Legg Mason’s credit collective investment fund (CIF), sub-advised by Western Asset, is designed to allow eligible retirement plans the efficiency and flexibility to better align assets with their liabilities.
Under normal circumstances, the fund generally invests in a diverse portfolio of primarily investment-grade credit bonds, but may also make other opportunistic investments, including limited investments in high-yield, emerging markets and mortgage-backed securities. Western Asset’s investment process combines a traditional fundamental value orientation with credit research-driven ideas in an effort to exceed benchmark indices. Western Asset aims to add incremental value by exploiting inefficiencies in the corporate bond market.
With more than 25 years managing long-credit assets, Western Asset believes active management is a critical element to keep pace with the liabilities of an Employee Retirement Income Security Act (ERISA) plan, according to Ryan Brist, head of U.S. investment-grade credit at Legg Mason and the fund’s manager.
According to Doug Hulsey, head of U.S. corporate relationships/liability-driven investment (LDI) solutions at Western Asset, the new vehicle is an efficient and cost-effective investment solution for clients and prospects focused on managing to their liabilities. “It should be particularly attractive for smaller pension plans and outsourced chief investment officers (OCIO) providers,” Hulsey says.
Hands Benefit &Trust (HB&T) is the trustee, responsible for establishing, maintaining and operating the fund. It is also responsible for retention and oversight of the sub-adviser and other service providers for the CIFs.
“The conversion of the Long-Duration Credit strategy from a separately managed account to a CIF reflects the broader industry trend of increased demand for the CIF structure,” says Stephen Hand, president at HB&T. “The ability to bring the defined benefit (DB) space cost-efficient access to Western Asset’s experienced team and strong track record was attractive from HB&T’s perspective.”
Brist’s co-manager on the fund is Blanton Keh, who will be supported by Western Asset’s global credit team.