M&G is taking a different investment approach with its High Yield Corporate Bond Pep.
Unlike most corporate bond Peps which invest in bonds with a Standard & Poor's AAA rating, M&G will invest in corporate bonds with a lower Standard & Poor's ratings, even as low as B. These companies include Orange Telecom, William Hill, Punch Taverns and HMV Media.
M&G will actively manage the Pep which aims to achieve its estimated annual distribution yield of 8.5 per cent through investing 80 per cent of the fund in corporate bonds. This is in contrast to many of its high yielding counterparts which rely on heavy weightings in preference shares and convertibles.
As a guide, Standard & Poor's Micropal figures as at September 22, 1998, show M&G's existing Corporate Bond fund is ranked 6th out of 17 funds in its sector since its launch, figures are based on a bid-to-bid basis for £1,000 with net income re-invested.