Legg Mason Brandywine Global launches absolute return fund

Ridhima Sharma
clock • 2 min read

Legg Mason continues to expand its portfolio of benchmark-independent bond funds. With the Legg Mason Brandywine Global Enhanced Absolute Return fund, investors in Germany and Austria can now subscribe to another so-called “unconstrained” bond fund with a global focus.

Headquartered in Dublin, the actively managed new fund is based on the global unconstrained bond strategy of the wholly owned Legg Mason subsidiary Brandywine Global. The objective of the fund is to provide positive absolute returns regardless of the market environment. And while fund management is not tied to any benchmark in the selection of securities, the FTSE 3-Month T-Bill Index is said to be beaten by 600 basis points per year on a rolling 36-month basis.

The fund is managed by a four-person fund management team consisting of David Hoffman, Steve Smith, Jack McIntyre and Anujeet Sareen. The four experienced executives will put together a focused portfolio based on the best ideas within the global bond markets, using mostly government bonds and currencies.

“With the new Legg Mason Brandywine Global Enhanced Absolute Return Fund, we as fund managers have the flexibility to invest exactly where we see the greatest potential and leverage opportunities in bonds and currencies that we have either identified as overvalued or undervalued”, said David Hoffman.

The fund management has both a long book and a short book. In addition, both investment grade and non-investment grade investments may be made, depending on which markets fund managers consider overvalued or undervalued. The duration in the portfolio can be between -10 and +10 years and thus has the potential to generate positive returns even in times of rising interest rates.

For the portfolio composition, the four fund managers use a top-down approach that is macro-driven and value-oriented to track long and short positions across different countries, currencies and the bond sector. The main focus is on investment-grade government bonds and below. But corporate bonds and structured loans can also find their way into the portfolio if the fund management team identifies attractive value opportunities there.

For the long positions, the Legg Mason Brandywine Global Enhanced Absolute Return fund focuses on the 10 to 20 markets with the greatest potential. The country weighting is based on fundamental factors, long-term trends, political and monetary conditions, the economic cycle and different risk factors.

At launch, the fund was weighted at just under 40% in the US and just under 14% in Mexico. Malaysia had a share of 6.7%. The top currencies included the US dollar (48.6%) and the Mexican peso (13.9%). The Swedish krona had a share of 12.2%. The Fund’s active currency management is not hedged further and focuses on real interest rates, currency valuations and their impact on the economic situation and on inflation in the country.

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