- The Legg Mason Western Asset Multi-Asset Credit fund offers attractive income yield and tail-risk protection
- The Legg Mason Western Asset Global Total Return Investment Grade Bond fund seeks attractive total returns from an investment-grade only portfolio
Legg Mason subsidiary Western Asset is launching two flexible fixed income funds for investors seeking returns from bonds in the current low rate environment but with some protection from principal losses. Investors have concerns that further rate rises could result in higher bond market volatility and are therefore increasing their focus on the merits of a more flexible approach to bond investing.
With the US raising rates in December, investors face a quandary of where to find attractive return opportunities in fixed income, while avoiding capital losses in the event of a downturn in fixed income markets.
The Legg Mason Western Asset Multi-Asset Credit fund, managed by Christopher Orndorff who is based in Western Asset’s Pasadena, California office, seeks to provide a solution to this challenge by targeting an attractive income from a portfolio of global high income securities while protecting against tail-risks.
Mr. Orndorff has successfully run the strategy since October 2010, which invests predominantly in investment grade and high yield credit, and emerging market debt, as well as bank loans, structured securities, inflation-linked bonds and government bonds.
The fund also seeks to minimise the downside risk to investors in the event of a credit market sell-off by employing a range of hedging strategies. The manager is seeking attractive returns with a volatility budget of 5-7%, by combining a globally diversified portfolio with tail risk protection.
The fund was launched on 31 December 2015 with assets of over £100 million.
Western Asset has also launched the Legg Mason Western Asset Global Total Return Investment Grade Bond fund, managed by a London-based team headed by Gordon Brown and Andrew Cormack. It seeks to maximise total return, while maintaining a focus on liquidity and preservation of capital, with volatility expected to remain below 6%.
Launched at a time when the traditional global fixed income benchmark – heavily weighted to US, Japanese and European government bonds – is close to an all-time low yield, the fund seeks to maximise returns from investment-grade rated bonds and currencies by combining a variety of global macro strategies with selected credit and other spread sector investments.
It will take an opportunistic approach to selecting credits holding a variety of higher-rated bonds issued by both companies and governments around the world, in both developed and emerging markets.
The fund will also have exposure to foreign currencies, with up to 25% in unhedged non-US dollar assets or currencies, and will use derivatives where appropriate, to maximise returns and manage portfolio risk.
The managers have the discretion to adopt a negative duration position to protect portfolio returns during periods of bond market declines, while drawing on the vast experience of the team at Western Asset to deliver the best possible outcomes for clients.
Adam Gent, head of UK sales at Legg Mason, said: “Fixed income investors find themselves at a crossroads in 2016, with the recent rate rise in the US, and the potential for further action from some other central banks globally, creating both opportunities and risks.”
“In such an uncertain environment, capital preservation is likely to be a priority for fixed income investors, but this does not mean they have to sacrifice income.”
“The Legg Mason Wester Asset Multi-Asset Credit fund has been launched with this very firmly in mind, seeking to offer investors a flexible approach for their fixed income exposure which seeks to protect capital but still offer an attractive yield in a world where rates will remain low for some time to come.”
“For those investors who are more focused on achieving an attractive total return, the Legg Mason Wester Asset Global Total Return Investment Grade Bond fund has a focus on higher quality fixed income sectors and uses its unconstrained mandate to exploit opportunities to generate returns.”