ClearBridge Appreciation Portfolios

Investment Overview

ClearBridge Appreciation Portfolios were designed for investors seeking long-term capital appreciation through investments primarily in a core portfolio of high-quality, large-capitalization companies. By investing in a diversified portfolio of growth and value stocks, the managers believe that they are able to position the portfolios to take advantage of changes in economic and market cycles.

 

Investment Philosophy

  • The managers seek to provide consistent and competitive risk-adjusted returns through a market cycle by balancing upside participation in good markets, while trying to limit downside risk during difficult markets. 
  • The managers invest in both growth and value stocks, consisting primarily of large-cap, blue chip companies that tend to have dominant market positions.

Generally, companies in the portfolio fall into one of the following categories: 

  • Companies that have assets or earning power that are undervalued or unrecognized by the market, or companies whose stock price has been driven down by cyclical factors. 
  • Companies with superior demonstrated and expected growth characteristics and whose stocks are available at reasonable prices due to temporary market-specific or stock-specific reasons. 
  • Companies the managers believe are well positioned to sustain or increase growth at a faster rate than market expectations. 

The managers use a disciplined valuation process that attempts to measure upside potential and downside exposure.

 

Portfolio Positioning

Low-volatility, core holding:

  • Balance upside participation in good markets, while trying to limit downside risk during difficult markets 
  • Core equities: manager has the flexibility to take advantage of both growth and value oriented markets
  • Typically focused on dominant “blue chips”
  • Demonstrates both growth and value characteristics
  • Great growth companies at reasonable prices
  • The managers may sometimes hold significant cash reserves as a portion of the portfolio while waiting for buying opportunities
 

Diversification does not guarantee a profit or protect against a loss.

There is no guarantee that the Portfolio's objectives will be met.

 

 

Investment
Process

Define the investment universe

Emphasize domestic large-capitalization stocks, but also consider mid- and small-capitalization companies and ADRs of foreign companies opportunistically.

Evaluate stocks using proprietary discipline

Screen for high-quality companies with dominant market positions, proven management teams and/or superior balance sheets across all market sectors. 

Select securities and construct portfolio

Conduct fundamental research to identify companies with attractive growth characteristics relative to their valuation levels, with a range of 40-60 stocks. 

Review holdings continuously 

  • Re-examine a current holding when valuation is realized, fundamentals deteriorate, insiders are selling and/or cyclical shifts alter industry’s attractiveness.
  • The managers may sometimes hold significant cash reserves as a portion of the portfolio while waiting for buying opportunities or to provide a hedge against possible stock market declines. 

The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. There is no guarantee investment objectives will be achieved.

 

 

meet your managers

Global investment manager with over 50 years of experience and long-tenured portfolio managers who seek to build income, high active share or low volatility portfolios.


Scott Glasser

Co-Chief Investment Officer, Managing Director, Portfolio Manager

Michael Kagan

Managing Director, Portfolio Manager

Active share is a measure of the percentage of stock holdings in a manager's portfolio that differs from the benchmark index.

To find out more about the ClearBridge Appreciation Portfolios, talk to your financial advisor.


 

What I Should Know
Before Investing

All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.  Investments may be made in small- and mid-cap companies, which involve a higher degree of risk and volatility than investments in large-cap companies.  While most investments are in U.S. companies, investments may also be made in ADRs and other securities of non-U.S. companies in developed and emerging markets which involve risks in addition to those ordinarily associated with investing in domestic securities, including the potentially negative effects of currency fluctuation, political and economic developments, foreign taxation and differences in auditing and other financial standards. These  risks are magnified in emerging markets.  The managers may sometimes hold significant portions of portfolio assets in cash equivalents while waiting for buying opportunities. 

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IMPORTANT INFORMATION: Past performance is no guarantee of future results. Management and performance of individual accounts may vary for reasons that include the existence of different implementation practices and model requirements in different investment programs.

Pure Gross performance shown does not reflect the deduction of investment management fees and certain transaction costs, which will reduce portfolio performance. Net performance includes the deduction of a 3% annual wrap fee for equity and balanced portfolios and a 1.5% annual wrap fee for fixed income portfolios. These deducted fees amounts are the maximum anticipated wrap fees. Actual fees may vary. For fee schedules, contact your financial professional or, if you enter into an agreement directly with Legg Mason Private Portfolio Group, LLC ("LMPPG"), refer to LMPPG's Form ADV disclosure document. Returns reflect the reinvestment of dividends and other earnings.

An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. 

Please see GIPS® endnotes for important additional information regarding the portfolio performance shown and for effects of fees. 

Performance Source: Legg Mason

Hypothetical growth of dollars: For illustrative purposes only. Assumes no withdrawals or contributions. The performance results shown were calculated assuming reinvestment of dividends and income and take into account both realized and unrealized capital gains and losses.

IMPORTANT INFORMATION: Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment adviser. Client portfolios are managed based on investment instructions or advice provided by one or more of the following Legg Mason-affiliated sub-advisers: ClearBridge Investments, and Western Asset Management Company. Management is implemented by LMPPG, the designated sub-adviser or, in the case of certain programs, the program sponsor or its designee.


