The Legg Mason Low Volatility High Dividend ETF (LVHD) seeks to track the investment results of an underlying index composed of equity securities of U.S. companies with relatively high yield and low price and earnings volatility.
- LVHD may benefit investors who want income but are concerned about the volatility that can come from traditional equity income investments.
The QS Low Volatility High Dividend Index (the Index):
- The Index starts with the largest 3,000 U.S. stocks as determined by the Solactive U.S. Broad Market Index, an index calculated and published by Solactive AG composed of 3,000 U.S. large-cap, mid-cap and small-cap companies.
- Based on historical and projected data using QS Investors' proprietary methodology,
- The index screens for profitable companies that have the potential to pay relatively high sustainable dividend yields.
- Yields of the remaining securities are then scored higher or lower based on the attractiveness of their price and earnings volatility.
- The portfolio is constructed of the highest scoring securities subject to concentration limits: no individual component of the Index will exceed 2.5%, no individual sector (as defined by QS) will exceed 25%, and real estate investment trust (“REIT”) components as a whole will not exceed 15%. The number of component securities in the Index is anticipated to range from 50 to 100.
- The Underlying Index’s components are reconstituted annually and rebalanced quarterly.
Meet your managers
QS Investors is a quantitative asset manager that provides multi-asset class and global equity solutions. Their approach unites intellectual and academic precision with the power of data and technology in their quest to elevate the certainty of outcomes they deliver.
Russell Shtern, CFA (industry since 1998), Michael LaBella, CFA (industry since 2005) and Michael Ripper, CFA, UK (industry since 1988) have been associated with the Fund since 2015, have leadership responsibility for the day-to-day management of the Fund and each is responsible for the strategic oversight of the Fund's investments.
The managers are responsible for the strategic oversight of the fund's investments. Their focus is on portfolio structure, and they are primarily responsible for ensuring that the fund complies with its investment objective, guidelines and restrictions and current investment strategies.
Legg Mason's unique structure provides you with access to this specialized expertise, offering a powerful portfolio of solutions through our independent investment management firms.
Russell Shtern, CFA
Head of Equity Portfolio Management
Michael J. LaBella, CFA
Head of Global Equity Strategy
The QS Low Volatility High Dividend Index (the “Index”) seeks to provide more stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields and lower price and earnings volatility. The Index is based on a proprietary methodology created and sponsored by QS Investors, LLC (“QS”). The Index is composed of stocks of U.S. companies across a wide range of market capitalizations, including the largest 3,000 U.S. stocks as determined by the Solactive US Broad Market Index. Stocks in the Index must have demonstrated profitability over the last four fiscal quarters as a whole. Stocks whose yields are not supported by earnings are excluded from the Index. The methodology calculates a composite “stable yield” score, with the yield of stocks with relatively high price and earnings volatility adjusted downward and the yield of stocks with relatively low price and earnings volatility adjusted upward. QS anticipates that the number of component securities in the Index will range from 50 to 100. As initially constituted and balanced, no individual component of the Index will exceed 2.5% of the Index, no individual sector (as defined by QS) will exceed 25% of the Index, and real estate investment trust (“REITs”) components as a whole will not exceed 15% of the Index. The Index’s components are reconstituted annually and rebalanced quarterly. The composition of the Index after annual reconstitution and rebalancing may fluctuate and exceed the aforementioned limits due to market movements. The components of the Underlying Index, and the degree to which these components represent certain sectors and industries, may change over time.
What I Should Know
Equity securities are subject to price fluctuation and possible loss of principal. Dividends are not guaranteed, and a company may reduce or eliminate its dividend at any time. In rising markets, the value of large-cap stocks may not rise as much as smaller-cap stocks. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. The Fund may focus its investments in certain industries, increasing its vulnerability to market volatility. Real estate investment trusts (REITs) are closely linked to the performance of the real estate markets. REITs are subject to illiquidity, credit and interest rate risks, and risks associated with small and mid-cap investments. There is no guarantee that the Fund will achieve a high degree of correlation to the index it seeks to track. The Fund does not seek to outperform the index it tracks, and does not seek temporary defensive positions when markets decline or appear overvalued. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance.
