Legg Mason is planning to launch a UCITS version of its global high yield fund, managed by its US subsidiary Brandywine Global, reported Citywire Global this week. Based in Philadelphia, Brandywine Global runs the Brandywine Global High Yield fund and it will soon by made available to European investors in a UCITS format, although exact timings are not yet known. Gerhardt Herbert, Brian Kloss and Regina Borromeo (pictured) will co-manage the new fund. A top-down approach combined macroeconomic and currency analysis will be used to construct a portfolio of between 50 and 100 global corporate high yield bonds, in addition to using quant screens. The largest exposure in the Brandywine fund is in the communications sector at 23 per cent, followed by energy at 15 per cent. Over three quarters (78 per cent) of the fund’s assets are invested in the US which has a much bigger, more developed corporate bond market than Europe. Only 14 per cent of assets are invested in Europe, and just 5.5 per cent in the UK.
The managers said that the key question investors must answer in 2012 is how European manufacturing weakness will impact other parts of the global economy. In a December factsheet they wrote that although the three primary global markets are the US, Europe and China the decline in manufacturing “may have a significant impact on the emerging economies if those economies do not have the appropriate fiscal and monetary response”. They also pointed out: “We continue to believe that high yield should offer a reasonable level of return for the next 12 to 18 months as the default rate continues to remain within reasonable historical bounds and central banks continue to provide ample liquidity.”