Legg Mason revises investment strategy of target date retirement funds

By Angela McDaniels

Tacoma, Wash., Nov. 14 - Legg Mason Partners Equity Trust said the investment strategy has been revised for the Legg Mason Target Retirement 2015, the Legg Mason Target Retirement 2020, the Legg Mason Target Retirement 2025, the Legg Mason Target Retirement 2030, the Legg Mason Target Retirement 2035, the Legg Mason Target Retirement 2040, the Legg Mason Target Retirement 2050 and the Legg Mason Target Retirement Fund.

The dynamic rebalancing period generally occurs five years before and five years after a fund's target date. During this period, each fund, except for Legg Mason Target Retirement Fund, will not be managed strictly according to the standard target allocation. Instead, the funds will implement a combination of risk-management strategies that will attempt to limit downside volatility.

These strategies include dynamic risk management and event risk management.

Dynamic risk management attempts to limit losses by allocating fund assets away from equity and long-term fixed-income funds. Legg Mason said it allocates a portion of a fund's assets into short-term defensive instruments that are expected to decline in value less than riskier assets in the event of market declines and into index options and index futures contracts that are expected to increase in value in the event of market declines.

Event risk management invests in options and futures that are expected to increase in value in the event of declines in the broad equity and bond markets during a short period of time.

Legg Mason said that through both strategies, a fund gives up some of the potential for high total return that could be achieved if the fund were to follow its target allocation under positive market conditions. In exchange, these strategies are intended to reduce significant declines in the fund's net asset value under negative market conditions.

The change will take place on or about Nov. 21, according to a 497 filing with the Securities and Exchange Commission.

Also beginning on that date, Western Asset Management Co., one of the funds' subadvisers, will manage the assets allocated to the new event risk management strategy for each fund except Legg Mason Target Retirement Fund during the fund's dynamic rebalancing period. The other subadviser, Legg Mason Global Asset Allocation, LLC, will manage the assets allocated to the dynamic risk management strategy.

Legg Mason Global Asset Management is based in Baltimore.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.