Global Income Optimiser
A nimble, all-weather global fixed income strategy that seeks attractive income generation and total return while guarding against downside risks.
Utilises broad geographic and sector flexibility to actively navigate markets throughout the economic cycle
Dynamically allocates capital across global fixed income markets, seeking opportunities that offer compelling valuations, durable fundamentals, and meaningful diversification while responding to macroeconomic conditions
The strategy is available as a UK Domiciled Fund and as an Ireland Domiciled Fund.
Philosophy and Process
The strategy seeks to balance a focus on income with the pursuit of total return based on the prevailing market environment. It leverages Brandywine Global’s fundamental research and top-down macro analysis.
Broad opportunity set:
No pre-set geographic, quality or sector constraints enables important flexibility across different market environments.
Diverse drivers of return:
Sources of alpha may include local currency sovereign debt, global investment grade and high yield credit, duration management, structured credit and currencies.
Managers take a relative value approach to the portfolio and make tactical changes in response to the team’s fundamental and macro guidance, independent of sector allocations in fixed income benchmarks.
Portfolio is constructed to hold a smaller number of high conviction ideas.
Meet the Team
The Portfolio Managers are part of Brandywine Global’s Global Fixed Income team, which shares expertise across the global fixed income universe, covering macro conditions, sovereign bonds, currencies, corporate bonds, and structured credit. The team combines top-down analysis of macro conditions with bottom-up fundamental research to determine where the most attractive valuations exist in the context of the business cycle. The team incorporates cross-sector analysis to gain a deeper understanding of the relative attractiveness of various segments of the fixed income market and identify specific securities within those sectors. The robust exchange of research and ideas across the broader team helps enable the managers to consider all risks and opportunities with respect to multi-sector positioning and portfolio decisions.
Meet the Team
Tracey Chen, CFA, CAIA, Portfolio Manager Tracy Chen is a portfolio manager on Brandywine Global’s Global Fixed Income team and leads global structured credit investing. She joined the Firm in 2008. Tracy earned her MBA with a concentration in Finance from the University of North Carolina at Chapel Hill. She also holds an M.A. in American Studies and a B.A. from the University of Electronic Science & Technology of China. Tracy is a CFA® charterholder and a CAIA charterholder. Her research on structured products has been published in the Journal of Structured Finance.
Brian L. Kloss, JD, CPA, Portfolio Manager Brian Kloss is a portfolio manager on Brandywine Global’s Global Fixed Income team. He joined the Firm in 2009, bringing extensive experience in high yield and distressed debt. Brian earned his J.D. from Villanova School of Law and graduated summa cum laude with a B.S. in Accounting from the University of Scranton. He is a member of the New Jersey and Pennsylvania Bar and is a Pennsylvania Certified Public Accountant.
Jack McIntryre, CFA, Portfolio Manager Jack McIntyre is a portfolio manager on Brandywine Global’s Global Fixed Income team. He joined the Firm in 1998. Jack is a CFA® charterholder and earned an M.B.A. in Finance from the Leonard N. Stern Graduate School of Business at New York University and a B.B.A. in Finance from the University of Massachusetts, Amherst.
Anujeet Sareen, CFA, Portfolio ManagerAnujeet Sareen is a portfolio manager on Brandywine Global’s Global Fixed Income team. He joined the Firm in 2016, bringing over 22 years of fixed income, global macro strategy, and currency management experience. Anujeet is a CFA® charterholder and earned a B.A. in Computer Science from Brown University.
Holistic Risk Management
The Fund takes a holistic and responsive approach to risk, utilising the strategy’s flexibility to limit credit risk, interest rate risk, and currency risk.
The managers seek to position the portfolio with the appropriate credit-quality bias while monitoring positive or negative political and economic developments. They vigilantly monitor the credit/default risk in the portfolio, both for individual credits and of sovereign bonds. Credit risk is managed through the use of derivatives, such as credit default swaps, interest-rate futures, and currency forwards during periods of volatility.
Interest Rate Risk
The managers take an active approach to managing interest rate risk and volatility by adjusting the interest rate exposure of the strategy based on the prevailing macro outlook and market conditions. The manager has made active use of the 0-10 year portfolio duration range.
Currency is predominantly hedged to limit foreign currency exposure and help control volatility. The team also uses currency forwards and short-duration exposure to hedge systemic macro risk.
