0914 Monthly Commentary Legg Mason Global Funds plc Legg Mason ClearBridge US Aggressive Growth Fund Performance1 to 30/09/2014 Legg Mason ClearBridge US Aggressive Growth Fund Russell 3000 Growth Index QUICK VIEW Key performance drivers The Legg Mason ClearBridge US Aggressive Growth Fund fell 1.93%1 in US dollar terms in September, underperforming its benchmark, the Russell 3000 Growth Index, which was down 1.75%. The Fund has outperformed its benchmark for the third quarter and year to date. Energy detracted at both the sector and stock levels. Healthcare exposure was positive both in September and the third quarter as a whole. Stock picking in information technology detracted over the quarter. Views and positioning The Fund’s largest overweights remain in the healthcare and energy sectors. The largest underweight exposures are in consumer discretionary, industrials and financials. The Fund maintained its lack of exposure to companies in utilities, telecommunication services and consumer staples. Current activity and manager outlook The manager will be taking advantage of recent volatility to add to some of the Fund’s holdings. The manager continues to expect the merger and acquisition environment to be robust, as companies starved for growth seek to find it through accretive acquisitions. The manager, as it always has, seeks to invest where it finds growth in earnings and cash flow, as well as good management teams and solid balance sheets. 1 Month 3 Months YTD -1.93% -1.75% 1.16% 0.88% 12.91% 6.91% Past performance is no guide to future returns and may not be repeated. Market Review US equities struggled slightly in September amid widespread concerns amongst investors about the health of the global economy, especially in Asia and Europe, as well as persistent fears regarding geopolitical issues in the Middle East and Ukraine. Oil prices fell over the month with markets anticipating that lower growth would mean a weaker demand for oil despite a steady supply. As a result, energy company shares were particularly badly affected, although almost all areas of the US equity market were down over the month. Defensive sectors proved most resilient, with consumer staples and telecommunication services (telecoms) the only sectors in the Russell 3000 Growth index in positive territory. Against this backdrop, the index was down 1.75% in US dollar terms in September, underperforming the S&P 500 index, which fell 1.40%. Fund Review The Legg Mason ClearBridge US Aggressive Growth Fund fell 1.93%1 in US dollar terms in September, underperforming its benchmark, the Russell 3000 Growth Index, which was down 1.75%. However, the Fund outperformed its benchmark over the third quarter as well as the year-to-date period. In September, energy was the single biggest detractor at both the sector and stock levels. The sector was by far the worst performer during the month, against a backdrop of falling oil prices, and overweight exposure here was detrimental. In terms of stock selection, Anadarko Petroleum and Weatherford International declined heavily over the month. Nonetheless, both are up significantly year to date. Healthcare exposure was positive, despite top holding Biogen Idec being down over the month (although it is still up considerably year to date). UnitedHealth fell only slightly, while Actavis and Vertex were up approximately 6% and 20%, respectively. The Fund’s considerably overweight allocation also added value. Within information technology (IT), Broadcom, Citrix and Autodesk were up while SanDisk was flat over the month in absolute terms. However, Seagate Technology fell in September, while Cree, which released disappointing earnings and warned on its fiscal first quarter due to weakness in LED products segments, was down in September and the third quarter. However, the manager’s long-term investment case is intact, with LED lighting continuing to gain market share as unit costs continue to fall. For the third quarter, healthcare, the best-performing sector, added value, owing to the Fund’s overweight exposure and strong stock selection particularly in biotechnology. Conversely, stock picking in IT (e.g. Cree, Nuance Communications) and overweight exposure to energy weighed on relative performance in the July to September quarter. The Fund’s largest active overweight allocations continue to be in the healthcare and energy sectors, while its largest underweight exposures included the industrials, financials and consumer discretionary segments (although the Fund still has a significant exposure to cable and media companies within this space). The manager maintained the Fund’s lack of exposure to companies in the utilities, telecoms and consumer staples sectors. FOR DISTRIBUTOR USE ONLY, NOT TO BE DISTRIBUTED TO THE PUBLIC OR END INVESTORS Brandywine Global • ClearBridge Investments • LMM • Martin Currie • Permal • QS Investors • Royce & Associates • Western Asset 0914 Monthly Commentary Legg Mason Global Funds plc Legg Mason ClearBridge US Aggressive Growth Fund Outlook The recent pullback was expected by the manager and it has been keeping “dry powder” for precisely that purpose. As such, the manager will be taking advantage of recent volatility to add to some of the Fund’s holdings. It is also worth noting that, despite recent weakness, a number of the Fund’s holdings have performed well for the year to date, with the Fund increasing 12.9 % against the benchmark’s 6.91% and the S&P 500’s 8.34% returns over this period. Looking further ahead, the manager continues to expect the merger and acquisition environment to be robust, as companies starved for growth seek to find it through accretive acquisitions. Although interest rates remain at historically low levels, cues from the US Federal Reserve about a rising-rate environment may be helping to pull forward deals. So far, the Fund has seen increased levels of takeovers, both on the acquisition side (e.g. Comcast and Time Warner Cable) and the target side (e.g. Forest Laboratories and