Legg Mason, the Baltimore-based mutual fund company that already
has plans to market active ETFs, filed new regulatory paperwork to
gain permission to also offer a variety of index ETFs, including
equity and fixed income funds.
The "exemptive relief" petition seeks permission to offer
domestic and global fixed income as well as equity securities
including funds-of-funds that could use other ETFs as underlying
The first fund it is planning is tentatively called the Legg
Mason Global Income ETF, a dividend-focused developed-markets
equity fund that will be tied to the price and yield of the Global
Income Index, according to the filing.
Legg Mason is one of many storied mutual fund firms to file for
permission to market ETFs. It first filed to offer active ETFs
early in 2010 and said late last year that its first active fund
would be called the Legg Mason Western Asset Ultra-Short Duration
ETF. That would make its first active fund quite like the popular
Pimco Enhanced Short Maturity Strategy Fund (NYSEArca:MINT).
Regarding the Legg Mason Global Income ETF, the filing said the
index consists of securities that have both high and sustainable
yields as determined by a proprietary methodology that incorporates
the following factors, each of which are equally
weighted: dividend yield; dividend payment history; and
dividend sustainability-the latter factor measured in part by free
cash flow and payout ratios.
The universe of equity securities from which index constituents
will be selected will consist of the top 85 percent of market
capitalization of equity securities within the global developed
market universe, the company said.
Securities in the index will be ranked and adjusted to balance
the index's exposure to individual regions and sectors. The
weightings of the securities in the index will correspond to their
relative ranking, and the index will consist of about 400 to 600
securities and will be rebalanced monthly, the filing also
Exemptive relief filings, such as the one Legg Mason submitted
to the Securities and Exchange Commission on Aug. 20, grant
exemptions to parts of the Investment Act of 1940, and represent
the first hurdle fund companies must clear to issue ETFs. It can
take anywhere from six months to more than a year for an initial
fund to launch following the filing of an exemptive relief
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