Legg Mason has launched a Global Blue Chip Bond fund for its fixed income affiliate Western Asset Management.
Dipankar Shewaram and Mike Buchanan will run the fund from their office in Pasadena. It will invest in what the managers deem to be pure investment grade, high quality companies which they say are trading at historically high credit spreads.
In a release, Shewaram says: “Spreads have reached historic highs, which reflect both the illiquidity in credit markets and investors’ extremely pessimistic outlook for the global economy and corporate defaults. There is a substantial amount of incremental yield that is reflective of neither market technicals nor credit fundamentals.”
He adds spreads are also implying a 20% default rate which they do not think will materialise.
The Western Asset Global Blue Chip Bond fund is benchmarked against Merrill Lynch US Treasuries 1-10 year Index. There are no sector or country restrictions but as part of the fund’s risk controls, exposure to senior debt of insurance, financial or real estate issuers is capped at 10%.
The fund was launched on June 2.