The Legg Mason Martin Currie Real Income Fund is a unique and proven blend of listed infrastructure, AREITs and utilities designed to provide a high, sustainable and growing income stream. This Fund is "Recommended" by both Lonsec1 and Zenith2 and has averaged a return of 13.5% per annum over the past 5 years*.
Below, Portfolio Manager, Ashton Reid reviews the fund and explains why it has proven so successful.
Martin Currie Australia
The Legg Mason Martin Currie Real Income Fund has delivered strong income plus capital returns for investors. Investment performance has been delivered by the deep insights of our experienced fundamental research team and well-structured investment approach.
Over the past five years the Fund has provided a fully franked income return of 6.97%* p.a. (before fees) and has grown the income stream above inflation. The high income and strong growth have combined to deliver a very attractive total return of 13.5% p.a. after fees over five years.* This is in line with the long-term investing time frame.
At Martin Currie, we recognised that retirees need a 'sufficient income for life' and realised that there was a lack of compelling strategies available in the marketplace. They then set about designing this unique solution with the aim of creating a fund that can help to replace the regular income generated during employment and help maintain the standard of living in retirement by building in a goal to protect against future inflation.
The Fund's philosophy is that an actively managed portfolio that targets listed real assets in Australia (such as real estate, listed infrastructure and utilities), can:
Specific real asset examples include A-REITs, toll roads, ports, airports, and electricity and gas grids.
* As at 28 February 2018. Past performance is not a guide to future returns.
The Fund reflects Martin Currie's Australian heritage as a listed equities specialist. The Fund is designed to provide a more attractive income stream than traditional stand-alone REITs, infrastructure or unlisted property strategies, or the broader market. By focusing on companies that offer:
The Fund is a simple and transparent alternative to more complex investment strategies. The transparency of both the investment universe and process creates a better understanding of how and where assets are invested. Owning only ASX-listed securities, the liquid and locally-focused strategy avoids the common problems that unlisted infrastructure or property funds face. As it is built without regard to a benchmark, the Fund also avoids the concentration issues encountered such as by the A-REIT index.
We look across the entire listed equity market to identify real assets, with their essential ingredients of a large sunk capital base to drive cash flow, low ongoing capital expenditure needs and typically contracted revenues that reflect their ability to produce income that can match future rises in the cost of living. Real asset demand is further boosted by population growth, which in turn is reinforced by control of supply. This means these assets typically have low business cycle risk and can naturally raise prices over time, thus providing protection against inflation.
A proprietary research edge comes from our team of expert analysts. We generate specialist insights into the sustainability of each real asset's income stream, with a focus on sustainable long-term cash flows and an assessment of investment quality. Through our proprietary research approach, our well-resourced team of analysts spend time establishing a deep understanding of each stock's Quality, Value, Direction and Sustainable Dividend metrics from both a fundamental and quantitative perspective. In contrast to any one single factor, we believe that the powerful combination of these four different investment pillars leads to stronger income and capital returns over the long-term.
Overall, we think the recent real asset market volatility is providing tactical opportunities to invest in an attractive asset class, with solid fundamental growth support leveraged to Australia's world-leading population growth. While the macro environment and uncertainty over long bond yields is making for a volatile market, we remain positive on the prospects for high-quality real assets, with conservative balance sheets, sustainable cash flows and distributions.
The portfolio continues to provide attractive characteristics when compared to a term deposit or fixed income securities. The current next twelve month (NTM) expected yield of 6% and expected growth in that income is 3.6% 4, offers an attractive total return expectation, with a low-volatility risk profile against equities.
Real asset dividend yield spreads to Australian government 10-year bonds are supportive of sector pricing, as this differential continues to sit at levels that are above long-run averages. Notably, bond yields are well up on levels from a year ago. While this yield spread remains high, it implies a level of price support for real assets. And, although we think bond rates will continue to rise, it is important to flag that higher bond yields augur well for stronger economic growth, which we believe will ultimately be more supportive of higher real asset cash flows from here.
Martin Currie Australia is an Australian active equity specialist that offers a range of equity based accumulation and income strategies, as well as multi-sector portfolios. Martin Currie Australia has a history that dates back to 1954, and began investing in Australian equities in 1982 with the launch of the Australian Core Equity portfolio. Since that time, the firm's product and investment capabilities have grown to include seven equity trusts, three multi-sector trusts, as well as tailored portfolios for a growing number of institutional clients across a common investment research platform.
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ADVISER & CLIENT SERVICES
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
*As at 28 February 2018.Past performance is not a guide to future returns.
Issued by Legg Mason Asset Management Australia Limited (ABN 76 004 835 849, AFSL 240827) (Legg Mason Australia ) which is part of the Legg Mason Inc. group. Legg Mason Australia as Responsible Entity has appointed Martin Currie as the fund manager for the Legg Mason Martin Currie Real Income Fund (ARSN 146 910 349). Before making an investment decision you should read the relevant Product Disclosure Statement (PDS) carefully and you need to consider, with or without the assistance of a financial advisor, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. The PDS is available and can be obtained by contacting Legg Mason Australia on 1800 679 541 or at www.leggmason.com.au. The information in this presentation is of a general nature only and is not intended to be, and is not, a complete or definitive statement of the matters described in it. The information does not constitute specific investment advice and does not include recommendations on any particular securities. Legg Mason Australia nor any of its related parties, guarantee the repayment of capital or performance of any of the Legg Mason trusts referred to in this document. Although statements of fact in this presentation have been obtained from and are based upon sources Legg Mason Asset Management Australia Limited ABN 76 004 835 849 believe to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in this communication constitute our judgement as of the date of this communication and are subject to change without notice.
* Performance number is as at 28 February 2018. Source: Martin Currie Australia. Data calculated for the representative Legg Mason Martin Currie Real Income account in A$. Franked income return is calculated in gross of management fee. Inception Date: December 2010. Assumes zero percent tax rate and full franking benefits realised in tax return.
1The 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 Martin Currie Real Income 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.
3 Source: Morningstar Direct. Quartile ranking based on the Fund ranking calculated within the Morningstar Equity Australia Other category amongst 18 funds as at 28 February 2018.
4Source: Martin Currie Australia as at 28 February 2018. The yield forecast for the next 12 months is calculated using the weighted average of broker consensus forecasts of each portfolio holding and research conducted by Legg Mason Asset Management Australia Limited and is gross of fees. Neither the yield forecasts nor past performance is a guarantee of future results.
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