In total, 46 funds count it as a top-10 holding. Woolnough is clearly a popular manager with his peers: his M&G Corporate Bond and M&G Strategic Corporate Bond funds are also in the top-10 list.
Most popular bond funds
| Name | Sector | Number of funds |
|---|---|---|
| M&G - Optimal Income |
IMA Sterling Strategic Bond | 46 |
| M&G - Corporate Bond | IMA Sterling Corporate Bond | 28 |
| L&G - Dynamic Bond | IMA Sterling Strategic Bond | 25 |
| Fidelity - Strategic Bond | IMA Sterling Strategic Bond | 24 |
| Fidelity - Moneybuilder Income | IMA Sterling Corporate Bond | 22 |
| Henderson - Strategic Bond |
IMA Sterling Strategic Bond | 22 |
| Jupiter - Strategic Bond | IMA Sterling Strategic Bond | 21 |
| Kames - High Yield Bond | IMA Sterling High Yield | 19 |
| Kames - Investment Grade Bond | IMA Sterling Corporate Bond | 19 |
| M&G - Strategic Corporate Bond | IMA Sterling Corporate Bond | 18 |
Source: FE Analytics
While historically low yields and talk of a bubble are putting off many investors from the fixed interest market, multi-asset managers still see the merits of having bond exposure in their portfolios.
The £12bn M&G Optimal Income fund has been headed up by Woolnough since its launch in December 2006.
According to FE Analytics, over that time it has returned 71.82 per cent while the IMA Sterling Strategic Bond sector has made 31.77 per cent.
Performance of fund vs sector since Dec 2006
Source: FE Analytics
The fund is also a top-quartile performer over three and five years. It is currently yielding 3.06 per cent.
Marcus Brookes and Robin McDonald’s £1.1bn Cazenove Multi Manager Diversity fund is one of 46 portfolios that count M&G Optimal Income in their top-10.
It is the fund’s largest holding, making up 8.59 per cent of assets under management (AUM).
M&G Corporate Bond is number-two on the list, appearing in the top-10 of 28 funds, including Henderson Multimanager Diversified and HSBC Income Fund of Funds.
The £6bn fund – which has a yield of 3.34 per cent – has beaten its IMA Corporate Bond sector average over three, five and 10 years, with less volatility.
In addition, 18 funds count Woolnough’s M&G Strategic Corporate Bond portfolio as a top-10 holding. That means that 92 funds of funds count a Richard Woolnough fund as one of their largest individual holdings. There are concerns that the popularity of Woolnough (pictured) could have a detrimental impact on future performance.
However Darius McDermott, managing director at Chelsea Financial, says investors should not be too concerned.
"We hold Richard Woolnough in the highest of regard – over the last 10 years he has one of the best track records in the retail space," he said.
"We have used him for a long time and he was on our buy-list back when he was running funds at Old Mutual."
"His real strength has been knowing which parts of the fixed income market to be in at what times; be it high grade, investment grade or what have you."
"He personally runs around £23bn to £24bn – which is a big sum of money – but M&G do have the best fixed interest resources team in the City."
"Woolnough has proved himself, but the greater challenge now is being able to protect investors’ capital at optimal size. His funds were a bit behind average last year but that’s nothing to be concerned about – it just happened to be when his funds saw huge inflows."
"M&G has said they are trying to slow inflows into his funds, as M&G Optimal Income has grown at a rapid rate. You just have to hope that they find a size that is comfortable so they can still protect their investors," he added.
IMA Sterling Strategic Bond is the most popular hunting ground for managers overall, with five of its funds in the top-seven.
The best-performing fund in the sector over five years – Richard Hodges’ L&G Dynamic Bond portfolio – is held by 25 funds of funds. It has returned 73.95 per cent since March 2008.
Another standout fund in the sector is the five crown-rated Jupiter Strategic Bond portfolio, which crops up in the top-10 of 22 funds of funds.
FE Alpha Manager Bill McQuaker is clearly a big fan of manager Ariel Bezalel, holding his fund in Henderson Multi Manager Absolute Return, Henderson Multi Manager Distribution, Henderson Multi Manager Income & Growth and Henderson Multi Manager Diversified.
Two funds on the list – Fidelity Strategic Bond and Fidelity Moneybuilder Income – are headed up by FE Alpha Manager Ian Spreadbury.
Henderson Strategic Bond, Kames Investment Grade Bond and Kames High Yield Bond complete the top-10 list.
The last of these is the only constituent member of the IMA Sterling High Yield sector. Inevitably, it is a strong relative performer, achieving top-quartile returns over three, five and 10 years.
The £1.4bn fund is run by the duo of Philip Milburn and FE Alpha Manager Melanie Mitchell. It is yielding 5.02 per cent.