ClearBridge Small Cap Portfolios

Investment Overview

ClearBridge Small Cap Portfolios systematically and actively seek investments in small-cap equities that offer the potential for long-term capital appreciation.
 

Investment objective

Long-term capital appreciation
 

Investment Philosophy

  • Valuation Driven Process: markets are not always efficient. Our process seeks investment opportunities where the price of the stock and the value of the corporation differ.
  • Team Based: exploit behavioral errors. Our cognitively diverse team looks to improve the questions we ask and the assumptions we make about each investment.
  • Diversification: in pursuit of the goal of building a resilient portfolio.
     

Portfolio Positioning

  • Designed for investors seeking long-term capital appreciation
  • The strategy seeks to offer a high active share investment approach to its stock selection
  • Invests in stocks of small-cap companies whose market price appears attractive in relation to manager’s assessment of their intrinsic value
     

Key Differentiators

  • Repeatable, proprietary process designed to form explicit variant perceptions relative to expectations embedded in the stock price
  • Team-driven approach that leverages cognitive diversity in order to improve the questions we ask and assumptions we make
  • Diversification across a multitude of vectors (sectors, industries, economic drivers, quantitative characteristics, etc.) with the goal of building a resilient portfolio, one that can outperform in a variety of market conditions
     

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

 

 

Investment
process

Generate ideas

  • Source ideas systematically using a variety of quantitative and qualitative tools

Analyze securities

  • Analyze industry structure and competitive position
  • Evaluate management, ROIC versus the cost of capital, and free cash flow potential
  • Understand the expectations embedded in the current stock price
  • Develop a range of potential future values using multiple valuation approaches

Make decisions, seeking to balance risk and return

  • Select stocks based on impact to the portfolio’s overall risk-adjusted returns
  • Weight positions based on the risk of capital impairment, diversification characteristics that a position brings to the portfolio, potential for value appreciation
  • Actively manage weights based on 3- to 5-year return potential

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.


Meet Your Managers

Albert Grosman

Managing Director, Portfolio Manager

Brian Lund, CFA

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 Small Cap 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.  Substantial investments may be made in speculative and/or small-cap and mid-cap companies which involve a higher degree of risk and volatility than investments in larger, more established companies. In addition, because the investments may be concentrated in a limited number of industries and companies, the portfolios may involve heightened risk.  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. 

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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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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 Small Cap SMA GIPS® Endnotes Inception date: November 2015. Composite creation date: November 2015.
Period Total
net
return
(%)
Total
*pure
gross
return
(%)
R2000
return
(%)
Number
of
portfolios
Bundled
fee
portfolios
(%)
Composite
dispersion
(%)
Composite
3 Yr.
St. Dev.
Benchmark
3Yr.
St. Dev.
Composite
assets
($mm)
Firm
assets
(%)
Total
firm
assets
($mm)
2016 28.73 32.51 21.31 6 100 n/m n/a n/a 1.1 0.0 100,936.9
Nov-Dec 2015
-2.86 -2.37
-1.93
<5
100 n/m
n/a
n/a
0.1 0.0 92,536.4

*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.

n/m - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.

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 Small Cap SMA composite consists of discretionary wrap accounts with an account minimum of $25,000. Accounts within the composite will generally invest in equity securities of U.S. companies that are within or below the market capitalization range of the Russell 2000 Index and that trade at significant discounts to the Investment Manager's assessment of intrinsic value. The strategy is designed for long-term investors who can tolerate the greater risks associated with small capitalization stocks. Under normal circumstances, the strategy will hold a portfolio of securities issued by small capitalization companies. These may include, but are not limited to, common stock, preferred stock, convertible securities, non-U.S. securities, ADR's, ETF's, and money market instruments. Clients should be aware of the possibility of high portfolio turnover, as the length of time a security is held is not generally a consideration with investment decisions. The main risks of this strategy are General Investment Risk, Small Cap Risk and Non-U.S. Investment Risk.

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. 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. The three-year annualized ex-post standard deviation is not available because the composite does not have 36 months of data. 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 Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe.

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.

Certain SMA products may not be available at all firms. 

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