Why Legg Mason Loves ETFs

MarketsETF Trends

This article was originally published on ETFTrends.com.

Traditional mutual fund players like Legg Mason are seeing ETFs as a natural opportunity to share their research and investment strategies with a wider audience.

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"We view the ETF wrapper is just that - it's a wrapper, and if we compare an ETF with a mutual fund, we find much more in common than there are differences. So they're both open-ended products, both subjected to rules and regulations under the '40 Act, both create and redeem shares at the end of the day at NAV. It's just that we find the ETF wrapper cheaper and more tax efficient," Tim Gilligan, ETF Product Specialist for Legg Mason, said at the Inside ETFs 2018 conference.

Consequently, Legg Mason has reached across its affiliates to tap their best strategies and bring those investment themes to market in an ETF wrapper.

For example, through a partnership with QS Investors, Legg Mason has launched a number of strategies that incorporate a top-down approach to help balance risk and to deliver broad market exposure. QS Investors has provided custom solutions for institutional and pension funds for 15 years. The Legg Mason Emerging Markets Diversified Core ETF (NasdaqGM: EDBI), Legg Mason Developed Ex-US Diversified Core ETF (NasdaqGM: DDBI) and Legg Mason US Diversified Core ETF (NasdaqGM: UDBI) all follow QS Investors’ proprietary Diversification Based Investing (DBI) rules-based methodology.

Legg Mason has also partnered with ClearBridge Investments to launch the ClearBridge All Cap Growth ETF (NasdaqGM: CACG). The active ETF is managed by the ClearBridge team and tries to achieve long-term capital appreciation by investing in a diversified portfolio of large, medium and small capitalization stocks that have the potential for above-average long-term earnings and cash flow growth.

"We really developed these products for what we saw coming down the pike and I think advisors really are struggling in that 'what do I do with my money, how do I invest my client money going forward,'" James Norman, President and Head of Equity Strategy for QS Investors, said. "They are excited about equity returns but they're a little nervous at these valuation levels."

For instance, investors may consider smart beta plays like the Legg Mason Low-Volatility High-Dividend ETF (NASDAQ: LVHD). The low volatility high dividend ETF should help investors who are seeking new sources of yield in a changing market environment. The funds focus on companies with relatively high yield and low price and earnings volatility, and the funds also targets profitable companies.

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