CLEARBRIDGE INVESTMENTS ENCOURAGED BY OPPORTUNITIES IN GLOBAL SMALL CAP EQUITY MARKETS

Mr. Ehrlichman and his team believe the current market climate will likely favor small cap investors in global equities for the foreseeable future.  Investors must be wary given the complexity of international issues and the unpredictability of financial markets, but ClearBridge Investments sees attractive trends in developed and emerging markets that can benefit those who dig deep in their research and are invested for the long term.

Emphasizing the breadth of their coverage, Mr. Ehrlichman explains that as a manager focused on all market capitalizations, ClearBridge can own stocks with market caps down to about a $100 million and all the way up to mega cap sizes.

Mr. Ehrlichman said a change in the perception of international markets and economies is creating new investment opportunities, “[W]e’re going from growth forever to growth never.  I guess it’s called the new normal, but I always have trouble keeping track of what’s new and what’s normal.

“So it used to be emerging markets and low inflation were great for growth,” he continued.  “Now emerging markets and low inflation are bad for growth.  But this pendulum swing of growth expectations plunging has particularly hit places like Europe, China and small caps. Low expectations and pessimism, being a contrarian value manager, are actually wonderful things.”

These conditions have Mr. Ehrlichman and the ClearBridge Investments team feeling “delighted” (as the moderator characterized) for the investing prospects of their clients.

According to Mr. Ehrlichman, “It takes a lot of risk out of the market, it broadens our opportunity set, absolutely, because people become indiscriminate, you know, just as crazy as they were in 2007 in the super cycle, now they’re ignoring the tremendous growth.  And we actually view the recent environment, the shift away from the super cycle is a move, we’re kind of semi-optimistic as we call it, from unsustainable to sustainable trends of drivers.”

Many of the aggressive moves made by governments and central banks have improved the outlook for global equity markets, in Mr. Ehrlichman’s view.

“So now we know what’s wrong with the system in China and Japan and Europe, they’re fixing their systems at different paces, the Italians slower than maybe the Germans.  But all of this is positive and it creates sustainable real financial drivers.”

When asked how the ClearBridge Investments team looks at China, Mr. Ehrlichman focused on the country’s development into a consumer-driven economy.

“[O]ver the long term clients [should] go where the wealth is going to be created … [T]here’s going to be a tremendous amount of wealth created as the middle class emerges, and everything that goes along with that … When the middle class emerges they want to eat out more often, they tend to travel more within their own country, so railroads and things like that [are promising].  They want to fill their houses with furniture.  And so there’s very much long term secular trends that you can play.”

He believes that outlook is part of a larger trend that will continue to benefit small cap investors.

“[O]ne of the best things again about being a small cap manager is you can find these companies that are specifically focusing, will benefit from these specific trends, both regionally and then globally within the emerging markets.”

To view a highlight (2:05) of Mr. Ehrlichman on the Asset TV interview, please access this link: https://atv.to/qMDyj0

Mr. Ehrlichman’s full portion (37:32) of the interview can be viewed at: https://atv.to/QyMGGr

Investment advisors can use this program for Continuing Education credit purposes.  To that end, the full video (56:04) can be viewed at: https://us.asset.tv/video/masterclass-international-investing-november-2014

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About Paul Ehrlichman

Head of ClearBridge’s Global Value Equity investment team and co-manager of numerous global and international strategies, Paul Ehrlichman has 31 years of investment industry experience.  Prior to launching predecessor firm Global Currents Investment Management in 2008, Mr. Ehrlichman spent 18 years at Brandywine Global Investment Management as Global Equity CIO and Managing Director.  Before joining Brandywine Global, he was a portfolio manager with Provident Capital Management and a securities analyst at First Pennsylvania Bank.  He is involved with community organizations including Fairville Friends School, The Brandywine Conservancy, Salesianum High School, St. Patrick's Parish of Kennett Square and The Delaware Nature Society.  Mr. Ehrlichman earned a B.S. in finance and quantitative analysis from La Salle University.

About ClearBridge Investments

ClearBridge Investments is a well-established global investment manager with $108 billion in assets under management as of September 30, 2014.  With a legacy dating back over 50 years, our long-tenured portfolio managers and fundamental research team focus on building equity portfolios for clients who seek income solutions, high active share or low volatility.  Owned by Legg Mason, ClearBridge operates with investment independence from headquarters in New York and offices in Baltimore, San Francisco and Wilmington.

About Legg Mason

Legg Mason is a global asset management firm, with $720 billion in AUM as of October 31, 2014. The Company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, Maryland, and its common stock is listed on the New York Stock Exchange (symbol: LM).

All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Equity securities are subject to price fluctuation and possible loss of principal. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. INVESTMENT PRODUCTS: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

©2014 Legg Mason Investor Services, LLC, member FINRA, SIPC. Legg Mason Investor Services, LLC and ClearBridge Investments, LLC are subsidiaries of Legg Mason, Inc.

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