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New growth to increase fixed income opportunities
Investors looking for higher yields and greater portfolio diversification will have an expanded range of fixed income opportunities to choose from, according to fixed income manager and Legg Mason affiliate Western Asset Management.
Legg Mason has also launched a new fixed income strategy that aims to exploit these opportunities within global credit markets.
Traditional methods of managing fixed income assets will change as emerging markets such as China exert increasing influence, according to the head of Australian fixed income at Western Asset Management, Anthony Kirkham.
“Australian bond investors used to pay close attention to the US to form a macro view of the world but this will change as the influence of markets such as China and India grow,” Kirkham said at the Legg Mason Investment Symposium in Sydney.
“Australia’s mainstream interest rate strategy will become strongly influenced by China in particular, and we are all going to have to become competent China analysts in the same way we are with developed markets.”
Changing economic fundamentals and under researched sectors offer value for early adaptors, he said.
Diversification opportunities would grow as newer markets such as Asian bonds evolve, while yields outside G3 markets will be higher in a stronger growth environment, but the changes would present challenges in Australia, he said.
“Australian investors are particularly heavily impacted by the shifting market environment as the Australian economy becomes more integrated into the faster growing Asian region and less influenced by the G3 economies,” he said.
The Legg Mason Western Asset Management Global Credit Absolute Return Fund offers investors the flexibility to benefit from both rising and falling credit markets through its ability to short credit sectors and individual securities, Kirkham said.
At this stage, the fund would target returns of 8-10 per cent per annum over three years with a volatility of 8-10 per cent, he said.
The strategy would be led by UK-based head of non US credit Dipankar Shewaram and is currently available to Australian institutional investors via direct mandates.
AUTHOR
Mike Taylor
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