The 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.
Legg Mason believes it is not necessary for investors to choose between income or growth because more companies, especially outside the UK, are beginning to pay high dividends but are still able to grow their businesses.
The company launched this fund to take advantage of the higher yields that can be found outside the UK It believes focusing on a single country in the pursuit of income means more risk, while a global approach diversifies this risk and can enhance returns. However, it says few asset management groups have the experience to take a global approach to equity income.
The new fund is managed by Global Currents Investment Management chief investment officer Paul Ehrlichman. Global Currents is a Legg Mason subsidiary and formerly part of the group’s Brandywine subsidiary.
Ehrlichman and his team will not be restricted by market cap, region or sector when selecting stocks. They will take a classic value approach, focusing on companies that are trading at low prices relative to what they regard as a company’s true value.
Diversification is one of the main advantages of this fund because investors are not dependent on one region and the fund can invest wherever the best opportunities are. Some UK equity income managers have not met the IMA yield requirements and dividend growth in the UK has slowed, which could lead investors to look further afield.
However, Legg Mason could face competition from companies such as Schroders, JPMorgan and Lazard, which established global equity income funds last year.