Last updated: 22:30 / Monday, 20 February 2017
Interview with Legg Mason

Western Asset Macro Opportunities Bond Fund is Available to Brazilian Investors through a Local Feeder Fund

Western Asset Macro Opportunities Bond Fund is Available to Brazilian Investors through a Local Feeder Fund

At the beginning of January of this year, Roberto Teperman was appointed Head of Sales for Legg Mason Global Asset Management in Brazil. Previously, Roberto, who has a track record of almost 20 years in the financial industry, worked for Western Asset Management for 12 years, a subsidiary of Legg Mason that specializes in global fixed income solutions.

Over a year now, Roberto Teperman, based in Sao Paulo, has worked alongside Jorge Letelier, Regional Director for Legg Mason in South America, based in Santiago, Chile, in the development of feeder funds, which are investment vehicles that allow local investors to access funds in the UCITS format, and are registered in either Dublin or Luxembourg.

In October 2015, Legg Mason launched its first feeder fund in Brazil, the Legg Mason Western Asset Macro Opportunities Bond fund, an 'unconstrained' fixed income strategy that invests in a combination of investment grade and high-yield debt securities and derivatives. While the original strategy, which was launched in November 2013, is registered in Dublin and managed by a team headed by Kenneth Leech, CIO at Western Asset, which manages over US$ 4 billion in assets, the feeder fund has approximately US$ 100 million in assets.

The launch of this feeder fund was carried out shortly after the establishment of Instructions number 554 and 555 of the Brazilian Securities and Exchange Commission, which modified the definition of qualified investor, thus opening the fund distribution business to the “mass affluent” client.
One of the main factors taken into account for the launch of the Western Asset Macro Opportunities’ feeder fund was its investment style, as it can invest up to 50% of the fund in high-yield debt and emerging markets as well as  have exposure to currencies.  Having the capacity to invest in futures, options, and other derivatives in order to actively manage the duration of the portfolio is a strategy that perfectly adapts to the preferences of the Brazilian investor.

“The Brazilian investor is accustomed to high interest rates on fixed income, which limits the options that can be offered to cover their investment needs. An alternative could be an equity fund, which generally offers near-double-digit yields, but they have higher volatility. However, fixed income funds with exposure to higher yielding securities seem like a better option,” says Roberto Teperman. “What we decided at that time was to review our product platform and look for the fund that best fits the needs of Brazilian clients. That's how it was decided to distribute the Western Asset Macro Opportunities,” he adds.

The second feeder fund, the ClearBridge Global Equity fund, has been launched in Brazil to provide exposure to the MSCI World Index; the given client’s needs. These investment strategies are aimed at both institutional and retail clients, with the latter being private banking platforms, HNWI, and asset managers.

“We are working with clients and the sales team at Western Asset, who is an entity legally licensed as a Brazilian fund administrator, to open and create feeder funds that invest in offshore funds.  Currently, we are evaluating the possibility of launching new feeder funds for different strategies with other affiliates of Legg Mason. The launch of these two funds is just the beginning, we are likely to launch new feeder funds in Brazil soon,” continues Roberto.

Legg Mason has been present in Brazil since 2005, after acquiring Citigroup's asset management business. By having a person with knowledge of the local players and language, based in Sao Paulo, and fully dedicated to funds distribution, the management company aims to reinforce its long-term commitment to the local market.

Chile, Peru and Uruguay

In Chile, Legg Mason has been present since 2006 and its Santiago office serves as a base from where to develop the business in Peru and Uruguay. Currently, talks are being held with institutional investors, private banks and family offices, so that feeder funds that give Chilean investors access to offshore products can soon be launched.

The latest tax amnesty programs that have taken place in Chile, Argentina, and more recently Peru, have changed the landscape of the local investment fund industry. In this regard, Legg Mason has adapted to the changes quickly.

“The fiscal amnesty in Argentina and the fact that some global players like Royal Bank of Canada and Merrill Lynch have left the region has caused the fragmentation of the offshore business in Uruguay. Due to the former, numerous independent financial advisors have established themselves as family offices so as to continue serving their clients,” says Jorge Letelier.

“Both in Argentina and Peru, investors are taking advantage of the benefits offered by their governments, to repatriate capital to their country of origin and to be able to invest, either in local bonds with high yields, or in local funds with tax incentives for them”.

At this very moment, Legg Mason is not considering the idea of having a sales manager in Buenos Aires, but it does follow the development of the local industry very closely. “For now, Chile will continue as the center of operations for the Southern Cone,” concludes Letelier.