Professional money management may not be suitable for all investors. Factual information relating to the securities discussed was obtained from sources believed to be reliable, but there can be no guarantee as to its accuracy. It should not be assumed that investments made in the future will be profitable or will equal the performance of the securities discussed in the material.

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Portfolio characteristics (Source: FactSet)

Source: FactSet. Portfolio characteristics are based on a model portfolio, not an actual client account. The model portfolio is a hypothetical portfolio whereby the portfolio characteristics are based on simulated trading and account activity of a client account invested in this strategy. The model portfolio assumes no withdrawals, contributions or client-imposed restrictions.

Portfolio characteristics of individual client accounts may differ from those of the model portfolio as a result of account size, client-imposed restrictions, the timing of client investments, market conditions, contributions, withdrawals and other factors. 

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ClearBridge Appreciation SMA GIPS® Endnotes Inception date: January 2006. Composite creation date: June 2008.
Period Total
net
return
(%)
Total pure
gross
return*
(%)
S&P 500
return
(%)
Number
of
portfolios
Bundled
fee
portfolios
(%)
Composite
dispersion
(%)
Composite
3 Yr.
St. Dev.
Benchmark
3Yr.
St. Dev
Composite
assets
($mm)
% of
firm
assets
Total
firm
assets
($mm)
2016 8.53 11.76 11.96 688 100 0.35 9.93 10.74 606.2 0.6 100,936.9
2015 -2.94 -0.02 1.38 859 100 0.28 10.46 10.62 619.0 0.7 92,536.4
2014 9.35 12.61 13.69 895 100 0.32 8.16 9.10 715.5 0.7 100,721.5
2013 27.82 31.58 32.39 911 100 1.04 10.75 12.11 688.0 0.8 85,024.7
2012 13.00 16.35 16.00 2,160 100 0.59 12.81 15.30 494.5 0.9 54,624.3
2011 1.42 4.46 2.11 2,081 100 0.58 15.91 18.97 398.1 0.8 50,870.8
2010 9.62 12.89 15.06 2,116 100 0.95 n/a n/a 378.9 0.7 55,366.5
2009 18.00 21.50 26.46 2,458 100 1.53 n/a n/a 392.8 0.7 53,522.7
2008 -27.54 -25.31 -37.00 2,500 100 1.95 n/a n/a 288.3 0.6 50,614.9
2007 6.14 9.31 5.49 3,096 100 1.33 n/a n/a 439.2 0.9 47,112.0

*Pure gross of fee returns do not reflect the deduction of any expenses, including transaction costs, and are presented as supplemental to the net of fee returns.

Compliance Statement:
ClearBridge Investments, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. ClearBridge Investments, LLC has been independently verified for the periods January 1, 1997 - December 31, 2016. The verification reports are available upon request.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

Firm Information:
ClearBridge Investments, LLC ("ClearBridge") is a wholly owned subsidiary of Legg Mason, Inc. ("Legg Mason"). The investment advisory business now known as ClearBridge was registered in September 2005 to facilitate Legg Mason's acquisition of substantially all the equity asset management businesses known as Citigroup Asset Management. These former businesses serve as the foundation of ClearBridge and its claim of GIPS compliance for institutional accounts through predecessor firms, effective as of January 1997. In June 2008, ClearBridge combined this business with its retail business to form a single GIPS firm. As of April 1, 2013 and January 1, 2016, ClearBridge's affiliates, Global Currents Investment Management, LLC, and ClearBridge, LLC, respectively, have become part of the ClearBridge GIPS firm.

Composite Information:
The ClearBridge Appreciation SMA composite consists of discretionary wrap accounts with an account minimum of US $25,000. Accounts within the composite are invested primarily in large capitalization companies, but may also invest in mid and small capitalization companies. The managers seek to create a diversified portfolio with investments in companies believed to have superior demonstrated or expected growth characteristics at reasonable prices. The main risks of this strategy are General Investment Risk, Small Cap Risk, Mid Cap Risk and Non-U.S. Investment Risk. Prior to June 2008, the minimum was $5,000.

Input and Calculation Data:
The fee schedule currently in effect is 3.00% on all assets. Net of fee composite returns are calculated by reducing each monthly composite pure gross rate of return by the highest "bundled" fee charged (3.00%) annually, prorated to a monthly ratio. The "bundled" fee includes transaction costs, investment management, custodial, and other administrative fees. Effective January 1, 2013, the number of portfolios reflects a change from prior periods due to an aggregation of accounts as reported by one sponsor. As of January 2014, the internal dispersion of annual returns is measured by the asset-weighted standard deviation of portfolio returns included in the composite for the entire year. For prior years, the equal-weighted standard deviation was used. Total firm assets for 2007 represents the CBI-Retail firm. The composite employed a 10% significant cash flow policy which was discontinued in January 2012. A list of composite descriptions is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Past performance is not necessarily indicative of future results.

Benchmark Information:
The S&P 500® Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks.

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 associated with hedge funds, alternative investments and other risks, performance and other important information. Review this information carefully before you make any investment decision.

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