dublin-based bond product to be managed from the us by brandywine asset management
Legg Mason Investments is to launch an offshore Global Opportunities Bond fund, with the management outsourced to its US subsidiary Brandywine Asset Management.
Due for launch in early October, the portfolio will be a sub-fund of the group's Dublin-domiciled Oeic and will mirror the Brandywine Global Fixed Income Product, a US-domiciled mutual fund that has a 10-year track record.
It will be run by David Hoffman, managing director of portfolio analysis at Brandywine, and Stephen Smith, executive vice president of the group.
Benchmarked against the Citigroup World Government Bond Index, the fund will invest in a mixture of investment grade corporates, sovereign bonds, Treasuries, cash and mortgage backed securities.
The average credit rating of the fund's holdings will be AAA and at launch more than 73% of the portfolio will be invested in AAA credit, with 20% in AA, 0.7% in A and 5.5% in the BBB area.
Brandywine describes itself as a value investor within fixed income markets. Its investment philosophy has four basic tenets: buy bonds with the highest real yields, manage currency to increase returns, rotate among countries to find the best value in fixed income markets around the world and control risk through buying undervalued securities.
The fund will focus on the more established global fixed income markets, with investments concentrated in six to 12 countries that are deemed to provide the best value and total return potential.
At present, the Brandywine portfolio the Legg Mason fund will mirror has about 32.8% invested in Europe, 32.2% in the US, 13% in Australia, 8% in New Zealand, 9.1% in Sweden and 4.6% in Canada.
In terms of currency, Hoffman said, both he and Smith will look for fixed income securities in countries with high real interest rates and a currency that is appreciating from an undervalued position. If a currency is overvalued, he added, such positions will be hedged.
The biggest currency position in the fund at present is in the US, where it has 47.6% of assets invested, followed by 17.6% in Europe and 12.98% in Australia.
Hoffman said because Brandywine concentrates investments where value is greatest, the portfolio will tend to have an intermediate to long duration bias when real interest rates remain high.
The fund will launch in the first week of next month with a one-month offer period and minimum investment of $10,000. It carries an initial charge of 5%, with a 1.1% annual management fee, while commission for intermediaries is negotiable.
From the start of the year to 30 June 2003, the Brandywine Fixed Income Product made a positive return of 10.29%, compared with its benchmark, the Citigroup World Government Bond Index, which returned 3.92%.
Over three and five years, it is up 15.9% and 9.72% respectively, versus returns of 8.77% and 6.69% from the benchmark.
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