Internal Risk Reviews
The Investment and Performance Analysis Group produces daily performance dispersion reports that explain any performance differentials between accounts, e.g., due to cash flows or client guidelines. In addition, attribution, value-at-risk, and tracking error reports are generated for internal risk oversight and compliance reporting on a monthly and ad-hoc basis.
Commitment to ESG
Brandywine Global believes that relevant and material ESG factors can meaningfully affect investment performance and should be considered as part of a fully informed investment decision and ongoing monitoring.
ESG-related factors are important components of the macroeconomic research analysis that guides the investment process.
Unsustainable or controversial environmental policies may lead to financial penalties, compromised reputation, competitive disadvantage, and negative implications for growth.
Poor labor practices or human rights violations may put companies or countries at risk of unrest or upheaval, impairing economic progress.
Insufficient governance may promote an environment that ignores investor rights and interests while enabling fraud or corruption, limiting investment returns and exacerbating risks.
ESG-related factors are essential components towards identifying and evaluating risks and opportunities in the investment decision making process.
Around the Curve
EM: Hit Me One More Time
Slowing growth, de-globalization, and higher savings rates may warrant greater caution and selectivity with respect to emerging markets debt over the next decade.
Income Optimiser Overview: 0sec – 38 sec
Legg Mason BW Global Income Optimiser is an all-weather fixed income portfolio that helps investors navigate global fixed income markets throughout the economic cycle .
It dynamically allocates across global fixed income markets to seek attractive total return and income while taking steps to manage portfolio volatility.
A suitable solution for investors looking for a nimble stand-alone strategy with a proven ability to actively adjust the fund’s exposures based on the prevailing macro and valuation landscape.
The Macro Environment and Why IO: 38 sec – 1:28mins
Over recent history rates have been a key driver of markets and Legg Mason believes clients can benefit from a manager who can actively manage duration for defensive purposes.
In a market environment where alpha generation matters more, it makes sense to be more selective about what sectors and regions of the global fixed income market you focus on and be willing to shift exposures as the macro and market environment changes.
The Legg Mason Brandywine Global Income Optimiser Portfolio aims to provide an all-weather fixed income investment that can help investors navigate global fixed income markets throughout the ups and downs of the economic cycle.
How the Fund Works: 1:28mins – 3:05mins
The Fund dynamically allocates across markets to seek attractive total returns through income and growth, while taking steps to manage portfolio volatility.
The Fund allocates dynamically across global fixed income markets to achieve attractive total returns, focusing on income and growth, while also having tools manage portfolio volatility when needed.
The manager aims to optimise income within the context of the prevailing macro and market environment, but doesn’t reach for yield and at times may sacrifice yield to protect capital. It sources income opportunities from across global fixed income sectors, without regional or sector biases.
The manager combines this with nimble portfolio management, both in terms of asset allocation and active use of interest rate management. As the team’s economic and market views change, the manager actively rotates between sectors and regions.
In an environment where the manager becomes more cautious, for example, you may see it significantly reducing exposures to high yield corporates, emerging markets exposures and Mortgage Backed Securities while favouring investment grade corporate and developed market sovereign exposures.
The manager also has a strong track record of actively using interest rate management, particularly as a tool for managing portfolio volatility. It has shifted duration in a 1 to 10 year range historically and has made an effective use of developed market sovereign bonds to balance return and downside protection.
In an environment where the manager looks to onboard risk, you may see the fund increase high yield corporate, emerging market exposures and Mortgage Backed Securities and reduce investment grade corporate and developed market sovereign exposures.
About Brandywine Global: 3:05mins – 4:09mins
Brandywine Global starts with a top down, macro driven approach and a deep understanding of the macroeconomic landscape.
That is the ideal starting point to identify opportunities and risks -- a belief held since the founding of the Global Fixed Income team back in 1992. The investment team for the Fund has an average of 25 years of experience and brings together demonstrated sector experience in global sovereigns, corporate and structured credit, emerging markets, currencies, and derivatives.
They then combine macro analysis with cross-sector relative value analysis and chooses names within the sectors based on their fundamental work. At any given time, the portfolio is positioned only in sectors that they believe will help achieve its objectives. This structured and repeatable investment process has resulted in successful outcomes in both periods of slowing growth and in environments supportive of risk assets.
How the Funds Compares to Peers: 4:09mins – 5:04mins
It’s a Fund that is designed to be flexible, managed by a team that is able to make full use of this flexibility, often through more dynamic asset allocation and active interest rate management than its peers.
The manager has a proven track record of combining diversified sources of return and diversified sources of income in one portfolio, while keeping return and volatility relatively stable over time.
