Baird joins Western Asset from UBS Asset Management where he was an Investment Specialist in the Australian fixed income team. He was responsible for communicating Australian and global fixed income investment strategies to clients and consultants and supporting distribution and product development. Previously he worked at Zenith Investment Partners as a lead analyst for four years on debt and equity sector reviews.

Western Asset is one of the world’s leading fixed-income managers with assets under management of $US425.9bn globally. By devoting all its resources to fixed-income, Western Asset deploys multiple diversified strategies that benefit a range of clients across different environments so no one strategy dominates performance.

Anthony Kirkham, head of Western Asset Australia said: “We have created this role in response to the increased level of interests for our bond funds. In this low interest world investors are keen to construct a well-diversified and balanced portfolio and to utilise best of breed fixed income strategies. Jonathan has the experience and expertise to work with clients in this regard.”

Speaking about his appointment Baird said: “Western Asset is one of the world leaders in fixed income markets measured by performance and scale. I am delighted to join such an impressive organisation and look forward to working with new and existing clients to develop the best investment strategies for the current environment.”

Legg Mason Australia/New Zealand Managing Director Andy Sowerby said: “At Legg Mason, we have expanded our fixed income fund offering to create flexibility and choice for our clients. The range of funds managed by Western Asset are central to this offer. Jonathan brings a depth of expertise and insights that will bolster the strength of Legg Mason Group.”

“The Legg Mason Western Australian Bond Trust is now $470m in size and is Highly Recommended by both Lonsec and Zenith and was awarded the best Australian bond fund by Zenith last year, and a finalist in the upcoming Lonsec awards,” said Sowerby.

Legg Mason Western Asset funds available to Australian investors include:

• Legg Mason Western Asset Cash
• Legg Mason Western Asset Cash Plus
• Legg Mason Western Asset Australian Bond
• Legg Mason Western Asset Global Bond
• Legg Mason Western Asset Macro Opportunities

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Jonathan Baird

Hedged infrastructure funds may be a better option than their unhedged counterparts according to Zenith Investment Partners Infrastructure Sector Review released this week.

“Investors need to consider many factors when making the decision between hedged and unhedged listed infrastructure investments”, says Jonathan Baird, Investment Analyst with Zenith.

“Volatility is definitely a key consideration.  During periods of heightened volatility, such as the GFC or the European Credit crisis, the difference in the level of volatility of unhedged versus hedged global equities has definitely been to the advantage of unhedged investors.  That is, unhedged global equities have experienced lower levels of volatility than hedged global equities.   But for global listed infrastructure, the same relationship hasn’t been as strong. During the GFC, unhedged infrastructure strategies provided a dampening of volatility, but this wasn’t the case during the European crisis of 2011 for example, and overall, the volatility of hedged and unhedged Infrastructure strategies has been much closer over time.”

In Zenith’s sector report, other factors such as the income distribution processes that Infrastructure managers need to contend with, and the fact that valuations are often undertaken in the listing currency are also considered.  Baird goes on to say, “Overall, we don’t believe the benefits for remaining unhedged are as strong in infrastructure versus global equities for example, and therefore we would generally advocate using hedged in infrastructure and unhedged in global equities when planning a long term neutrally hedged portfolio structure.”

The report also discusses the potential impact of some of the infrastructure asset sales proposed by state governments in Australia, and takes a deeper dive into the Master Limited Partnership (MLP) structure which has seen significant growth in the infrastructure sector in North America.

From an initial investment universe of 15 Infrastructure products, 4 were rated “Highly Recommended’; 5 “Recommended”; and 2 were rated “Approved.

Zenith’s Approved list for the Infrastructure Sector:

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Jonathan Baird

While the interest rate sensitivity of REITs has recently spiked, Jonathan Baird, Investment Analyst with Zenith Investment Partners, believes this is a relatively short-term trend and should not be relied upon for structural asset allocation decisions.

When discussing Zenith’s Property Sector Review released this week Baird said ‘The view that REITs have bond like characteristics may be partially derived from the income pass through that is supported by the trust tax structure. This structure generally results in higher dividend yields and payout ratios relative to broader equity markets. However, changing property valuations and fluctuating earnings streams have delivered varying correlations to the Australian bond market over the past ten years’.

Baird said “Generally, managers continue to view the sector as trading at fair value, with many believing current conditions are relatively conducive for active management”. The report also notes that many managers in both domestic and global REITs are anticipating a total return in the range of 7% to 9% for the next 12 months.

From an initial investment universe of 70 Property products 5 were rated “Highly Recommended”; 15 “Recommended”; and 9 were assigned an “Approved” rating. In addition to the investment grade ratings, 3 funds were placed on “Redeem”; 36 were “Not Rated”; while 2 strategies remain “Under Review” due to investment staff departures.

The report highlights that both the domestic and global REIT (hedged) sectors performed slightly below expectations, achieving 4.9% and 5.1% respectively for the 12 months to March. While this performance was materially down on the exceptionally strong prior year, it does support the thesis that REITs have returned to more traditional and conservative business models.

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Strong property returns unlikely to continue.

