Legg Mason Dividend Strategy Balanced Tax-Favored Portfolios aims to meet long-term financial goals with dividend income, dividend income growth and long-term capital appreciation. The portfolios use municipal bonds to limit portfolio volatility, and offer a balanced approach to diversification.
The strategy seeks to:
- generate dividend income
- achieve growth of dividend income
- achieve long-term capital appreciation
- utilize fixed income as an anchor to manage volatility in the overall portfolio, as well as to provide income that is exempt from regular U.S. income tax and total return.
We believe that:
- A total return portfolio—with exposure to companies that either pay an existing dividend or have the potential to pay and/or significantly grow their dividends—combined with the potential added stability of tax-favored municipal bonds to help manage volatility—has the potential to outperform over the long term
- Competitive risk-adjusted returns may be achieved by investing in select large- and mid-cap companies complemented by investment-grade securities within the municipal bond market and by seeking to limit portfolio turnover to capitalize on potential for long-term growth
Equity investment process
Fixed Income 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
Interest rate exposure/Duration weighting
Western Asset’s investment team comprehensively analyzes a variety of domestic and international macroeconomic factors to establish a duration target
Evaluate stocks using proprietary discipline
Screen for companies across all market sectors with either an attractive dividend yield, a history of (or prospects for) dividend growth, strong balance sheets, dominant positions and/or reasonable valuations
Term structure weighting
The Firm carefully employs strategies in an attempt to take advantage of changes in the yield curve’s shape and shifts in the relationship between short-, intermediate-, and long-maturity securities.
Select securities and construct portfolio
Conduct fundamental research and dividend analysis to identify companies with attractive growth characteristics relative to their valuation levels
Western Asset believes that the value can be added to a portfolio by actively rotating among, and within, different sectors of the Municipal bond market. The investment team studies the fundamental factors that influence sector spread relationships.
Re-examine a current holding when valuation is realized, fundamentals deteriorate, and/or cyclical shifts alter industry’s attractiveness
Using a bottom-up process, the Firm seeks to identify issuers with changing credit characteristics and securities that are undervalued and out of favor due to unusual circumstances.
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
One of the world’s leading global fixed income managers. Founded in 1971, the firm is known for team management and proprietary research, supported by robust risk management and a long-term fundamental value approach.
With a legacy dating back over 50 years, ClearBridge Investments is a leading global equity manager committed to delivering differentiated long-term results through authentic active management.
Managing Director, Senior Portfolio Analyst, Portfolio Manager
Michael Clarfeld, CFA
Managing Director, Portfolio Manager
Co-Chief Investment Officer, Managing Director, Portfolio Manager
Managing Director, Portfolio Manager
Peter Vanderlee, 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.
What I Should Know
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. Limited investments also may be made in non-dividend paying stocks that are not expected to pay a dividend in the near future. The managers may sometimes hold significant portions of portfolio assets in cash equivalents while waiting for buying opportunities. Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities falls. Fixed income securities are subject to illiquidity risk, which is the risk that securities may be difficult to sell at certain prices when no market participants are willing to purchase the securities at such prices. A general rise in interest rates may lead to increased portfolio volatility.
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.
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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*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.
Legg Mason Private Portfolio Group, LLC ("LMPPG") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Legg Mason Private Portfolio Group, LLC has been independently verified for the periods January 1, 2013 - December 31, 2017. 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.
Legg Mason Private Portfolio Group, LLC is a wholly-owned subsidiary of Legg Mason, Inc. LMPPG, together with its Subadvisers ClearBridge Investments, LLC ("ClearBridge"), Martin Currie Inc. ("Martin Currie"), QS Investors, LLC ("QS"), RARE Infrastructure (North America) Pty Ltd ("RARE"), Royce & Associates, LP ("Royce") and Western Asset, provides investment advisory services primarily in investment programs sponsored by Sponsor Firms. The investment advisory services LMPPG and the Subadvisers provide differ depending on the type of Sponsor Firm investment program in which a client participates. ClearBridge, Martin Currie, QS, RARE, Royce and Western Asset claim compliance with the Global Investment Performance Standards (GIPS®) and have been independently verified through December 31, 2017. The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPSstandards 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. LMPPG has used Subadvisers for all periods presented.
The Legg Mason Dividend Strategy Balanced Tax-Favored 60/40 composite consists of discretionary wrap accounts with an account minimum of US $25,000. The strategy aims to meet long term financial goals with dividend income, dividend income growth and long-term capital appreciation. The portfolios use municipal bonds to manage portfolio volatility, and offer a balanced approach to diversification. The main risks of this strategy are General Investment Risk, Small Cap Risk, Mid Cap Risk, Credit Risk, Interest Rate Risk, Illiquidity Risk, and Geographic Concentration 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. 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. Data prior to January 2013 is not displayed because that data is non GIPS compliant. The three-year annualized ex-post standard deviation is not available prior to 2015 because the composite did not have 36 months of GIPS compliant 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.
The composite uses the following blended benchmark 60% S&P 500® / 40% Bloomberg Barclays Municipal 5 Year which is rebalanced monthly. Benchmark returns are not covered by the report of independent verifiers.
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.
The Bloomberg Barclays Municipal 5 Year is a capitalization weighted bond index intended to be representative of major municipal bonds of all quality ratings with an average maturity of approximately five years.
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.
Certain SMA products may not be available at all firms.