Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
While the path of equity market returns for 2024 has yet to be laid, there is one thing we know right now - U.S. stocks are expensive and international stocks are not. That hasn’t really changed the calculus over the past couple years as pricey U.S. stocks have gotten pricier and cheap foreign stocks have gotten cheaper. When value will make a big comeback remains to be seen, but if early signs are any indication, 2024 could be the year where fundamentals start getting a longer look. Diversification may be more important than ever, especially away from the handful of mega-cap tech names that have been driving the major averages.
The Lazard Global Total Return & Income Fund (LGI) is one of the more unique ways to play it. While the fund’s ⅔–⅓ split between equities and fixed income is relatively standard, the use of emerging markets debt and forward currency contracts in the fixed income sleeve isn’t. The combination of global developed market equities with emerging market bonds & currencies provides a unique mix of assets and a risk/return profile that has few comps in the fund marketplace. The relative value could be attractive at these levels or it could be exposing shareholders to excessive risk.
Fund Background
LGI’s investment objective is total return, consisting of capital appreciation and current income. It typically invests in a portfolio of approximately 60-80 U.S. and non-U.S. equity securities, generally of companies with market capitalizations greater than $2 billion. Equity investments may include emerging markets. The fund also invests in emerging market currencies and may invest in debt obligations, including government, government agency and corporate obligations and structured notes denominated in emerging market currencies.
LGI also uses a modest amount of leverage to enhance yield and total return potential.
This is definitely a unique combination of assets and one you don’t see often at all. The equity sleeve consists mostly of well-developed names and should help mitigate some downside risk should the global economy decelerate. The fixed income sleeve is very well diversified, holding well over a dozen different emerging markets currencies with an average duration of just 10 months. The currency position may seem somewhat intimidating to someone not familiar with investing in this area of the market, but LGI tends to do it in a fairly risk-controlled way. Outside of the addition of some leverage, LGI doesn’t appear overly risky in any particular area and that’s a good thing for investors.
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