Zenith Investment Partners (Zenith) Investment Analyst Jonathan Baird has released the 2013 Listed Property Review and confirmed that although the sector performed strongly both domestically and abroad over the past 12 months, the strong returns are unlikely to be repeated in the coming year.

In addition, the Sector review noted that investment team turnover continues to plague fund managers. Baird described the personnel turnover situation as having a ‘domino effect’ with changes impacting many of the managers rated by Zenith.

Zenith expects that high level of turnover to continue with a number of managers seeking experienced personnel to fill key vacancies and while noting that there are some positives associated with staff turnover, there are negatives that will require careful management.

Despite these issues, the Listed Property Sector, both domestically and abroad, performed strongly during the twelve months to May 2013, with the S&P/ASX 300 (A-REIT) Index rising 30.62% and the FTSE Developed Rental Index returning 25.55%.

Referring to the Zenith Property Sector report Baird said, “Many managers have indicated that the Sector’s strong returns over the past 12 months has increased the number of securities trading above fair value, and therefore the magnitude of returns over the past 12 months are unlikely to be replicated in the coming year.”

Zenith’s Sector Report also noted that both “domestic and global Real Estate Investment Trusts (REITs) are now trading close to long-term average price to tangible book value”.

From an initial investment universe of 78 Property products: 6 were rated “Highly Recommended”; 18 “Recommended”; and 13 were assigned an “Approved” rating – see table below.

Standout performer was the S&P Global Infrastructure Index returning over 20%. Jonathan Baird concluded, “This year managers also highlighted the return of Real Estate

Investment Trusts to more traditional business models as being a key driver of the increased investor confidence in the sector.”

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Jonathan Baird, Investment Analyst at Zenith said “Given the ongoing fiscal challenges faced by many developed countries and the accelerating level of infrastructure funding required, Zenith expects an increase in the opportunities for meaningful private sector involvement in the development of infrastructure assets. Similar fiscal issues are also leading to the privatisation of state-owned infrastructure assets in stressed countries in Southern Europe.”

“While there is strong rationale to suggest there is a significant pipeline of private investment opportunities it must be acknowledged that not all infrastructure assets are created equally, and not all private participation will occur with a similar risk return profile.”

“The level of regulation and the perceived security that it provides is one of the key consideration for many infrastructure assets,” Baird said.

Performance (over the last 12 months) has been strong, with the S&P/ASX Global Infrastructure Index ($A Hedged) returning over 18% for the 12 months ending 30 September 2012.

Of the eight global funds and one domestic fund that undertook the full due diligence process, three funds achieved the Zenith’s Highly Recommended rating, three funds achieved a Recommended rating and one fund was received an Approved rating.

International Ratings

• RARE Infrastructure Value Fund – Highly Recommended
• RARE Infrastructure Value Fund – Unhedged Highly Recommended
• Magellan Infrastructure Fund Highly – Recommended
• CFS Wholesale Global Listed Infrastructure Securities – Recommended
• Lazard Global Listed Infrastructure Fund – Recommended

Emerging Markets Ratings

• RARE Series Emerging Markets Fund – Recommended

Domestic Markets Ratings

• Goldman Sachs Wholesale Australian Infrastructure Fund  – Approved

Baird, also discussed the inclusion of listed infrastructure funds in client portfolios.

“Infrastructure assets typically provide a long-term reliable income stream, which is resilient to changing economic conditions, and is largely protected from inflation.”

“Zenith believes that over the longer-term, the inclusion of listed infrastructure in an investor’s international equities exposure provides significant diversification benefits, with the potential to improve the risk/return profile of the overall portfolio.”

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The three new appointments are an Investment Analyst, Data Analyst and Client & Sales Administrator. Commenting on the new appointments, David Wright said the increase in staff reflected Zenith’s new business success this year, future growth prospects and opportunities; and commitment to build on its enviable marketplace reputation for service, innovation and addressing the research and support needs of its dealer group and adviser clients.

In June Zenith announced a significant internal restructure with the launch of a new Division, Zenith Investment Solutions headed by Associate Directors Glen Franklin and Ben Davis; the Zenith Sector Research team to be headed by David Wright and the Zenith Alternatives Research team under the responsibility of Co-Founder and Director David Smythe and lead by Daniel Liptak.

Jonathan Baird joins the Asset Class team as Investment Analyst. Aryeh (Ari) Kraemer joins Zenith as a dedicated Data Analyst. The Zenith Client and Sales Support team has been boosted with the addition of Susan Hodges as the Administrator for the area. With the addition of the new staff members and resources within Zenith, David Wright also announced that Christopher Huang will join the Alternatives team as a dedicated Investment Analyst.

“The restructure announced in June has been well received by the marketplace and our clients and this has been reflected in the need to further strengthen Zenith’s operation with the new appointments and Christopher Huang’s move into the Alternatives team,” said David Wright. Reflecting on Zenith’s successes this year, David Wright pointed out that the new accounts and increased demand for services has been achieved in a highly competitive retail market that demands the very highest standards of quality, experience, depth of understanding and research expertise.

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