The fixed income landscape has never been more challenging for investors, and current allocations may not be ideal for the road ahead. Given the current uncertainty, fixed income investors should ensure that their portfolios are properly diversified to align with their outlook and desired risk.

 


A Broad Spectrum of Solutions

Challenge:

How well might current bond holdings help mitigate equity volatility?
 

Solution:

Core Bond strategies can target a relatively steady source of income that can also help anchor portfolios to help mitigate equity volatility and act as a buffer to credit risk.

Challenge:

Are they positioned against rising rates and global macro risks?
 

Solution:

Short duration strategies to tactically address interest rate concerns may help mitigate the effect of rising interest rates.

Challenge:

Are they meeting current income and growth goals?
 

Solution:

Opportunistic strategies including those with a global approach and flexible guidelines may help reach specific income and growth goals and also enhance overall portfolio diversification, given a willingness to accept the potential for heightened volatility.
Clearly, no one strategy can address all the challenges in the bond market. But a diversified portfolio — including core, core complement and opportunistic fixed income components — may offer the best potential to secure the traditional benefits of fixed income while seeking better risk-adjusted returns over a market cycle.


Legg Mason’s bond managers — Western Asset and Brandywine Global — offer a wide range of solutions across the fixed income spectrum to address these questions and potentially help investors build an all-weather bond portfolio.

 

 

Featured Resources


  • Discover Western Asset
    Western Asset’s active approach combines long-term fundamental value with multiple diversified strategies. 
 

 

Investment Process Summary 

 

Brandywine Global

Our approach is to seek undervalued assets globally by utilizing a top-down macroeconomic framework and a value-driven process. Real yield is our primary measure of value in the global bond market. We also actively manage our currency exposures and focus on owning undervalued currencies with the potential for appreciation. We hedge currencies that we believe are overvalued or pose downside risk. We structure our portfolios along macroeconomic themes involving business cycle analysis, inflation trends, monetary policies and political risk. We typically concentrate investments in the 10 to 15 countries that we find most attractive.

Western Asset

We believe we can identify and capitalize on markets and securities that are priced below fundamental fair value. We do this through disciplined and rigorous analysis, comparing prices to the fundamental fair values estimated by our macroeconomic and credit research teams around the globe. The greater the difference between our view of fair value and markets’ pricing, the bigger the potential value opportunity. The greater the degree of confidence in our view of fundamentals, the greater the emphasis of the strategies in our portfolios. We seek to diversify investments and add value across interest rate duration, yield curve, sector allocation, security selection, and country and currency strategies. We deploy multiple diversified strategies that benefit in different environments so no one strategy dominates performance, helping to dampen volatility.

 

Duration measures the sensitivity of price (the value of principal) of a fixed income investment to a change in interest rates. The higher the duration number, the more sensitive a fixed income investment will be to interest rate changes.

 

All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.

Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus, for this and other information. Read it carefully.

Fixed-income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed-income securities falls.

High yield bonds are subject to greater price volatility, illiquidity, and possibility of default.

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.

Diversification does not guarantee a profit or protect against a loss.