Fund Rationale: Legg Mason Brandywine Global Income Optimiser Fund

Legg Mason Brandywine Global Income Optimiser Fund (the "Fund")
SGD Hedged Class A Plus Distribution Shares (ISIN: IE00BLSP4122)
Fund Manager Page

Endowus has selected the Fund for its dynamic go-anywhere portfolio designed to maximise income, preserve capital, and protect against downside risks across all market conditions, which is managed by a team of highly experienced investment professionals.
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Key Information

Fund Objective: Aims to generate income in all market conditions while maintaining the value of the fund and limiting downside risk.

Suitability: Investors who are looking to invest in a fund that is seeking to maximise income yield in all market conditions, as well as to preserve capital, are willing to accept fluctuations (sometimes significant) in the net asset value per share of the Fund, and are long-term investors.

Cost:
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* Total Fund-level Fees include fund management fee of 1.1%.
** Endowus do not charge a preliminary sales charge or any other additional fees, other than the all-in Endowus Access Fee.

Fund Characteristics

Fund Inception: 3 Jun 2013
Share Class Inception: 21 October 2015
Benchmark: FTSE 3-Month Treasury Bill (Endowus typically uses the MSCI ACWI equity index and the Bloomberg Barclays Global Aggregate fixed income index as representative indexes to benchmark performance over the long term.)

Fund AUM: SGD 1.1bn
Source: MorningStar as of 27 May 2021. Please refer to the FMC page for the most updated AUM.

🌱EU SFDR Rating: Article 8

Regional Allocation:
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Sector Allocation:
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Source: MorningStar as of 30 April 2021. Allocation data indicate actual exposure as a percentage of the Fund's total Net Asset Value. Please refer to the Fund Manager Page for the most updated information on Fund Holdings and Breakdown.

Selection Criteria

Endowus has selected the Legg Mason Brandywine Global Income Optimiser Fund for its dynamically rotating portfolio designed to maximise income, preserve capital, and protect against downside risks across all market conditions.

We think the Fund is a classic example of a go-anywhere fixed income portfolio that is executed very well through a systematic investment process. The investable universe is broad, including Global Sovereign, Investment Grade, High Yield, Structured Credit, and EM Hard and Soft Currency instruments. At any given time, the portfolio will be positioned in sectors that the investment team believes will help achieve the investment objective, based on both top-down macroeconomic country and sector perspective, as well as deep fundamental analysis on the issuers to actively exploit income opportunities from various sources. The Fund also actively taps on duration and credit to hedge against downside risks. The resulting portfolio is typically concentrated with 50 to 125 conviction-driven holdings.

We also like the ESG analysis that is fully integrated in the investment research, that is centralised within the investment team rather than segregating the process to a specialist ESG team. The Strategy also actively engages with companies that are assessed to be weak in their ESG practices to ensure that ESG risks are minimised on the portfolio level, rather than simply discarding them, making more room for enhanced returns in the longer term. With this approach, the Fund has earned an SFDR Rating of Article 8.

The Fund is managed by Brandywine Global Investment Management (“Brandywine”), an affiliate of Franklin Templeton and a dedicated global fixed income manager. Brandywine emphasises team effort in its investment process and discourages the use of “star managers” -- this Strategy is run by a team of 6 Portfolio Managers, each of them highly experienced in the field, and is further supported by over 20 research analysts with an average experience of more than 15 years. The investment professionals at Brandywine are “generalists”, rather than being a sector specialist, to ensure that the resulting portfolio is consensus-driven and free of bias.

The Strategy has been successful in meeting its investment objective, proven through a reasonably high and stable historical payout, strong total returns that places the Fund as one of the best products within the peer group, as well as good downside protection -- specifically, during the market downturn of March 2020, the Strategy has only experienced a short, one-month drawdown of -5.59%, as compared to the peer group average of -8.93%.

🌱Sustainable Investing Methodology

Brandywine utilises a multi-faceted approach to assess ESG factors across at least 90% of its current and prospective holdings. This process entails using a proprietary system for scoring and ranking issuers along with the use of external vendor raw data, metrics, and analysis. These inputs are used to create proprietary ESG scoring, identify material risks, candidates for engagement, track progress on corporate and sovereign interactions, and ultimately make portfolio management decisions. The results of this analysis form the basis for portfolio exclusion where the bottom decile, as defined by the Environmental and Social factors for both sovereign and corporate issues, of the investable universe will be screened out and the second lowest decile will become automatic engagement candidates. 

  • The Fund will maintain a portfolio ESG rating of higher than that of the Fund’s investment universe.
  • Issuers in the lowest scoring 10% (the bottom decile) are excluded from the investable universe as a result of the ratings methodology deployed. The promotion of E and S factors is achieved via this exclusion.
  • Issuers in the 10-20% worst scoring (2nd lowest decile) are not excluded; rather they are treated as engagement candidates.
  • Up to 8% tracked and monitored for environmental and social factor deterioration or improvements.

Brandywine will perform a screen of the Fund’s investable universe via the multi-faceted approach to identify securities for exclusion (bottom decile) and candidates for engagement (2nd lowest decile) as mentioned above. In addition to this, Brandywine will monitor current and prospective holdings for deterioration and improvement for Environmental and Social factors.

In terms of sovereign issuers, the ESG analysis framework covers a wide range of ESG factors that include but are not limited to: deforestation and land usage/conservation, climate change vulnerability, overall greenhouse gas emissions, reliance on fossil fuel exports, water usage, civil and political rights, private sector oversight and regulation, particularly with respect to safety.

Regarding corporate issuers, Brandywine evaluates environmental and social issues that include but are not limited to: carbon emissions and greenhouse gas emissions, water usage and conservation, stranded assets and other liabilities associated with physical and transition risks, potential product liabilities, and the failure for a corporate to address and amend breaches in safety and environmental standards and other controversies that would increase business risk. After continual engagement and assessment of the ESG scores of corporate issuers against the Environmental and Social factors, portfolio management decisions may include reducing or exiting the positions.

The Fund does not have a specific sector exclusion on fossil fuels; however, corporate issuers in the fossil fuel sectors are excluded if their Environmental & Social scores fall in the bottom decile according to the ESG characteristics set out above.

There is a benchmark already assigned and used for performance comparison for the Fund, and not for the purpose of determining whether the Fund is aligned with the ESG characteristics set out above.

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Updated by Endowus: June 2021

** Disclaimer: Past performance should not be taken as an indication or guarantee of future performance and no representation or warranty, express or implied, is made regarding future performance. Any opinions expressed reflect a judgment at the original date of publication by us and are subject to change without notice.
The prospectus, profile statement, product highlight sheet, fund factsheet or other offer or product documents may contain references about the expected risk tolerance of their target investors. These are in no way indicative of how we at Endowus have assessed your risk tolerance based on your stated objectives and financial situation. Endowus accepts no responsibility for investment decisions made in response to the expected risk tolerance levels mentioned in the product or offer documents.