The Legg Mason Western Asset Australian Bond Fund is designed to maximise the investment opportunities from Australian fixed income as well as promote the defensive attributes that this asset class offers. The Fund is managed by the Legg Mason wholly owned affiliate Western Asset which is one of the world’s largest fixed income specialists.
Below, Portfolio Manager, Anthony Kirkham details why this Fund has been particularly successful and the process the team employs to deliver results.
Head of Investment Management,
Western Asset Australia
The Fund benefits from both Western Asset’s global scale and our local expertise. Over the Fund's long history, we have provided attractive risk adjusted returns for investors, outperforming the benchmark with lower risk. I believe that this is a result of our highly experienced, stable and globally integrated investment team, who adheres to a consistent investment philosophy that has been developed over the past 45 years.
This genuinely team based approach leverages the significant breadth of the firm’s resources to make balanced and well-informed investment decisions. We utilise our best ideas within an integrated risk management approach to build a portfolio that is designed to meet the long-term objectives of our clients.
Philosophically, we believe that securities have an intrinsic value which markets often misprice, providing investment opportunities. Through disciplined and rigorous analysis by our macroeconomic and credit research teams, we aim to systematically identify and then capitalise on such opportunities.
That said, it is our disciplined and risk controlled focus on diversification that has been the major difference. By holding diversified positions and sizing them appropriately, we ensure that no single factor can swamp our ability to outperform our benchmark.
Using our global research teams to assist with our credit decision process also sets us apart from many other managers, particularly with such a large proportion of local bonds issued by international companies. As this continues to grow, we expect this as a source of increasing value add for our portfolio. Having on-the-ground research teams covering international issuers at their home base allows for greater insight into their credit worthiness and resulting value offered by these securities.
Finally, active sector rotation, particularly in liquid sectors recognising the different valuation opportunities across the yield curve, has also been an important contributor to our outperformance.
Our investment process combines both top-down and bottom-up assessments of value:
The RBA’s latest forecast affirms a base case for inflation remaining at or below the lower bound of its target band over the next two years, which reinforces the case for rates to remain on hold at least until late 2018. We have retained our mild yield-curve steepening position in the 3- to 10-year tenors for our portfolios. We also continue to hold a flattening position in the 30-year versus the 10-year tenor as a ballast to our overweight credit position and as long-dated Australian bonds continue to stand out relative to other developed markets. Interest-rate strategies will remain tactical to take advantage of market overreactions and/or any new developments that may arise.
Monetary conditions remain extraordinarily accommodative even as the major central banks discuss or cautiously commence the removal of emergency policy settings. We believe such conditions still favour spread sectors as investors seek yield. In our opinion, these sectors should therefore be the best-performing fixed-income assets and continue as our major theme. We maintain an overweight to corporate bonds with a concentration in large financials, property trusts and utilities, focused at shorter maturities to manage spread risk. We may seek to selectively add where market volatility has forced spreads wider than credit fundamentals would justify or as new opportunities present.
Legg Mason affiliate, Western Asset Management is one of the world's leading fixed income managers. Established in 1971, from offices in Pasadena, Hong Kong, London, Melbourne, New York, São Paulo, Singapore, Tokyo and Dubai, the company provides investment services for a wide variety of global clients, across an equally wide variety of mandates. Western Asset's long performance track record and global presence have positioned the company to continue its commitment to excellence in fixed-income investment management and client service. With a focus on long-term fundamental value investing that employs a top-down and bottom-up approach, the firm has nine offices around the globe and deep experience across the range of fixed income sectors.
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ADVISER & CLIENT SERVICES
|General Enquiries:||Phone:1800 679 541
|Melbourne Office:||Level 47, 120 Collins Street|
Melbourne VIC 3000
PO Box 24011
Melbourne VIC 3001
|Sydney Office||Level 25, 88 Phillip Street
Sydney NSW 2000
Past performance is not a guide to future returns.
All funds issued by Legg Mason Asset Management Australia Ltd, (“Legg Mason”) (ABN 76 004 835 849 AFSL 240827). Western Asset Management Company Pty Ltd ("Western Asset") is a division within Legg Mason. Before making an investment decision you should read the Product Disclosure Statements (“PDS") for the Legg Mason Western Asset Australian Bond Fund (ARSN 088 670 286) carefully and you need to consider, with or without too assistance of a financial advisor, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. The PDS can be obtained at www.leggmason.com.au or on 1800 679 541. The product has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Neither Legg Mason, nor any of its related parties guarantees any performance or the return of capital invested. Past performance is not necessarily indicative of future performance. Investments ae subject to risks, including, but not limited to, possible delays in payments and loss of income or capital invested.
* Source: Morningstar Direct. Ranked in the first quartile in its peer group among 91 funds within Morningstar Bonds Australia category as at 31 December 2017.
© 2017 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 (“ASXO”).
The Morningstar Rating is an assessment of a fund’s past performance – based on both return and risk – which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision.
Legg Mason Western Asset Australian Bond Fund received a 5-star Morningstar Rating™ as at 31 December 2017.
The Morningstar Analyst Rating™ for Legg Mason Western Asset Australian Bond strategy is 'Silver' as at 2 October 2017.
1 The Lonsec Rating (assigned April 2017) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445. The Rating is limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial product(s). Past performance information is for illustrative purposes only and is not indicative of future performance. It is not a recommendation to purchase, sell or hold Legg Mason Asset Management product(s), and you should seek independent financial advice before investing in this product(s). The Rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria. For further information regarding Lonsec’s Ratings methodology, please refer to our website at: http://www.lonsecresearch.com.au/research-solutions/our-ratings
2 The Zenith Investment Partners (“Zenith”) Australian Financial Services License No. 226872 rating (Legg Mason Western Asset Australian Fund assigned June 2017) referred to in this document is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith™ methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at http://www.zenithpartners.com.au/RegulatoryGuidelines. As at 31 August 2014. Past performance is not indicative of future performance.
The Professional Planner | Zenith Fund Awards are determined using proprietary methodologies. Fund Awards were issued October 6, 2017 and are solely statements of opinion and do not represent recommendations to purchase, hold or sell any securities or make any other investment decisions. Fund Awards are current for 12 months from the date awarded and are subject to change at any time. Fund Awards for previous years are referenced for historical purposes only.