Why Wait for the Inevitable – Western Asset Core Plus Portfolios
When interest rates go up, bond prices tend to decline. Yet, with its well-diversified portfolio and “plus” sectors, the strategy has generated positive returns during each of the last two rising interest rate environments, and it has provided a potential hedge against rising prices.
A unique approach to access
Western Asset Core Plus Portfolios combine individual securities and no-fee funds1 in a hybrid structure that can provide broader sector exposure than SMA portfolios that only hold individual securities.
- Active Management
- Enhanced income potential
An experienced, bottom-up fixed income manager like Western Asset doesn’t simply follow the crowd. Instead, Western Asset performs extensive proprietary credit surveillance and detailed, security-level analysis. This time-tested approach has helped it navigate market cycles and provide clients with diversified portfolios managed for the long term.
- Dedicated to fixed income — 40-plus years of fixed income expertise; one of the leading providers of Separately Managed Accounts (SMAs).
- All-world team — Culture unites insights of specialist groups in nine global offices covering different fixed income sectors and asset classes.
- Research prowess — Investment ideas are generated by proprietary credit surveillance and detailed analysis of individual securities and structures.
- A unique Approach to Access — The Portfolios combine individual securities and no-fee funds in a hybrid structure that can provide broader sector exposure than SMA portfolios that only hold individual securities.
Western Asset Core Plus Portfolios
Total return-focused portfolio that offers more balanced exposure to the Bloomberg Barclays U.S. Aggregate Bond Index, along with greater flexibility and enhanced return potential from investments in higher-yielding sectors
1The 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. May invest in derivatives, which can be illiquid and may have a potentially large impact on performance. Market conditions, security valuations and other investment considerations may cause turnover to be higher from time to time. Shares of the no-fee funds may only be purchased by or on behalf of separately managed accounts by 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 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 December 31, 2017. The expense reimbursement agreement does not cover brokerage, taxes and extraordinary expenses.
Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by one or more of the following Legg Mason-affiliated sub-advisers: ClearBridge Investments, LLC and Western Asset Management Company. Management is implemented by LMPPG, the designated sub-advisor or, in the case of certain programs, the program sponsor or its designee.
All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.
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 fund’s 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.” High-yield bonds are subject to increased risk of default and greater volatility due to the lower credit quality of the issues.
Shares of the no-fee funds may only be purchased by or on behalf of separately managed accounts 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 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 December 31, 2017. The expense reimbursement agreement does not cover brokerage, taxes and extraordinary expenses.
Active management does not ensure gains or protect against market declines.
Fixed income securities may be subject to extension risk, which is the risk that the issuer will repay their obligations more slowly than the market anticipates in the event market interest rates rise. Issuers also have the right to pay their payment obligations ahead of schedule in the event market interest rates fall, subjecting to prepayment risk.
U.S. Treasuries are direct debt obligations issued and backed by the "full faith and credit" of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasury securities, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.
Foreign securities, where permitted, are subject to the additional risks of fluctuations in foreign exchange rates, changes in political and economic conditions, foreign taxation, and differences in auditing and financial standards. These risks are magnified in the case of investments in emerging markets.
Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will be unable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed income securities falls.
Investments may also be made in mortgage-backed, asset-backed securities and taxable municipal securities. Asset-backed securities generally decrease in value as a result of interest rate increases, but may benefit less than other fixed-income securities from declining interest rates, principally because of prepayments. Mortgage-backed securities involve additional risk over more traditional fixed-income investments, including: interest rate risk, implied call and extension risks; and the possibility of premature return of principal due to mortgage prepayment, which can reduce expected yield and lead to price volatility.
Investments may also be made in taxable municipal securities.
Diversification does not guarantee a profit or protect against loss.