More than NZ$800 million (A$742 million) could transfer to a new NZ-domiciled Legg Mason product in a deal that also opens up the popular institutional Brandywine fixed income fund to retail investors for the first time. It is seen as setting a new trend in locally constructed product across the Tasman.
Andy Sowerby, Australian head of Legg Mason, said the portfolio investment entity (PIE) version of the group’s Brandywine Global Opportunistic Fixed Income Fund – to be officially launched in New Zealand this week – was created to meet the strong demand from NZ clients for a tax-efficient solution.
“NZ investors have already entrusted more than $NZ800 million invested in the Brandywine Global strategy and a sizable portion of this money is expected to move across to the new PIE fund,” Sowerby said.
The Brandywine opportunistic fixed income fund, which follows a ‘benchmark agnostic’ concentrated portfolio investment strategy, manages some US$28 billion globally, including marquee NZ clients such as the approximately NZ$4 billion Government Superannuation Fund.
As well as providing a more tax-efficient vehicle for wholesale clients the new Brandywine PIE fund, registered under the
Financial Markets Conduct Act regime, would also be available to retail investors, in a first for Legg Mason in NZ.
“Having a PIE fund provides a solution that is open to both wholesale and retail investors, while also providing regulatory oversight and the tax benefits and associated with the regime,” Sowerby said. “We look forward to building relationships with financial advisory groups, investment platforms and retail clients with this commitment to the New Zealand market.”
Chris Douglas, Morningstar Asia-Pacific director of manager research ratings, said the Brandywine PIE, offered under a ‘fund-hosting’ agreement in NZ by Wellington-based firm Implemented Investment Solutions (IIS), provided a much-needed new international fixed income option for retail investors and advisers.
“High quality active global fixed income PIE funds are hard to find in New Zealand, especially those with a competitive price,” Douglas said. “It’s very pleasing to see Legg Mason bring their highly successful Legg Mason Brandywine Global Opportunistic Fixed Income Fund to New Zealand investors in a PIE structure and hedged back to NZD.”
Likewise, Ben Trollip, Melville Jessup Weaver (MJW) principal and head of investment consulting, said the new Brandywine PIE structure would offer greater choice for NZ wholesale investors.
“From an investment consultant’s perspective, this gives us further tools with which to tailor NZ clients’ portfolios,” Trollip said in the release.
According to the latest MJW quarterly investment survey, the Brandywine fund returned 7.8 per cent over the five years to December 31, 2017, compared to the benchmark 5.5 per cent. While the fund had a rough final quarter (down 0.7 per cent), Trollip said it bounced back strongly in January.
IIS chief, Anthony Edmonds, said the precedent-setting launch of the Brandywine fund could open the PIE door for other products in the Legg Mason stable and from other global managers.
Legg Mason invests about A$962 billion globally via its network of nine ‘affiliate’ managers including Western Asset Management, QS Investors and Martin Currie.
IIS currently acts as fund host for two other managers: the Australian property fund APN and the NZ-domiciled Hunter global fixed income product.
While the almost $600 million Hunter fund is managed by PIMCO, Legg Mason is the first major global player to stamp its own name on a PIE.
“The fact that a global funds giant like Legg Mason has opted to structure a product specifically for the NZ market – rather than taking the usual route of offering an offshore-domiciled fund – is also evidence of the growing attractiveness of NZ as an investment destination,” Edmonds said. “It’s great to see international fund managers competing directly in NZ with locally-designed products – we expect other firms will follow suit.”
– David Chaplin, Investment News NZ