The FSA Spy market buzz – 4 October 2024
Schroders is hiring, Federated Hermes warns on PE exits, Fidelity thinks China is cheap, Pictet likes, gold and emerging markets, S&P 500 dividend woes, October’s volatility and much more.
The two funds clearly have different investment universes. Legg Mason Clearbridge aims to generate long-term capital appreciation through holdings in a concentrated group of large cap US companies that dominate their industries and have global reach.
In contrast, at least two-thirds of the Schroder fund’s portfolio can be invested in small- and mid-sized companies that are in the bottom 40% by market capitalisation in the US equities market.
“However, both funds adopt a cautious style. Although they seek growth, neither fund has a high beta, which provides them with a cushion during market declines. They both also have a bottom-up stock-picking approach,” said Tambe.
He identifies three tactical “buckets” that guide the Legg Mason Clearbridge strategy. The first includes non-cyclical stocks that evince stable growth and can benefit from disruptive technologies to improve earnings. The second are cyclical stocks, which typically comprises a quarter of the portfolio, but have been reduced as the economy nears the end of its growth cycle.
The managers are allowed more flexibility within the third bucket and can make more aggressive selections.
“Management quality is as important as financial ratios in their investment approach,” said Tambe.
The fund’s largest allocations are to the technology, consumer products and healthcare sectors. However, its biggest individual holdings are in dominant companies, such as Amazon and Microsoft.
“The fund is a core offering among the Legg Mason Clearbridge fund suite, so its primary emphasis is not growth at any price,” said Tambe.
The Schroder fund also differentiates between three discrete categories: companies that show strong growth trends and cash flows, but are mis-priced by the markets; so-called “steady Eddies” that generate reliable earnings and revenues; and recovering companies whose turnaround has often been prompted by a catalyst unrecognised by other investors.
“Plentiful free cash flow is the common criteria for stock selection within each category, so the fund usually avoids companies with high leverage or R&D expenditure,” said Tambe.
Both funds emphasise the importance of deep fundamental company analysis and valuation as the key determinant for stock selection.
Legg Mason | Schroder | |
Size |
$1.45bn |
$1.73bn |
Inception |
2007 |
2006 |
Manager | Peter Bourbeau, Margaret Vitrano | Jenny Jones, Robert Kaynor |
Three-year cumulative return* |
50.92% |
36.71% |
Three-year annualised return** |
13.82% |
10.20% |
Three-year annualised alpha** |
2.24% |
1.69% |
Three-year annualised volatility** |
14.00 |
12.54 |
Morningstar analyst rating |
– |
Bronze |
Morningstar star rating |
**** |
*** |
FE Crown fund rating |
***** |
** |
OCF (retail share class) |
1.74% |
1.84% |
Market Exposure:
Sector Weightings (31 Dec 2018)
Sector % | Legg Mason* | Schroder** |
Technology |
33.95 |
18.23 |
Healthcare |
16.93 |
8.39 |
Consumer |
14.53 |
12.24 |
Financials |
11.05 |
16.75 |
Industrials |
8.46 |
18.04 |
Top 5 holdings (31 December 2018)
Legg Mason* | % weighting | Schroders** | % weighting |
Amazon |
6.14 |
Schroder ISF US Dollar Liquidity |
3.26% |
Mircrosoft |
4.59 |
Aramark |
1.99 |
Visa |
3.63 |
Advance Auto Parts |
1.80 |
3.59 |
Dentsply Sirona |
1.75 |
|
Alphabet |
3.28 |
Reinsurance Group of America |
1.71 |
Schroders is hiring, Federated Hermes warns on PE exits, Fidelity thinks China is cheap, Pictet likes, gold and emerging markets, S&P 500 dividend woes, October’s volatility and much more.
Part of the Mark Allen Group.