, having previously drawn fire for a failed takeover bid of Danish firm ISS last year.
Graham Spooner (pictured), who covers the stock for The Share Centre, says he thinks it is likely Buckles will go and that there will be a further management shake-up of some kind; however, he added that the stock is unlikely to be downgraded on the news.
"In the medium-term we remain confident; the security issue is not going away globally and they are the world’s leading company in the field." "They will have to build up confidence again, it’s just a matter of how quickly they can do that," he commented.
Richard Hunter, head of equities at Hargreaves Lansdown, said: "There will be questions over future contracts, the reputational issue could be a problem and they have to prove to prospective clients this was a one-off issue and not a systemic problem."
"Confidence in the management is falling and whenever you have uncertainty around the top positions, it is damaging."
Spooner added: "I don’t think this story is over yet, there’s more to come out about their use of short-term contracts and temporary workers."
Only one other fund in the entire IMA universe has the security firm in its top-10, the £2.9m SF Delmore Growth and Income portfolio, which has performed in line with its IMA UK All Companies sector over three years but faltered over the past 12 months.
M&G refused to comment on the matter.