Actavis). In the manager’s opinion, large segments of the market (such as utilities and telecoms) appear expensive, while healthcare, energy, media and some parts of information technology continue to offer the best combination of attractive valuations, solid fundamentals and the potential for consolidation. The manager believes that many of the names that have been added to the portfolio recently should benefit from lower oil prices. Many of the energy names held are still profitable at $60 & $65 per barrel so the manager does not think low oil prices will impact the business as much as it will their stock prices. The manager believes that, as the consumer benefits from the lower cost of capital and lower costs of energy, global growth will ultimately benefit over the long term and that near-term global concerns are already priced into these energy names. The market this year, as expected by the manager, is proving much more challenging, against a backdrop of disappointingly subdued economic recovery. Nonetheless, the manager continues to see compelling opportunities. Due to the manager’s bottom-up, fundamentaldriven stock selection process, the Fund tends to look very different to the benchmark index. The manager, as it always has, seeks to invest where it finds growth in earnings and cash flow, as well as good management teams and solid balance sheets. On the whole, the manager believes that the market is actually becoming more and more attractive in light of recent downside volatility events. This Fund is managed by ClearBridge Investments 1 Source: Legg Mason as at 30/09/2014 for Class A Distr. (A) US Dollar shares. Cumulative performance is calculated on a NAV to NAV basis, with gross income reinvested and after deduction of annual fund expenses. Past performance is not a reliable indicator of future results. This is a sub-fund ("fund") of Legg Mason Global Funds plc (“LMGF plc”), an umbrella fund with segregated liability between sub-funds, established as an open-ended investment company with variable capital, organised as an undertaking for collective investment in transferable securities (“UCITS”) under the laws of Ireland as a public limited company pursuant to the Irish Companies Acts and UCITS regulations. LMGF plc is authorised in Ireland by the Central Bank of Ireland (the “Central Bank”). It should be noted that the value of investments and the income from them may go down as well as up. Investing in a sub-fund involves investment risks, including the possible loss of the amount invested. Past performance is not a reliable indicator of future results. An investment in a sub-fund should not constitute a substantial proportion of an investor’s investment portfolio and may not be appropriate for all investors. Investors’ attention is drawn to the specific risk factors set out in a fund’s share class key investor information document (“KIID”) and LMGF plc’s prospectus (the “Prospectus”). Individual securities mentioned are intended as examples only and are not to be taken as advice nor are they intended as a recommendation to buy or sell any investment or interest. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors. Investment in company shares: The fund invests in shares of companies, and the value of these shares can be negatively affected by changes in the company, its industry or the economy in which it operates. Geographical location: This fund invests primarily in one country or region, which means that it is more sensitive to local economic, market, political or regulatory events in that one country or region, and will be more affected by these events than other funds that invest in a broader range of regions. Concentrated fund: The fund invests in fewer companies than other funds which invest in shares usually do. This means that the fund does not spread its risk as widely as other funds and will therefore be affected more if an individual company has significant losses. Fund operations: The fund is subject to the risk of loss resulting from inadequate or failed internal processes, people or systems or those of third parties such as those responsible for the custody of its assets. This material is not necessarily a complete summary and is not intended, for example, as a complete analysis. The information and data in this material (that may include without limitation research, forecasts, figures, opinions, statements, trends, investment techniques and strategies) has been prepared from sources believed reliable but is not guaranteed in any way by Legg Mason Investments (Europe) Limited nor any Legg Mason, Inc. company or affiliate (together “Legg Mason”). No representation is made that the information or data is correct as of any time subsequent to its date. Further there is no guarantee or assurance that funds will achieve their investment objectives. Before investing investors should read in their entirety LMGF plc’s application form and a fund’s share class KIID and the Prospectus (which describe the investment objective and risk factors in full). These and other relevant documents may be obtained free of charge in English, French, German, Greek, Italian, Norwegian and Spanish from LMGF plc’s registered office at Riverside Two, Sir John Rogerson’s Quay, Grand Canal Dock, Dublin 2, Ireland, from LMGF plc’s administrator, BNY Mellon Investment Servicing (International) Limited, at the same address or from www.leggmasonglobal.com. This material is not intended for any person or use that would be contrary to local law or regulation. Legg Mason is not responsible and takes no liability for the onward transmission of this material. This material does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London, EC2M 3AB. Registered in England and Wales, Company No. 1732037. Authorised and regulated by the UK Financial Conduct Authority. This information is only for use by professional clients, eligible counterparties or qualified investors. It is not aimed at, or for use by, retail clients. October 2014
© Copyright 2024