‘We want to have our cake and eat it’: Man Dynamic Income pushes limit on high yield

Source: Trustnet

“We want to have our cake and eat it too” – that’s the philosophy driving the Man Dynamic Income fund, a strategy that blends high-yield returns with a rigorous approach to credit risk.

It’s an ambitious claim but one that appears to be backed up by numbers, with the fund delivering 80.1% over three years, making it the top performer in the IA Sterling Strategic Bond sector (and it ranks in the top 10 across all other major timeframes since its inception in July 2022).

In a category where many of the longstanding names are stepping back or struggling to adapt, manager Jonathan Golan – who was recently named FE fundinfo Alpha Manager of the Year 2025 – is quickly gaining recognition as a rising force.

Below, he explains how his margin-of-safety mindset, flexible allocation and counter-cyclical instincts have shaped the fund’s returns – and why he believes most investors behave exactly the wrong way at exactly the wrong time.

Performance of Man Dynamic Income against index and sector over 3yrs

Source: FE Analytics

What’s your investing philosophy?

We manage our funds with a deeply bottom-up process. Our key concept is the margin of safety. In the context of corporate bonds, every single company we lend money to must greatly overcompensate us for the risks that we're taking. In practice, that means that the spread that we're getting greatly exceeds the fair value spread.

In other words, we will not invest in a situation where we're not getting a valuation that is below mid-cycle value (or intrinsic value or the fair value, whichever way you want to call it).

 

How does Man Dynamic Income behave in different market cycles?

We are naturally counter cyclical, because at the top of the market, there are going to be fewer securities trading below cycle value.

When the market is attractive, we have a lot of opportunities and we're fully invested – then we let money over a longer period of time, because we want to lock in attractive prices for a long period of time; when the market is unattractive, we retrench the exposure of the fund through two mechanisms – the net exposure and the length of the lending that we do.

This counter cyclicality combined with the margin of safety is what has historically allowed us to deliver strong returns in any market.

 

Does your allocation shift around a lot?

We don't use benchmarks as a guide for asset allocation, we use the margin of safety, which means that we're oscillating between sectors, geographies and single names over the cycle that allow us again to get effective yield without compromising on credit quality.

We're harvesting a temporarily high-risk premia that the market is attaching to those parts of the market but, in our view, are completely unjustified. On one side, we go in sectors where Mr. Market is being overly pessimistic about and then on the flip side, when the Mr. Market is super optimistic, that's when we lose interest and become more defensive.

 

How is Man Dynamic Income different than the competition?

Other funds have an artificial, self-imposed limit on the proportion of high yield that can be held in the portfolio. My big idea was to remove that constraint but still maintaining very rigorous underwriting criteria. That allows us to achieve a much higher yield and then, therefore, if we avoid credit events, much higher returns without compromising on credit quality.

We want to get the high yields that the highest market is offering us without taking the additional credit risk. We're trying to have our cake and eat it too. So far, we've had very strong returns and we've never had an issuer that materially detracted from performance.

 

Does your process have any flaws?

Perfection doesn't exist; the process has been continuously improved for over a decade. We make mistakes all the time, and then we adjust the process to minimise the risk of future mistakes.

When we follow the process and it doesn’t go our way, it could be for a whole host of reasons. It could be a secular change in industry that we probably can't predict. Maybe we missed something in the financials and we can learn from it.

We have a list of golden underwriting rules that a company needs to meet in order for us to lend money and part of that is a list of red flags, which has really been created from past mistakes.

 

What was your most recent mistake?

We haven't had any situations where there's been a dramatic mistake. We didn't have a single issuer that detracted more than 20 basis points performance at top fund level over the past two years. And over those two years, you can see what returns we've done. The process is very robust, so I can't point to anything big. It’s the small things that we pick up and correct.

 

What were the best and worst calls of the past year?

We've been positioned more in the financial sector and in Europe, both parts of the market that have performed better in 2025 since Liberation Day. Year to date, we've generated a 7.1% total return before fees – about 60% of that was from European and UK companies.

The worst detractor in the strategy was a real estate company that knocked off around 20 basis points.

 

You’re a young, successful fund manager. What’s your edge?

I had a professor at university who told me that everyone might think that free trade is a good idea in principle, but they are a mercantilist at heart. It’s the same in investing – everyone is cyclical at heart, emotional.

Human nature is not about being aggressive when the market is in difficulty and defensive when the market is very expensive – the opposite. But we've devised a process that removes these emotions and goes against human nature.

This is key and I've seen this in every place I worked in my career. Even people who have been in the seat for a long time end up being quite pro-cyclical.

 

What are your hobbies?

I play Blues on my guitar, I like paddleboarding and walking in nature.