Legg Mason, begun trading two new Active ESG ETFs, the ClearBridge Dividend Strategy ESG ETF (Nasdaq: CSML) and the ClearBridge Large Cap Growth ESG ETF (Nasdaq: LRGE), on Tuesday, May 23, 2017. Here is a synopsis of the new ETFs:
1.
FUND INFORMATION:
| Symbol: YLDE | Exchange: NASDAQ |
| Name: ClearBridge Dividend Strategy ESG ETF | Net Expense Ratio: 0.59% |
FUND OBJECTIVE:
The ClearBridge Dividend Strategy ESG ETF is an actively managed fund which seeks dividend income, growth of dividend income and long-term capital appreciation.
Under normal circumstances, the fund will invest at least 80% of its net assets, plus borrowings for investment purposes, if any, in dividend-paying stocks or other instruments with similar economic characteristics that offer the potential for income growth and capital appreciation over time and that meet its financial and environmental, social and governance (ESG) criteria. The fund may also invest in companies that the subadviser believes are making substantial progress toward becoming a leader in ESG policies.
Determination of a company’s ESG standards is based on the subadviser’s proprietary research approach. The subadviser will exercise judgment to determine ESG best practices based on its twenty-five year history of managing ESG investment strategies through an established proprietary process. The subadviser utilizes a fundamental, bottom-up research approach that emphasizes company analysis, management and stock selection.
The ESG evaluation is integrated into a thorough assessment of investment worthiness based on financial criteria as well as ESG considerations including innovative workplace policies, employee benefits and programs; environmental management system strength, eco-efficiency and life-cycle analysis; community involvement, strategic philanthropy and reputation management; and strong corporate governance and independence of the board. The ESG analysis is conducted by the fundamental analyst platform on a sector-specific basis, and a proprietary ESG rating is assigned to each company.
The fund invests primarily in common stocks. Equity securities in which the fund may invest also include preferred securities, convertible securities, securities of other investment companies and of real estate investment companies (REITs) and warrants and rights. The fund may invest in equity securities of foreign issuers, either directly or through depositary receipts. The fund may invest in companies of any size but focuses on large cap companies.
The portfolio managers focus on companies that they believe to be of high quality and that:
– Pay an attractive dividend
– Have the potential to significantly grow their dividends
– Provide consistent and competitive risk-adjusted returns achieved by capitalizing on the convergence between a company’s investment potential and its ESG attributes
The subadviser uses fundamental analysis to identify companies with strong balance sheets, dominant market positions and reasonable valuations. It is also the subadviser’s intention to engage and encourage management to improve in certain ESG areas identified by the subadviser through the sector analysts’ lead engagements. The subadviser will sell a security if the issuer no longer meets its financial or ESG criteria.
Top Holdings (06/09/17):
| STATE STR INSTL INVT TR | 6.48% |
| TIME WARNER INC | 2.89% |
| HOME DEPOT INC | 2.80% |
| COMCAST CORP CLASS A | 2.68% |
| BLACKROCK INC | 2.64% |
| BANK OF NEW YORK MELLON CORP | 2.59% |
| NESTLE SA SPONS ADR | 2.50% |
| INTERNATIONAL PAPER CO | 2.49% |
| MERCK + CO. INC. | 2.45% |
| MICROSOFT CORP | 2.42% |
Useful Links:
YLDE Home Page
2.
FUND INFORMATION:
| Symbol: LRGE | Exchange: NASDAQ |
| Name: ClearBridge Large Cap Growth ESG ETF | Net Expense Ratio: 0.59% |
FUND OBJECTIVE:
The ClearBridge Large Cap Growth ESG ETF is an actively managed fund which seeks long-term capital appreciation through investing in large capitalization companies with the potential for high future earnings growth.
Under normal circumstances, the fund seeks to meet its investment objective by investing at least 80% of its net assets, plus borrowings for investment purposes, if any, in equity securities or other instruments with similar economic characteristics of U.S. companies with large market capitalizations that meet its financial and environmental, social and governance (ESG) criteria.