The Fund benefits from Brandywine Global’s strong fundamental and macro heritage. Their edge is the ability to actively adjust the fund’s exposures based on the prevailing macro and valuation landscape.
It is not a Fund that relies on high yield for returns and has a lower correlation to high yield than many peers. It is also not a fund that will reach for yield in all market environments, with a focus on managing portfolio volatility playing a key role in addition to a focus on total return.
Where does the Fund fit in my Portfolio: 5:04mins – 5:50mins
The fund can function as a stand-alone fund, providing clients with a diversified exposure to global fixed income markets with dynamic asset allocation through the market cycle.
It can also function as an alternative to absolute return or diversified growth funds, which may have been more correlated than expected to market movements.
As an income diversifier, it fits well as a complement to high yield focused income strategies due to its lower correlation to high yield than many peer funds. In addition, it fits well as a more defensive complement to more volatile strategies, which may be more reliant on emerging markets or currencies, or as a complement to flexible bond fund allocations which are less dynamic and more credit-focussed over time.
Bonds: There is a risk that issuers of bonds held by the fund may not be able to repay the investment or pay the interest due on it, leading to losses for the fund. Bond values are affected by the market’s view of the above risk, and by changes in interest rates and inflation. Liquidity: In certain circumstances, it may be difficult to sell the fund’s investments because there may not be enough demand for them in the markets, in which case the fund may not be able to minimize a loss on such investments. Low rated bonds: The fund may invest in lower-rated or unrated bonds of similar quality, which carry a higher degree of risk than higher rated bonds. Emerging markets investment: The fund may invest in the markets of countries that are smaller, less developed and regulated, and more volatile than the markets of more developed countries. Asset-backed securities: The timing and size of the cash-flow from asset-backed securities is not fully assured and could result in a loss for the fund. These types of investments may also be difficult for the fund to sell quickly. Fund currency: Changes in exchange rates between the currencies of investments held by the fund and the fund’s base currency may negatively affect the value of an investment and any income received from it. Interest rates: Changes in interest rates may negatively affect the value of the fund. Typically as interest rates rise, bond values fall. Derivatives: The use of derivatives can result in greater fluctuations in the fund’s value and may cause the fund to lose as much as or more than the amount invested. Fund counterparties: The fund may suffer losses if the parties that it trades with cannot meet their financial obligations. Fund operations: The fund is subject to the risk of loss resulting from inadequate or failed internal processes, people or systems, or those of third parties such as those responsible for the custody of its assets, especially to the extent that it invests in developing countries.
The Legg Mason Brandywine Global Income Optimiser Fund (“the Fund”) is a sub-fund of the Legg Mason Global Funds plc, an umbrella fund, with segregated liability between sub-funds, established as an open-ended investment company with variable capital and incorporated with limited liability under the laws of Ireland with registered number 278601. It qualifies and is authorized in Ireland by the Central Bank of Ireland as an undertaking for collective investment in transferable securities. The Fund is available only to qualified investors who are not citizens of, and who do not reside in, the United States.
Legg Mason is not responsible and takes no liability for the onward transmission of this material. This material does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. In the UK this financial promotion is issued by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London, EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorised and regulated by the UK Financial Conduct Authority. This information is only for use by professional clients, eligible counterparties or qualified investors. It is not aimed at, or for use by, retail clients.
The aim of the fund is not guaranteed, and may not be achieved, the fund may suffer losses and you may not get back the amount originally invested. Owing to its investment philosophy, this Fund should be viewed as a high-risk investment. The fund is subject to the following risks which are materially relevant but may not be adequately captured by the indicator: Bonds: There is a risk that issuers of bonds held by the fund may not be able to repay the investment or pay the interest due on it, leading to losses for the fund. Bond values are affected by the market’s view of the above risk, and by changes in interest rates and inflation. Liquidity: In certain circumstances it may be difficult to sell the fund’s investments because there may not be enough demand for them in the markets, in which case the fund may not be able to minimise a loss on such investments. Low rated bonds: The fund may invest in lower rated or unrated bonds of similar quality, which carry a higher degree of risk than higher rated bonds. Emerging markets investment: The fund may invest in the markets of countries which are smaller, less developed and regulated, and more volatile than the markets of more developed countries. Asset-backed securities: The timing and size of the cash-flow from asset-backed securities is not fully assured and could result in loss for the fund. These types of investments may also be difficult for the fund to sell quickly. Derivatives: The use of derivatives can result in greater fluctuations of the fund’s value and may cause the fund to lose as much as or more than the amount invested. Hedging: The fund may use derivatives to reduce the risk of movements in exchange rates between the currency of the investments held by the fund and base currency of the fund itself (hedging). However, hedging transactions can also expose the fund to additional risks, such as the risk that the counterparty to the transaction may not be able to make its payments, which may result in loss to the fund. Interest rates: Changes in interest rates may negatively affect the value of the fund. Typically, as interest rates rise, bond values fall. Interbank offered rates: The use of IBORs (the rates at which banks are prepared to lend to one another) is changing and may affect the value of the fund, or investments held by the fund. The transition away from IBORs may impact markets that rely on IBORs to determine interest rates and may reduce the value of IBOR-based investments. Fund operations: The fund is subject to the risk of loss resulting from inadequate or failed internal processes, people or systems or those of third parties such as those responsible for the custody of its assets, especially to the extent that it invests in developing countries. Fund counterparties: The fund may suffer losses if the parties that it trades with cannot meet their financial obligations. Please refer to the Key Investor Information and Prospectus documentation, which describe the full objective and risk factors associated with this Fund.
