Lonsec upgrades Western Asset Enhanced Income Fund – Class A to Highly Recommended
Lonsec Research has upgraded the Western Asset Enhanced Income Fund – Class A to Highly Recommended, its highest rating, recognising the strategy’s experienced investment team, disciplined process and consistent record of returns above cash and its peers.
The upgrade, from the Recommended rating assigned in November 2025, comes three months after Franklin Templeton brought the strategy to the ASX as Western Asset Enhanced Income Fund – Active ETF (FEIF), giving investors a choice of access through the managed fund or a listed structure. The Lonsec rating applies to the managed fund.
For financial advisers, a ‘Highly Recommended’ rating carries considerable weight when selecting an income solution within fixed income. Research house ratings frequently inform which products are included on advice licensees’ approved product lists, and a top tier rating provides independent assurance on the quality of the manager, team and process.
In its review, Lonsec said the rating is “supported by a highly experienced and stable investment team, overseen by Damon Shinnick”, and that the manager’s research, portfolio construction and risk management systems “combine to deliver an effective means of accessing an Australian and global credit portfolio targeting higher income returns.”
Lonsec rated the fund above its peers on all seven factors it assesses: business, team, process, ESG, product, fees and performance within a peer group of 34 rated Fixed Interest Specialised Income funds. The fund’s annual fees and costs of 0.50 per cent sit below the peer median of 0.52 per cent.
“This acknowledgment is an important independent endorsement of the Fund and the experienced team behind it, and one that matters to the advisers who rely on research to build income portfolios for their clients,” says Felicity Walsh, managing director of Franklin Templeton Australia and New Zealand.
The fund, managing over $565 million in assets under management, is an actively managed, short-duration credit strategy investing across Australian and global investment grade corporate credit, structured credit and a modest allocation to high yield, with all global exposures hedged to Australian dollars. It targets returns of 1.5 to 2 per cent per annum above the Bloomberg AusBond Bank Bill Index (before fees) over rolling three-year periods and pays distributions monthly.
To August 31, 2026, the fund returned 5.37 per cent over one year and 7.36 per cent per annum over three years after fees, compared with 3.99 per cent and 4.21 per cent for the benchmark. Since inception in June 2021, it has returned 4.79 per cent per annum, compared with 3.14 per cent for the benchmark.
Lonsec noted the fund has outperformed both its benchmark and peer median across all rolling periods, with lower volatility than the peer median. Over three years to June 30, 2026, the fund recorded a Sharpe ratio of 2.55, compared with a peer median of 1.56.
“The fund is built for investors whose priority is income,” says Damon Shinnick, portfolio manager at Western Asset Management. “We aim to keep interest rate risk deliberately low and focus instead on where investors are paid for taking credit risk, rotating across sectors and selecting securities across the capital structure. That allows the portfolio to generate income from running yield rather than relying on the direction of interest rates.”
“Lonsec’s upgrade reflects the depth and stability of the team behind the strategy. Our Melbourne-based team works closely with Western Asset’s global credit research and investment teams, to build a portfolio that provides a diversity of alpha sources, without sacrificing liquidity. Investors benefit from the breadth of our global team’s experience and track record, and our focus on finding value across the full spectrum of domestic and global credit markets.”
Shinnick adds that while Australian fixed income markets have seen volatility as domestic inflation concerns and higher global bond yields pushed yields higher, the backdrop for credit remains constructive.
“Global credit markets remain supported by healthy corporate balance sheets, resilient earnings and strong demand for income. Domestic credit markets continue to go from strength to strength, absorbing record levels of supply, particularly from kangaroo (non-Australian) issuers such as Alphabet. An evolving investor base, with increased global and retail participation, is underpinning strong and ongoing demand. The changing dynamics of the domestic market should provide a solid springboard for the strategy to continue to perform going forward,” he notes.
Western Asset is a global fixed income specialist and wholly owned subsidiary of Franklin Templeton, with AUD$322.9 billion in assets under management as at June 30, 2026. Its Australian business was established in 1998.
