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Legg Mason targets Brazil with feeder fund launches

Legg Mason targets Brazil with feeder fund launches

Legg Mason Asset Management is ramping up its presence in Brazil through its affiliate Western Asset Management with the view of launching more feeder funds to capture Brazil's growing wealth.

The US-based firm hopes to follow up two recent launches, including a mirror fund of the Legg Mason ClearBridge Global Equity Fund -  run by Paul Ehrlichman, Sean Bogda and Safa Mushtaseb -  in August and one in November 2015 that feeds into the Western Asset Macro Opportunities Fund, managed by Ken Leech.

Fernando Franco, head of distribution Americas International at Legg Mason, told Citywire Americas his firm is currently considering launching funds from two of its other subsidiaries, Martin Currie and QS Investors.

These funds would be distributed by Western Asset, which has had a presence in Sao Paulo since 2005 when Legg Mason acquired a part of Citigroup’s asset management business and gave Western Asset control of its fixed income assets. 

Recent regulatory changes have allowed for individual investors with investable assets of BRL1 million ($300,000) to invest up to 100% of their assets in foreign assets.

In order to sell funds however, foreign asset managers have to distribute their products through master-feeder structures using locally domiciled funds, their 'feeder funds', and not offshore funds like Ucits.

Open opportunity 

Legg Mason said the new regulation has opened the path to the ‘attractive’ mass affluent market, which has traditionally been very focused on domestic investment.

Quoting a report from Cerulli Associates Franco said, Brazilian assets are expected to reach over BRL4 trillion by 2019, or about $1 trillion, excluding retirement vehicles or pension funds.

‘[The regulator] changed the numbers game and expanded the opportunity for feeder funds,’ said Franco.

‘It allowed us to align our value chain with Western Asset… we were able to move very quickly and be one of the first ones to market.’

According to Franco, Brazilians are also opening up to the concept of diversifying their assets with investment abroad despite being able to get high returns from local interest rates, due to political turmoil and uncertainty.

Previously, the firm had concentrated its efforts on distributing Latin America cross-border funds within Brazil. 

‘Our focus is very straightforward. We see the opportunity with feeder funds today, strategically we believe the market is very compelling and with our partnership with Western we’re making sure we’re using all of our Legg Mason parts to continue growing our asset base as an asset management firm,’ said Franco.

Outside of Brazil, Legg Mason is also eyeing the possibility of cross-listing its ETFs in Mexico. Like a number of other asset management firms, it is also aiming to win over business from some of the country’s pension funds, the Afores.

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