Large capitalization companies are those companies with market capitalizations similar to companies in the Russell 1000 Growth Index. The size of the companies in the Index changes with market conditions and the composition of the Index. As of March 31, 2017, the largest market capitalization of a company in the Index was approximately $753.7 billion and the median market capitalization of a company in the Index was approximately $9.42 billion. The fund may also invest in companies that the subadviser believes are making substantial progress toward becoming a leader in ESG policies. The fund’s investment strategy focuses on consistent growth of capital while managing volatility.
Determination of a company’s ESG standards is based on the subadviser’s proprietary research approach. The subadviser will exercise judgment to determine ESG best practices based on its twenty-five year history of managing ESG investment strategies through an established proprietary process. The subadviser utilizes a fundamental, bottom-up research approach that emphasizes company analysis, management and stock selection.
The ESG evaluation is integrated into a thorough assessment of investment worthiness based on financial criteria as well as ESG considerations including innovative workplace policies, employee benefits and programs; environmental management system strength, eco-efficiency and life-cycle analysis; community involvement, strategic philanthropy and reputation management; and strong corporate governance and independence of the board. The ESG analysis is conducted by the fundamental analyst platform on a sector-specific basis, and a proprietary ESG rating is assigned to each company. The subadviser seeks to invest over the long term in large-capitalization companies that are considered to be of high quality with sustainable competitive advantages as evidenced by high returns on capital, strong balance sheets, and capable management teams that allocate capital in an efficient manner. The subadviser seeks to invest in leadership companies where the portfolio managers believe the market price underestimates the magnitude of future growth. Leadership may be assessed both quantitatively and qualitatively. The subadviser seeks to select securities of companies that are category leaders with characteristics to sustain that position and grow market share consistently. The subadviser performs rigorous analysis to understand company fundamentals, key competitive dynamics and industry structure with the belief that the best business models win over time. The subadviser seeks to identify social or economic trends that will have an impact on the economy as a whole to support multi-year investment opportunities, allowing for compounding of earnings and cash flow. The subadviser seeks companies with self-funding business models with significant recurring revenue and businesses with the ability to generate superior free cash flow over time. In addition, the
subadviser takes a disciplined approach to valuation and stress tests the sustainability of profitability and growth. The subadviser will also consider emerging companies with promising future prospects that may not yet have demonstrated substantial profitability.
The subadviser will utilize fundamental analysis to identify investment candidates with these attributes, and evaluate industry dynamics, the strength of the business model and management skill. Valuation will be carefully examined using a variety of techniques that depend on the type of company being researched. Methods typically used are discounted cash flow analysis, market implied growth and returns relative to the subadviser’s expectations, multiple comparisons and scenario analysis.
It is also the subadviser’s intention to engage and encourage management to improve in certain ESG areas identified by the subadviser through the sector analysts’ lead engagements.
The subadviser will sell a security if the issuer no longer meets its financial or ESG criteria. In addition, the subadviser will seek to replace securities when the company’s risk/reward profile is no longer favorable due to price appreciation or if the company’s investment fundamentals have deteriorated meaningfully relative to original expectations. Securities may also be sold to permit investment in an issuer considered by the subadviser to be a more attractive alternative.
The fund emphasizes investments in equity securities or related instruments of U.S. large-capitalization companies; however, it may invest in equity securities of foreign issuers with similar characteristics.
Top Holdings (06/09/17):
| AMAZON.COM INC | 4.94% |
| MICROSOFT CORP | 4.45% |
| UNITEDHEALTH GROUP INC | 3.62% |
| ALPHABET INC CL C | 3.58% |
| COMCAST CORP CLASS A | 3.32% |
| CELGENE CORP | 3.18% |
| VISA INC CLASS A SHARES | 3.12% |
| FACEBOOK INC A | 2.84% |
| COCA COLA CO/THE | 2.78% |
| UNITED PARCEL SERVICE CL B | 2.61% |
Useful Links:
LRGE Home Page