Western Asset Core Plus Portfolios

Overview

The Western Asset Core Plus Portfolios offer investors access to these flagship strategies in a separately managed account. These separately managed accounts consist of investments in individual securities and shares of no-fee mutual funds1 advised by Western Asset and its affiliates. The no-fee funds are used by Western Asset to achieve appropriate levels of diversification, as well as provide clients with exposure to sectors that are normally difficult to include in a separately managed account with low minimum investment requirements.2

Investment Objective

The strategy seeks to:

  • maximize total return consistent with prudent portfolio management.

Investment Philosophy

Long-term

  • Seek out the greatest long-term value by thoroughly analyzing a wide range of sectors of the fixed-income market

Value oriented

  • Identify and favor sectors and issuers that are undervalued or out of favor in the market

Diversified strategies

  • Results do not depend on only one or two opportunities; multiple themes employed in portfolios. Diversification seeks to limit the impact of a single adverse market event
  • Strive to add incremental value over time and potentially reduce volatility

Sector rotation

  • The Core Plus Portfolios predominantly focus on investment-grade securities across all market sectors and maturities, as well as other alternatives such as high yield bonds, emerging markets debt, and non-dollar bonds

Investment Process

Interest Rate Exposure/Duration Weighting

  • Western Asset's investment team comprehensively analyzes a variety of domestic and international macroeconomic factors to establish a duration target.

Term Structure Weighting

  • The Firm carefully employs strategies in an attempt to take advantage of changes in the yield curve's shape and shifts in the relationship between short-, intermediate-, and long-maturity securities.

Sector Allocation

  • Western Asset believes that value can be added to a portfolio by actively rotating among, and within, different sectors of the bond market. The investment team studies the fundamental factors that influence sector spread relationships.

Issue Selection

  • Using a bottom-up process, the Firm seeks to identify companies with changing credit characteristics and securities that are undervalued and out of favor due to unusual circumstances.

Western Asset Core Plus Portfolio construction:

Western Asset portfolios will normally maintain a minimum of 50% of the portfolio in individual securities. Typically, 10-15 individual bonds3 are held in the account. These securities will consist primarily of bonds in the Treasury, Agency and investment-grade corporate bond sectors.

These bonds are an integral part of the overall portfolio construction and are actively managed in concert with the no-fee funds.

Portfolio composition may include:

Individual Securities

  • U.S. Treasuries
  • Agencies
  • Investment-grade corporates
  • Mortgage-backed securities †
  • Cash and cash equivalents

No-fee mutual funds4

  • Investment-grade corporates
    • Investment-grade corporates
  • Mainly mortgages
    • Agency and non-agency mortgage-backed securities †
    • Mortgage pools †
    • Asset-backed securities †
    • U.S. Treasuries and Agencies
    • U.S. Treasury Inflation Protected Securities ("TIPS") † *
    • Mortgage dollar rolls †
    • Cash equivalents
  • Extended credit
    • Emerging markets debt
    • Non-dollar
    • U.S. high yield

Investment Risks

High yield bonds are subject to additional risks such as the increased risk of default and greater volatility because of the lower credit quality of the issues. Foreign securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets.

Fixed income investments are subject to interest rate risk. As rates rise, the price of fixed income securities falls. Also, there is possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt.

Investment Management

Western Asset Team Approach

  • Team unites groups of specialists dedicated to different market sectors
  • Each group of sector specialists utilizes their expertise in bottom-up analysis of each portfolio sector



The Core Plus portfolios are available as separately managed accounts that utilize both individual securities and no-fee mutual funds. These mutual funds were created specifically for, and are made available exclusively through these separately managed accounts. The funds prospectus is available from your financial professional and includes information on fund investment objectives, strategies and risks, including the heightened risks associated with investments in high yield securities, also known as "junk bonds."

*U.S. Treasury Inflation Protected Securities ("TIPS") are bonds sold at auction and available in 10- or 30-year maturities. TIPS receive a fixed, stated rate of return. But they also increase their principal by the changes in the CPI-U (the non-seasonally adjusted U.S. city average all items consumer price index for all urban consumers, published by the Bureau of Labor Statistics). Investors should note that TIPS, like most fixed income instruments with long maturities, are subject to price risk.

The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. Not all investments in a client's portfolio will meet such criteria. Investments in these separately managed accounts present special considerations. The mix of investments will vary depending on market conditions, the manager's views as to the relative attractiveness of available sectors, cash flows into and out of the account, and other factors.

† Please see "Market terms" endnote.

1Shares of the no-fee funds may only be purchased by or on behalf of separately managed accounts managed by Legg Mason affiliates, including Western Asset. Managed account clients will pay fees to program sponsors or to their account managers, and such fees will be calculated taking into account assets invested in shares of no-fee funds. Unless reimbursed by the fund's manager or its affiliates, ordinary and extraordinary fund-level operating expenses are borne by fund shareholders. The manager of the no-fee funds has entered into an expense reimbursement agreement with the funds pursuant to which the manager has agreed to reimburse 100% of each fund's ordinary operating expenses through February 28, 2010. The expense reimbursement agreement does not cover brokerage, taxes and extraordinary expenses. Mutual funds are sold by prospectus. Please contact your financial professional for a prospectus for the no-fee funds discussed.

2The investment minimum for the Western Asset Core Plus Portfolios is $250,000.

3Allocations will vary.

Professional money management may not be suitable for all investors. Western Asset Management Company manages the Western Asset Core Portfolios pursuant to a subsidiary relationship with another Legg Mason, Inc affiliate.

Diversification does not ensure a profit or protect against market loss.

There is no guarantee the investment objectives will be met.

Client portfolios are managed based on investment instructions provided by one or more of the following Legg Mason-affiliated investment management firms, as indicated in portfolio names or otherwise: ClearBridge Advisors, LLC, Western Asset Management Company, Brandywine Global Investment Management, LLC and Global Currents Investment Management, LLC . Effective April 1, 2008, client portfolios are implemented by a service provider on behalf of Legg Mason Private Portfolio Group ("LMPPG") or, in the case of certain programs, by the program sponsor or its designee.

An investor cannot invest directly in an index. Click here for Index Definitions.

The program manager(s) may, to a limited extent, invest in other securities entailing additional risks beyond those highlighted in this profile.

All investment managers mentioned are subsidiaries of Legg Mason, Inc. Legg Mason Investor Services is a subsidiary of Legg Mason, Inc.

All investments involve risk, including possible loss of principal.

INVESTMENT PRODUCTS: NOT FDIC INSURED / NO BANK GUARANTEE / MAY LOSE VALUE

This site is intended for U.S. investors only. The products and services described on this site are generally not available to non-U.S. investors.