Legg Mason Western Asset’s Macro Opportunities Bond fund has hit £1.74bn ($2.7bn*) in size just one year after launching, following a stellar 12 months which saw it deliver 6.4%** to investors.
The fund, run by Legg Mason’s largest fixed income manager Western Asset, is lead-managed by Chief Investment Officer Ken Leech with a focus on both long-term value investing combined with active management of duration, yield curve and volatility. Idea generation reflects Western Asset’s long-term fundamental outlook based on the macro view of its global team of investment professionals.
The approach has paid off, with the unconstrained fund not only delivering a return of 6.4% in its first year, but also keeping volatility below 7%.
Flexible guidelines enable the portfolio managers to invest wherever the team sees the strongest value opportunities. The fund does not employ leverage but can benefit from both rising and falling prices, with its diversified strategy working particularly well in the face of increasing volatility throughout 2014
Investors have been attracted to this approach, and in particular to the fund’s unique return profile since it launched, with the portfolio offering low correlation to traditional fixed income assets, as well as to equities.
Adam Gent, head of UK sales at Legg Mason Global Asset Management, said: “The fund has really caught the attention of wealth managers and advisers thanks to its unique approach.
“While the fund is benchmark agnostic, the impressive return in its first year compares favourably to traditional strategic income bond funds as well as to multi-asset funds, and explains why it has grown so rapidly just 12 months after launching.”
As we begin the New Year, the manager believes the fund is positioned to benefit from an expected continuation of the moderate growth, low inflation and low interest rate environment which has persisted throughout 2014. The team expects the market should remain supportive of selective opportunities in credit and emerging market debt.
Leech said Western Asset’s base case was for the moderate pace of the US recovery to continue into next year allowing interest rates to finally rise, although any move upwards for rates should be marginal.
“We believe the US Federal Reserve (Fed) will inch the policy rate above zero but our central premise remains that the Fed continues to be accommodative” he said.
“Given the extensive monetary accommodation and low inflation backdrop, US yields are unlikely to rise substantially. But on the flip side, the risk case of a shortfall in global growth in the context of historically low European and Japanese yields could lead to further rallies in the US Treasury market.”