The Dublin-domiciled Legg Mason Western Asset Global Credit Absolute Return Fund will invest in a portfolio of investment grade and high yield credit, including emerging market credit, and will target an annual return of 8-10% over three years.
As a Ucits-III compliant vehicle the fund will be able to short credit sectors and individual securities and will also have the ability to be short duration, with a range of plus or minus ten years.
A model portfolio suggests the fund will initially have a spread duration of 3.6 years, and average bond rating of between BBB+ and Baa1 with a cashflow yield, of 6%. The model also suggests 50% of the fund’s long positions will be held in senior financials with the rest of the long portfolio consisting of 25% in subordinated financials, 23% in high yield and 2% in emerging markets.
The model’s short positions are a -10% against iTraxx main, -15% against industrial stocks and -10% against iTraxx Xover.
The fund will be managed by Western’s head of non US credit and senior portfolio manager Dipankar Shewaram and, subject to regulatory approval, should be launched within the next few weeks. Initially the fund will only be available for sale in Ireland but will be registered for sale in the UK shortly after.
It is the second absolute return strategy to be launched by Legg Mason in the past six months, following the launch of the Legg Mason Global Absolute Return Fund, which is managed by affiliated hedge fund specialist Permal, in October 2009. The fund has so far returned 11.62% since its launch, according to data from Financial Express.