Performance shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than the original cost. Market price returns are typically based upon the mid-point between the bid and ask on the fund’s principal trading market when the fund’s NAV is determined, which is typically 4 pm eastern time (US). These returns will not represent your returns had you traded shares at other times.
Shareholders may pay more than net asset value when they buy Fund shares and receive less than net asset value when they sell those shares, because shares are bought and sold at current market prices.
*Distribution rate is calculated by annualizing the most recent distribution amount paid, excluding special distributions, divided by the closing market price or NAV.
**Gross expenses are the Fund's total annual operating expenses. There are currently no fee waivers in effect, so gross and net expenses are identical.
IMPORTANT HOLDINGS INFORMATION: Portfolio holdings are based on total portfolio, and are subject to change at any time. Holdings are provided for informational purposes only and should not be construed as a recommendation to purchase or sell any security. Any negative allocations or allocations in excess of 100% are primarily due to unsettled trade activities.
Distributions are not guaranteed and are subject to change.
The per share distribution amounts presented above reflect the distribution rates that were paid to shareholders on the indicated payable dates. The character of distributions for certain funds may have been subsequently adjusted for tax purposes. Shareholders can determine which funds may have reclassified the tax character of distributions by visiting the Tax Center in Account Services. Information on reclassifications for distributions paid during the current calendar year will not be available until the first quarter of the following year.
When the value of a fund holding increases, the fund has an unrealized capital gain until the fund sells or otherwise disposes of the holding. Upon disposition of the appreciated holding, the fund realizes the gain. Under U.S. tax laws, during its taxable year, a fund must distribute all capital gains that it has realized from the disposition of fund holdings, net of realized losses, so the fund will not be subject to an entity level income tax.
Consequently, a fund’s capital gain distribution in a particular year is a result of the disposition of holdings that may have appreciated in value, perhaps during prior years when the fund’s returns were positive. To the extent that a fund has long-term capital gains that exceed current period and deferred short-term capital losses from a prior year, a fund may have distributable gains that will be distributed to shareholders. Such gains would be distributed to shareholders as a long-term capital gain distribution no matter how long the shareholder has owned shares in the mutual fund.
While the fund may itself gain or lose value over the course of a year, a capital gain distribution paid by the fund may not be indicative of current performance of the fund. The distributable amount of net capital gains are calculated under U.S. tax laws and are paid on a per-share basis to all investors who hold shares of the fund on the record date of the distribution. A shareholder must report the amount of net gains distributed to them on their income tax return regardless of when the gains or losses arose in the fund.
Please see a fund’s annual report for specific information regarding distributions and unrealized capital gains.
Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the promotion or marketing of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Each investor’s tax situation is different, and is based on an individual’s tax bracket, type of account used for investment and other factors. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.
IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.
Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully.
Authorized participants ("APs") may acquire shares in the primary market directly from the ETFs and may tender their shares for redemption directly to the ETFs, at net asset value per share only in Creation Units or Creation Unit Aggregations. Once created, shares of the funds generally trade in the secondary market in amounts less than a Creation Unit.
Retail investors buy and sell shares of ETFs at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for purchase or redemption directly from the ETF.
Legg Mason Investor Services, LLC (LMIS) serves as the distributor of Creation Units for the ETFs on an agency basis. LMIS does not maintain a secondary market in the funds' shares.
If you are neither a resident nor a citizen of the United States or if you are a non-U.S. entity, the ETF's ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. federal withholding tax, unless a lower treaty rate applies. For further information, please see each fund’s prospectus.
Redemption payments will be effected within the specified number of calendar days following the date on which a request for redemption in proper form is made. Please see each fund’s statement of additional information (SAI) for more information.
FINANCIAL ADVISORS: Please note that not all products may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.
Exchange Traded Funds (ETFs) — A type of investment company which is bought and sold on a securities exchange. ETFs generally represent a portfolio of securities, derivative instruments, currencies or commodities. The risks of owning an ETF generally reflect the risks of owning the underlying securities or commodities the ETF is designed to track. ETFs also have management fees and operating expenses that increase their costs.
Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.