Legg Mason’s Growth and Balanced Trusts are the two top performing multi-sector growth funds over three and five years to February 2015, according to the latest Morningstar Australian Superannuation Survey of Pooled Superannuation.
With a three year total return of 19.7 per cent per annum, the Legg Mason Growth Trust - shadowed by the Legg Mason Balanced Trust at 17.6% pa - was 5.8% per annum above the industry average.
There are three factors that make the 5.8% outperformance significant in the context of multi-sector funds: Firstly, the Survey results are net of fees, and in a world focused on low fees, the Legg Mason Growth and Balanced Trusts have fees (ICRs) of 0.88% and 0.83% respectively. Secondly, outperformance in the context of diversified funds is made seemingly more difficult because there are many factors at play that need to contribute positively to overall returns, consistently. The fact that retirement savings are long term investments also makes any difference highly significant in terms of the savings to the investor at retirement.
According to the monthly survey, which includes retail and not for profit funds, the funds in the Multi-sector Growth category held an average allocation to equities of 57.3 per cent at the end of February 2015, split between Australian equities and international equities. The Legg Mason funds have a relatively high allocation to Australian shares, reflecting the fund manager’s view that Australian equity strategies are attractive considering the potential that the resources sector is yet to pass the economic baton to the Australian consumer. Added to that, Australia has one of the highest dividend yields in the developed world.
The outperformance is not all due to an overweight in equities. The funds access other Legg Mason fund managers such as Brandywine and Western Asset that are among the leading performers in their peer group in specific time periods.
Award winning performer
The Legg Mason Growth and Balanced Trusts are managed by Martin Currie Australia, formerly Legg Mason Australian Equities. Legg Mason was the winner in two categories at the 2014 Money Management/Lonsec Fund Manager of the Year Awards, including Asset Allocator of the Year and Balanced Fund Manager of the Year. In addition, Legg Mason was a finalist as the overall Fund Manager of the Year. The prestigious nomination reflects the quality of the investment process and the strong performance of the Trust, one of Australia’s longest running balanced funds.
At this year’s award to be held on May 21, four Legg Mason strategies are finalists in their respective categories including: Legg Mason Diversified Trust (multi-sector), Legg Mason Western Asset Australian Bond Trust (Australian bonds), Legg Mason Brandywine Global Opportunistic Fixed Income Trust (global fixed income), and Legg Mason Property Securities Trust (property & infrastructure securities).
Fourteen portfolio managers contribute to the investment process of the Growth and Balanced Trusts, with over 20 years’ average experience between them. The Trust and most of its underlying funds have ratings from research houses.
Legg Mason multi sector comes in various shapes and sizes
The Legg Mason Growth and Balanced Trusts are pooled superannuation trust designed for trustees of complying super funds seeking a multi-sector, tax paid solution. A distributing version of the fund, the Legg Mason Diversified Trust, is also offered as a unit trust to professional, mFund and retail investors.
A recent innovation has been the launch of a retirement income version, the Legg Mason Multi Asset Retirement Income Trust. This Trust is designed for retirees and self-managed super funds seeking an income solution across asset classes.
Legg Mason difference
According to Martin Currie Australia Chief Investment Officer and Portfolio Manager Reece Birtles, the Trust’s performance benefits from Legg Mason’s unique affiliate model which is designed to provide investors with a ‘best of breed’ option under the one corporate structure. Its specialist investment managers, such as Brandywine, QS Batterymarch, ClearBridge, Martin Currie Australia and Western Asset, offer access to the major investment classes around the world and operate with investment independence that allows them to focus on their individual competencies. As all the Trust’s underlying fund managers are part of the Legg Mason family, there is a unified focus and total accountability to the experience of the investor. This is a feature that is often overshadowed by other features in the assessment of suitable balanced funds.
“We have a pure focus on investment performance – we don’t have a mixed business model that includes operating adviser/platform businesses,” Reece says.
“The analysts, researchers and managers within the Legg Mason stable form a unique culture of co-operation and are all accountable because they all wear the same reputation and brand across the 31 countries we operate in. This results in innovation within our Funds, as well as the ability to act swiftly and consider investment circumstances around the world.”
Asset allocation changes
Reece says the Trust has more recently increased its weighting to real assets that include A-REITs, infrastructure and utilities, as these typically have low volatility and provide high domestic yield and inflation protection. The weighting to Australian small companies has also increased as they represent a significant opportunity to add value and are attractively valued compared to large companies. Exposure to absolute return strategies has been reduced as offshore yields are well below domestic yields.
Any reference to “Legg Mason Australia” is a reference to Legg Mason Asset Management Australia Limited ABN 76 004 835 849 AFSL 240827. Neither Legg Mason Australia, nor any of its related parties, guarantee the repayment of capital or performance of any of the trusts referred to in this document. Past performance is no guarantee of future performance. Applications to invest in a Legg Mason Trust can be made using an application form comprising part of the current Product Disclosure Statement, which is available from our offices or on our website at www.leggmason.com.au. Certain eligibility criteria applies. Legg Mason Australia does not guarantee the accuracy or completeness of this document. To the extent permissible by law, Legg Mason Australia accepts no liability in contract, tort (including negligence) or otherwise for any loss or damage suffered as a result of reliance on this document. This document does not constitute investment advice, and has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should read the Product Disclosure Statement 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.
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