ii view: why income star M&G has surged toward 4-year high
Shares in the FTSE 100 company have outperformed the index year-to-date and offer a highly attractive dividend yield. Buy, sell, or hold?
30th May 2025 12:16
by Keith Bowman from interactive investor
New strategic partnership
- Expects to generate at least $6 billion of new business flows into M&G funds over the next five years
- Dai-ichi Life to acquire a 15% share stake in M&G Group
Chief executive Andrea Rossi said:
"The strategic partnership with Dai-ichi Life Holdings and the associated c.15% investment is recognition of M&G's strengths and clear confidence in our leadership, strategy and long-term prospects."
"It brings together two highly complementary international businesses with shared growth ambitions who aim to deliver excellent client service and sustainable shareholder returns."
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ii round-up:
UK headquartered fund manager M&G Ordinary Shares (LSE:MNG) today looked east, announcing a new long-term-strategic partnership with Japan’s Dai-ichi Life.
M&G will become Dai-ichi Life’s preferred asset management partner in Europe with Dai-ichi also planning to acquire a 15% shareholding in M&G. The partnership is expected to generate at least $6 billion (£4.45 billion) of new business flows into M&G funds over the next five years, supporting future profits.
Shares in M&G group rose 8% in UK trading having come into this latest news up by just over a tenth so far in 2025. That’s ahead of a 6% gain for the FTSE 100 index year-to-date. Major rival Schroders (LSE:SDR) is up by just under a tenth during that time. M&G shares haven't been this high since June 2021.
The new partnership brings closer M&G’s approximate £345 billion of assets under management with Tokyo stock market listed Dai-ichi’s 67.5 trillion worth of yen assets (£337 billion) under control.
As part of the deal, Dai-ichi’s pending share stake in M&G will give it the right to appoint a director to M&G’s board for as long as a minimum 15% share stake is held.
Of the $6 billion or more in new M&G business flows, at least £3 billion will go towards M&G’s high-alpha strategies across public and private markets and accelerating management’s ambition for growth in these areas .
The deal is also expected to generate at least $2 billion in new business flows for Dai-ichi over the five-year period.
Broker Morgan Stanley reiterated its ‘overweight’ stance on M&G shares following the news, highlighting a fair value price of 254p per share.
ii view:
Previously separated out of Prudential (LSE:PRU), M&G Group today manages money for around 4.5 million retail clients and more than 900 institutional clients globally. Employing around 6,000 people across 39 offices worldwide, group competes include BlackRock, Vanguard, Man Group (LSE:EMG), Jupiter Fund Management (LSE:JUP) and Ashmore Group (LSE:ASHM).
For investors, intense competition across the asset management industry and including many providers of low-cost index tracking funds, has placed downward pressure on fees. A net outflow of £1.9 billion in funds in 2024 contrasted with a net inflow of £1.7 billion in 2023. Costs for businesses, including wages, remain elevated, while elevated borrowing costs could be forcing some customers to sacrifice savings to pay increased loan and mortgage repayments.
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On the upside, this new partnership is focused on growth, distribution and product development opportunities, with the goal of delivering substantial new business flows for both M&G and Dai-ichi Life. The boost to new business inflows now sits alongside M&G’s recently raised cost cutting target of £230 million by the end of 2025, up from a previous £220 million. A wide diversity of products exists from traditional stock market funds to its smoothed returns life type PruFund, while M&G’s capital cushion, or Solvency II coverage ratio remains robust at a year-end 223% versus 203% the year before.
In all, and despite intense industry competition, a combination of cost cutting, partnership growth initiatives and forecast dividend yield of over 8% are likely to see income investors still want to own the shares.
Positives:
- Targeting cost cuts
- Attractive dividend payment (not guaranteed)
Negatives:
- Uncertain economic and geopolitical outlook
- Intense industry competition
The average rating of stock market analysts:
Strong hold
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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