Active ETFs

It's a Celebration! Two Years of Delivering Client Choice
Through our Active ETF's (ASX: EINC | RINC)

Peter Cook, Senior Investment Writer, Legg Mason
March 2020

On the two-year anniversary of the launch of the BetaShares Legg Mason Equity Income Fund (ASX: EINC) and the BetaShares Legg Mason Real Income Fund (ASX: RINC) Active ETF’s, we take the opportunity to reflect on how these ETF’s have helped deliver an active investment solution for clients with income oriented objectives. 

All About the Income - The BetaShares Legg Mason Equity Income Fund (ASX: EINC) 

We believe a successful equity income strategy should focus on two objectives. First, it should invest in companies whose dividends are both sustainable in difficult economic conditions and are expected to grow in value over time. Second, through active company selection, it should identify companies that offer the potential for long-term capital growth which can, in turn, support a growing income stream. The Fund has, since inception, delivered a consistent income stream by employing these objectives as its guiding principles.

Since inception, EINC has delivered a 17.75% total return1, net of fees. EINC also posted a franked income return in excess of the index’s franked income return since inception, which is in-line with Martin Currie’s objectives for the Strategy.

Investment Growth of BetaShares Legg Mason Equity Income Fund (ASX: EINC)

It bears noting that, as the Yield Premium Chart shows, the straegy's expected yield premium will be 126% relative to the S&P/ASX Accumulation Index.2 This yield premium is a powerful point of differentiation for the Fund when one considers that in this low-yield environment, every incremental basis point of yield represents a scarce source of portfolio income. 

Keeping it Real - The BetaShares Legg Mason Real Income Fund (ASX: RINC) 

RINC's objective is to provide a pre-tax yield above the S&P/ASX 200 Index and income stream growth above inflation. 

Since inception, RINC has delivered a cumulative 36.55% total return3, net of fees. It also posted a franked income return in excess of the index’s franked income return since inception, which is in-line with Martin Currie’s objectives for the Strategy.

Investment Growth of BetaShares Legg Mason Real Income Fund (ASX: RINC)

In of its objective, RINC holds a portfolio of listed companies that own ‘hard’ physical assets, like property, utilities and infrastructure (e.g. A-REITs, airports, toll roads, electricity and gas grids)  Real asset companies like these are an integral part of everyday life and are often monopolistic in nature. Demand for their products is therefore less flexible and less correlated to the business cycle. Hence, these companies have more predictable free cash flow and dividends. 

The Risk Adjusted Return Chart shows RINC's attractive risk and return trade-off when compared to the S&P/ASX 300 Australian Real Estate Investment Trust (A-REIT) Index and the broader share market as measured by the S&P/ASX 200 index4.

The total returns (capital plus income) net of fees for the Legg Mason Martin Currie Real Income Fund measured over rolling 5-year periods has achieved a higher return per unit of risk (as measured by standard deviation) when compared to the performance of narrow A-REITs and the broader share market.

Solution Focused Investment Expertise Where You Need It

EINC and RINC were the beginning of Legg Mason’s commitment to delivering intelligent investing solutions in an ETF format, and our efforts haven’t stopped there. We’ve since launched two more listed solutions: The BetaShares Legg Mason Australia Bond Fund (ASX: BNDS) and The BetaShares Legg Mason Emerging Markets Fund (ASX: EMMG). We’re proud to provide this breadth of investment choice wherever and however our Australian clients demand it. 

[1] Performance calculated as of Jan 31, 2020. Past performance is not a guide to future returns. As EINC is newly established we only have the performance returns since inception.

[2] Source: Martin Currie Australia, FactSet; as of 31 December 2019. Data calculated for the representative Martin Currie Australia Equity Income account. No formal benchmark. S&P/ASX 200 Accumulation Index may be used for comparison (over periods longer than 5 years). Next 12 Months (NTM) Income yield is gross of fees and is calculated using the weighted average of broker consensus forecasts of each portfolio holding – because of this, the returns quoted are estimated figures and are therefore not guaranteed. Assumes zero percent tax rate and full franking benefits realised in tax return. * Does not guarantee against income shocks. The investment vehicles shown may have different risk profiles and a direct comparison may not be appropriate.

[3] Performance calculated as of Jan 31, 2020. Past performance is not a guide to future returns. As RINC is newly established, we only have the performance data 

[4] Source: Martin Currie Australia; as at 31 December 2019. Data calculated for the representative Martin Currie Australia Real Income account in A$ gross of management fee. This strategy is not constrained by a benchmark, however for comparison purposes the account is shown against the following indices Australian Equities: S&P/ASX 200 Accumulation Index; AREITs: S&P/ASX A-REIT 300 Accumulation Index; Global REITs: NAREIT Global REIT Index. The investment vehicles shown may have different risk profiles and a direct comparison may not be appropriate. Past performance is not a guide to future returns. Past performance is no indication of future performance. As RINC is newly established, the performance of the unlisted Legg Mason Martin Currie Real Income Fund which was incepted in November 2010, is shown above to illustrate how a comparable fund managed by Martin Currie using the same strategy has performed in the past over a longer time period.

Legg Mason Asset Management Australia Ltd (ABN 76 004 835 849 AFSL 240827) is part of the Global Legg Mason Inc. group. Any reference to ‘Legg Mason Australia’ is a reference to Legg Mason Asset Management Australia Limited. The information in this article is of a general nature only and is not intended to be, and is not, a complete or definitive statement of the matters described in it. The information in this article does not constitute specific investment advice and does not include recommendations on any particular securities. These opinions are subject to change without notice and do not constitute investment advice or recommendations.