As part of our ongoing service we regularly monitor the funds within your portfolio to ensure that they continue to meet their objectives and continue to perform the function within your portfolio for which they were selected.

Following our most recent review, we are writing to recommend the following switch within your portfolio/s:

From L&G UK Property Feeder (100%) to Legg Mason IF ClearBridge Global Infrastructure Income (100%).

L&G UK Property 

After a difficult period for UK property funds as a result of the ongoing Covid crisis this fund is due to resume trading on the 13th October 2020 following its suspension in March 2020. The fund was forced to suspend due to material uncertainty on valuations and not because of outflows from the fund (which has previously been the case when property funds have been forced to suspend). L&G are expecting some degree of redemption requests and as a result have increased liquidity to around 30%.   
The fund is well placed compared to many of its peers – it is underweight retail (and its retail portfolio is not traditional high street), it is overweight industrials and alternatives. They have collected rent from over 80% of the portfolio and have in place agreements to bring this up into the 90’s. However, this is still a daily dealing property fund and if the liquidity buffer is utilised to meet outflows, it will have no choice but to suspend again.
Whilst we think this is a good fund we believe the commercial property sector will continue to face challenges in the short to medium term and as such we have made the decision to switch out of commercial property in favour of an alternative asset class.

Legg Mason IF ClearBridge Global Infrastructure Income 

The fund seeks to provide a high and growing income stream and a total return that outpaces inflation over the longer term. The managers aim to do so through a globally diversified portfolio of high quality listed infrastructure securities. The shares held in the fund have typically less sensitivity to economic conditions than many equity funds, so we expect the fund's performance to be less volatile. In addition, as the fund holds listed equities it should avoid the liquidity concerns that can affect open ended property funds.
Due to the underlying investment strategy this fund should offer an element of diversification when compared to broader global equities. Ultimately, over the long term, the team aim to provide a stable series of returns and, when combined with the natural defensiveness of this specialist asset class, we would expect the fund to operate with lower levels of risk when compared to broader equity markets. This approach should result in an attractive risk/return profile over time. 
Infrastructure offers many of the same characteristics as property albeit we think that the infrastructure fund has more positive prospects in the short to medium term. By switching between these two asset classes we will maintain diversification and the new fund will complement the other holdings in the portfolio.
A Key Investor Information Document (KIID) has been provided detailing information such as charges, objectives, risk and past performance. The information is designed to assist in making a reasoned judgement on whether it is appropriate to invest in a particular fund.
The switch of funds will take place within your existing account/s and as such there will be no change to this element of your investment. Please note this change does not significantly alter the risk profile of your portfolio as the infrastructure fund offers many of the same characteristics as a property fund. The other funds will remain as before and will be reviewed at our next regular review.

Charges Summary

As this transaction forms part of our on-going service, Dentons will not charge any additional fees to switch funds. Additionally, there will be no platform charges for administering this switch. Switches within an ISA or pension will be free from any tax charge. For any investments held within a general investment account the switch is potentially subject to capital gains tax, however, unless you have made large gains elsewhere in the current tax year, we do not believe there will be any tax charge as a result of this switch. 

The ongoing fund charge for the L&G UK Property fund is 1.16% and the Legg Mason IF ClearBridge Global Infrastructure Income fund 0.93%. Therefore there will be a slight decrease in your overall ongoing fund charges.

Risk Warnings

  • Please note that if you agree to the fund switch your funds may be out of the market whilst the switch is being processed and you will lose out on any fund value gains during this time.
  • Past performance is no guarantee of future returns.
  • There is no guarantee that the fund will achieve its objective.
  • A switch does not guarantee that the new fund will outperform an existing fund.
  • Inflation will reduce the real value of the capital invested if returns do not match or exceed the rate of inflation.
  • The value of the investment is determined by units or shares, the price of which can fall as well as rise. The value could be less than what was originally invested, especially in the early years.
  • Equities can significantly fall in value and in difficult times dividends may reduce or stop.
  • Where a fund invests in overseas markets, domestic upheaval and changes in currency exchange rates mean that the value of the investment can go up or down.
  • The fund may use derivatives to generate returns as well as to reduce costs and/or the overall risk of the fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Where switching occurs outside of a tax exempted investment, the sale of units or shares could create a Capital Gains Tax (CGT) liability and any gains exceeding the annual allowance will be taxable.
  • Property funds have recently undergone a period of suspension where no trading was permitted. Should this happen again before we are able to process the switch recommendation we may be unable to complete this recommendation in a timely manner and will have to wait for the suspension to be lifted. If this occurs we will switch the fund once the suspension is lifted. Should there be any change in our recommendation before we are able to switch this fund we will communicate this to you before taking any further action.
  • Infrastructure investments can potentially face headwinds in a rising interest rate/bond yield environment, with those areas or companies that have poor growth potential and operate with high levels of debt the most vulnerable. Furthermore, the impact of political or regulatory decision making can be meaningful.
As we manage your investments on an advisory basis we do require your approval before we can process the above fund switch. Therefore, if you are in agreement for the above switch to occur, please could you confirm this to us (in writing, telephone or by e-mail) and we will make the change. 
If you would like any further information regarding this switch please don’t hesitate to contact your Financial Adviser on 01483 521 528.