Product review: Legg Mason ClearBridge Tactical Dividend Inc

The Legg Mason ClearBridge Tactical Dividend Income fund focuses on income-producing equity and equity-related securities including high dividend stocks, energy-oriented companies, master limited partnerships (MLP) and real estate investment trusts (Reits).

Its aim is to deliver a consistent level of income while seeking to protect capital and is particularly concerned with energy infrastructure support services.

The fund, which launched on 3 June 2013, is domiciled in Dublin and is managed by Mark McAllister and Peter Vanderlee. The annual management charge for the retail share class is 1.5 per cent and a minimum investment of £1,000 applies. The fund is benchmarked against the Dow Jones US Select Dividend Index and is closely aligned to Legg Mason’s existing ClearBridge strategy based in the US.

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Legg Mason is pinning great hope on the US energy boom and is proposing to offer a consistent return stream based on direct or indirect investment in a wide variety of income-producing vehicles, including the lesser-known MLP structure.

The managers are right to look to the US energy market for increased growth at this time: production of renewable energy is increasing, and there are some plans for new nuclear power plans, but only shale gas and oil could currently be described as a “boom”.

As far as it is possible to ascertain, the energy-oriented companies and infrastructure-oriented MLPs are involved in the acquisition and distribution process for shale oil and gas. This fund may therefore be unsuitable for the socially responsible investor – or even those who have specific concerns in this area – since putting money into processes that perpetuate the need for fracking may be contrary to their ethical standpoint.

The presence of Reits in the fund offers exposure to US real estate. These trusts are generally performing well and this strategy corresponds with Mark McAllister’s expertise of the US property market.

The fund is being pitched as a complement to the Legg Mason US Equity Income fund, but since it has 89.54 per cent of its equity allocation in the US, to invest in both funds would result in huge exposure to America and limit geographical diversity.