Aim: Income and growth by investing globally in equities
Minimum investment: Lump sum £3,000
Investment split: 17.3% financials, 14.6% consumer staples, 12.5% telecommunication services, 11.6% energy, 11.3% healthcare, 8.4% industrials, 7.3% consumer discretionary, 7% information technology, 6.4% utilities, 3.6% cash
Isa link: Yes
Charges: Initial 4.25%, annual 1.5%
Special offer: initial charge reduced to 3%
Offer period: Until May 23, 2008
Commission: Initial 3%, renewal 0.5%
Tel: 020 7070 7444
Legg Mason’s global equity income fund aims to provide a growing level of income and the potential for capital growth by investing globally in a portfolio of 40-80 stocks. Stocks will be selected within mature and emerging markets.
Flowers McEwan director David Flowers regards this as a well timed launch into one of the few segments of the market where there is not already an oversupply of funds. “Legg Mason, a substantial American fund manager based in Delaware, has added this fund to its Oeic range listed in the UK and regulated by the FSA.
“Historically, one of the main selling points of UK equities was access to a robust dividend stream. This fund provides a good alternative in aiming to provide a 4 per cent dividend yield from a non-UK portfolio of equities,” says Flowers.
According to Flowers, this fund seems to be an excellent diversifier for asset allocation purposes, as well as a wise investment choice as it follows the dividend rather than the growth alone. “The literature is adequate and the web site easy to use. Legg Mason is also supporting the launch with a series of road shows, which ishelpful,” says Flowers.
Assessing the charges on the retail shares, Flowers thinks the 1.5 per cent annual charge is typical of funds of this nature, while the initial charge of 4.5 per cent is slightly lower than the norm. “These charges support the standard IFA commission of 3 per cent initial plus 0.5 per cent renewal. The charges are levied on the capital, which will facilitate reaching the 4 per cent yield target.”
Turning to the potential drawbacks of the fund Flowers says: “From a UK investor point of view it would feel better to have the fund management team based on this side of the Atlantic. But of course one would expect the fund managers to work equally well out of Delaware,” he says.
Scanning the market for the main competitors Flowers says: “There is a dearth of competition. In fact searches on the fund research engines don’t usually have a global equity income sector to examine. It seems that Legg Mason has this patch largely to itself, for a while at least.
Summing up Flowers says: “Legg Mason operates a fund management process that starts with quantitative analysis to reduce the equity choices and then apply a bottom up stockpicking approach with little restriction on the manager’s decision making and buying. If it proves good at this I would think they have timed the launch well because many markets have fallen. It has also created a new niche in which to play.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good