This is a sponsored article from Legg Mason.
“US equities have been rallying since the presidential election, driving major equity indexes such as the S&P 500 Index and the Russell 2000 Index to record highs.”
The global financial environment is changing, driven in part by the Fed’s monetary policy moves and the Trump Administration’s potential changes to US fiscal policy. This may create opportunities to exploit inefficiencies – a cornerstone of all actively managed strategies, especially in sectors which might benefit from the pro-growth policies such as healthcare, infrastructure, defence, energy and financials.
Areas that lend themselves to potential outperformance through active management include:
High Active Share U.S. Equities
Funds with high active share are designed to be bolder and take on off-benchmark opportunities and risks. These fund managers typically implement very robust and structured investment processes. They generally have proven track records in building high-conviction, concentrated and low-turnover portfolios.
High active share funds have the potential to deliver higher returns, particularly when markets are volatile or falling. Aside from the alpha these managers deliver, given the historical highs at which US equity markets have been trading, a correction may be inevitable. Passive products have no ability to protect investors when there is a market drawdown.
Small Cap Equities
By size and nature, there are greater inefficiencies within small cap equities. This could offer active managers more opportunities to outperform, given higher levels of insider ownership, which tends to align management and investor interests.
The benefits of active management extend beyond performance. Active managers can screen for quality and use buy/sell triggers to reduce risk, investing only in the most attractive stocks. This is particularly important in small caps, which includes many illiquid, under-followed companies with greater price discrepancies.
Those who invest in the top quartile of actively managed funds can potentially benefit over time. The key is to find managers whose approach is truly distinct from the indexes and have demonstrated longer term expertise.
Active management can provide investors with enhanced capabilities and options that will help them continue to capture alpha, while offering protection from the downturn. Some managers may not beat the benchmark each year, but the best often outperform the market in difficult times. Now may be the time for investors to seek out and trust their portfolios to successful , well-chosen active managers.
Morningstar Performance Data: © 2017 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Source: Legg Mason. This document is issued by Legg Mason Asset Management Hong Kong Limited in Hong Kong and by Legg Mason Asset Management Singapore Pte. Limited in Singapore (“Legg Mason”). This document is for information only and does not constitute an offer or invitation to the public to purchase any shares in any fund in Hong Kong or Singapore.
This document is for information only and is not intended to provide investment advice. All data, opinions, estimates and other information are provided as of the date of this document and may be subject to change without notice. Where past performance is quoted, such figures are not indicative of future performance. Investors intending to subscribe for any units or shares of a fund should refer to the Fund’s most current offering document. INVESTMENT INVOLVES RISKS. Please refer to the offering documents for further details, including the risk factors. Although information has been obtained from sources that Legg Mason believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice.
Any views expressed are opinions of the respective investment affiliates as of the date of this document and are subject to change based on market and other conditions without notice and may differ from other investment affiliates or of the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. The mention of any individual securities/ funds should neither constitute nor be construed as a recommendation to purchase or sell securities, and the information provided regarding such individual securities/funds is not a sufficient basis upon which to make an investment decision. Portfolio allocations, holdings and characteristics are subject to change at any time. Legg Mason, its affiliates, officers or directors, may have an interest in the acquisition or disposal of the securities mentioned herein. Distribution of this document may be restricted in jurisdictions, other than Hong Kong and Singapore. Any person coming into possession of this document should seek advice for details of, and observe such restrictions (if any).
Neither Legg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this document or its contents. The information in this document is confidential and proprietary and may not be used other than by the intended user. This document may not be reproduced, distributed or published without prior written permission from Legg Mason.
Issuer in Hong Kong:
Legg Mason Asset Management Hong Kong Limited.
Issuer in Singapore:
Legg Mason Asset Management Singapore Pte. Limited is the legal representative of Legg Mason, Inc. in Singapore. (Registration Number (UEN): 200007942R)
The document has not been reviewed by any regulatory authority in Hong Kong and Singapore.
This is a sponsored article from Legg Mason.