Investors should not rely on the passage of US President Donald Trump’s growth-oriented agenda through Congress, says a Philadelphia-based fixed income portfolio manager.
Speaking at the launch of the Legg Mason Brandywine Global Income Optimiser Fund in Sydney yesterday, Brandywine Global head of global credit Gary Herbert said his team is making investment decisions based on “political realities” rather than “political rhetoric”.
Having recently met with several Trump administration officials, including Treasury Secretary and former Goldman Sachs executive Steve Mnuchin, Brandywine’s portfolio managers retain a slightly more sceptical view of the US economic growth outlook than the administration itself, Mr Herbert said.
“I think there is a little hubris in the Trump administration,” he said. “They will likely face a number of speed bumps in getting tax reform passed and other parts of their agenda. They will be constrained by some political realities.”
Far from Mr Trump’s highly optimistic assessment of the US economy, the Brandywine team by contrast describes the current environment as a “Goldilocks scenario”.
“The US economy will grow but not at the rate [suggested by US administration officials],” Mr Herbert said. “Reflation is taking place, but not as quickly as we would like.”
The comments come as Mr Herbert is in Australia to launch a new income-focused retail fixed income fund, to be marketed and distributed via Brandywine’s parent company Legg Mason.
He said the launch of the fund reflects “ongoing demand for attractive returns with minimal risk to capital in a world of increasing uncertainty”.
“We originally launched this strategy offshore back in 2013 and since then we have delivered attractive risk adjusted returns leading it to be extremely well-received by investors in other markets,” he said.
“Having discussed this with potential investors in Australia, we believe that given the ongoing uncertainty in fixed income markets, now is an ideal time to launch as we can offer a global solution designed for all seasons.
“The fund should have strong appeal for self-directed and advised individual investors including the SMSF market, as it offers predictable returns in all conditions and diversification away from the local staples of the ASX-listed equities and term deposits.”
Head of Legg Mason Australia, Andy Sowerby, told the same event that the fund will now be put forward for rating by the research houses, and he then intends to apply to have the fund accepted by platforms and dealer group approved product lists.