Legg Mason equity income fund seeks exposure to US economy

Domiciled in Dublin, the Legg Mason ClearBridge Tactical Dividend Income fund – which seeks to closely mirror the $417m (£280m) US-based original – will be managed by ClearBridge Investments, Legg Mason’s largest subsidiary with $68bn (£45bn) assets under management.

The primary source of investment for the fund will be income-producing equities that offer exposure to an improving US economy.

Direct and indirect investment will be sought in master limited partnerships, high-yielding listed limited partnerships that offer infrastructure support services, including pipelines, storage facilities and processing plants and real estate investment trusts.

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Mark McAllister, managing director and portfolio manager for ClearBridge – who specialises in real estate investment trusts – will take the helm of management duties alongside Peter Vanderlee, who also co-manages Legg Mason’s US Equity Income fund.

With minimum investment set at £1000, charges include an annual management fee of 1.5 per cent for the retail A share class and an initial fee of 5 per cent.

Adam Gent, head of UK sales for Legg Mason, said that beyond traditional income generating areas the fund would seek additional growth opportunities from the “extraordinary US renaissance in energy production.”


Adviser view

Sarah Del Bravo, financial adviser for Essex-based Grangewood Financial Management, said: “As with any fund that aims to provide a high level of income, careful consideration of the investment risks is key. The prospectus of the existing US version of this fund is nearing war and peace with its risk disclosures, and so it should be. MLPs may not be so familiar as a US invention and I would recommend that we are comfortable with these instruments before advising clients to invest – master limited partnerships could be affected by the weather, as well as the more common legislative changes, such as energy demand. The current US version is also not cheap, ranging from 1 per cent for the institutional version up to 2 per cent total expense ratio, and yet alpha over the last five years is lower than the fees. If it was appropriate for our clients to invest in such a specialist area I would ask myself whether it could be accessed at a cheaper rate and with better risk-adjusted returns.”

Provider view

Legg Mason’s head of UK sales Adam Gent said: “Yield-starved investors continue to seek alternatives to traditional sources of income as central banks keep rates at historically low levels. While the US has become a popular hunting ground for equity income investors, with corporate America increasingly responding to the needs of an ageing population by paying and raising dividends, the extraordinary US renaissance in energy production has also begun to produce some interesting opportunities in this lesser known space; an area in which ClearBridge has strong knowledge and experience.”


Annual management fees of 1.5 per cent and an initial charge of 5 per cent.


Exposure to high-yield US equities in times of a drought will appeal to the more risk-prone investor, as will the expertise of two fund managers who are very familiar with this asset class. However, for those seeking exposure to US income opportunities, it may be wise to seek out a cheaper alternative.