The Legg Mason Brandywine Global Income Optimiser Fund is a sub-fund of Legg Mason Global Funds plc (“LMGF plc”), an umbrella fund with segregated liability between sub-funds, established as an open-ended investment company with variable capital, organised as an undertaking for collective investment in transferable securities (“UCITS”) under the laws of Ireland as a public limited company pursuant to the Irish Companies Acts and UCITS regulations. LMGF plc is authorised in Ireland by the Central Bank of Ireland. It should be noted that the value of investments and the income from them may go down as well as up. Investing in a sub-fund involves investment risks, including the possible loss of the amount invested. Past performance is not a reliable indicator of future results. An investment in a sub-fund should not constitute a substantial proportion of an investor’s investment portfolio and may not be appropriate for all investors. Investors’ attention is drawn to the specific risk factors set out in a fund’s share class key investor information document (“KIID”) and LMGF plc’s prospectus. There is no guarantee or assurance that funds will achieve their investment objectives. This material is not intended as a complete summary or analysis. The information and data in this material has been prepared from sources believed reliable but is not guaranteed in any way by any Legg Mason, Inc. company or affiliate (together “Legg Mason”). No representation is made that the information is correct as of any time subsequent to its date. This material is not intended for any person or use that would be contrary to local law or regulation. Legg Mason is not responsible and takes no liability for the onward transmission of this material. This material does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. Individual securities mentioned are intended as examples only and are not to be taken as advice nor are they intended as a recommendation to buy or sell any investment or interest. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors. Before investing investors should read in their entirety LMGF plc’s application form and a sub-fund’s share class KIID and the Prospectus (which describe the investment objective and risk factors in full). These and other relevant documents may be obtained free of charge in English, French, German, Greek, Italian, Norwegian and Spanish from LMGF plc’s registered office at Riverside Two, Sir John Rogerson’s Quay, Grand Canal Dock, Dublin 2, Ireland, from LMGF plc’s administrator, BNY Mellon Fund Services (Ireland) Limited, at the same address or from www.leggmasonglobal.com. In Europe (excluding UK & Switzerland) this financial promotion is issued by Legg Mason Investments (Ireland) Limited, registered office 6th Floor, Building Three, Number One Ballsbridge, 126 Pembroke Road, Ballsbridge, Dublin 4, D04 EP27, Ireland. Registered in Ireland, Company No. 271887. Authorised and regulated by the Central Bank of Ireland. In the UK this financial promotion is issued by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London, EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorised and regulated by the UK Financial Conduct Authority. In Switzerland, this financial promotion is issued by Legg Mason Investments (Switzerland) GmbH, authorised by the Swiss Financial Market Supervisory Authority FINMA. Investors in Switzerland: The representative in Switzerland is FIRST INDEPENDENT FUND SERVICES LTD., Klausstrasse 33, 8008 Zurich, Switzerland and the paying agent in Switzerland is NPB Neue Privat Bank AG, Limmatquai 1, 8024 Zurich, Switzerland. Copies of the Articles of Association, the Prospectus, the Key Investor Information Documents and the annual and semi-annual reports of the Company may be obtained free of charge from the representative in Switzerland. German investors: Shares of the Fund may in particular not be distributed or marketed in any way to German retail investors if the Fund is not admitted for distribution to this investor category by the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). This information is only for use by professional clients, eligible counterparties or qualified investors. It is not aimed at, or for use by, retail clients.