Western Asset Corporate Bond Ladders (1-10 Years)

Investment Overview

The Western Asset Corporate Bond Ladders are designed to deliver income opportunities while preserving capital and reducing interest rate risk by investing in laddered corporate bonds. The strategy invests in a diversified portfolio of credit-monitored investment-grade corporate securities with equally weighted maturities from 1-10 years.

 

Investment Objective

The strategy seeks to maintain a competitive level of income while preserving of principal by investing — and reinvesting — in a well-diversified portfolio of investment-grade corporate bonds with laddered maturities.

 

We believe:

  • Laddered portfolios may offer advantages over self-managed portfolios in creating a stable stream of income
  • Ladders represent a disciplined approach that allows investors to manage changes in interest rates
  • Credit monitoring may enhance income by providing opportunities to allocate across the full range of investment-grade securities
  • A diversified set of bonds with staggered maturities and coupon stream may provide continued opportunities for reinvestment
 

Key Differentiators

Team-managed approach

  • Team unites groups of specialists dedicated to different market sectors
  • Each group of specialists draws on its distinctive expertise in the bottom-up analysis of its respective sector

In-depth bond research

  • Looks across sectors and issues to select attractive income opportunities and ensure diversification when reinvesting cash flows

Overseen by a fixed income leader

  • Access to a highly regarded proprietary credit research team in selecting and monitoring holdings 
  • Exclusive focus on fixed income management
  • Long tenure managing separately managed accounts in taxable and tax-exempt markets
 

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


 

Investment
Process

Identify term structure of ladder

Term structure

  • Purchase bonds maturing at regular intervals from 1-5 or 1-10 years (Other options may be available.)
  • Hold securities to maturity and reinvest back out at longest maturity rung of ladder
  • Manage reinvestment risk by staggering maturities and coupon streams across a diverse mix of sectors and issuers

Identify attractive sectors and industries

Sector and issue decision

  • Employ in-depth research to uncover yield opportunities across the investment-grade rating spectrum 
  • Winnow portfolio candidates using proprietary credit analysis

Build portfolio from credit-monitored approved list

Review/sell process

  • Monitor credits constantly, despite intent to hold all securities until maturity 
  • Re-examine whether a particular investment should continue to be held when the issuer’s ability to pay the coupon or repay upon maturity is in doubt

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.


 

Why invest in a corporate bond ladder?

  • Help minimize impact of rising rates by allowing bonds to roll down curve until maturity
  • May provide greater income from investing at potentially higher rates 
  • May benefit from owning well-diversified portfolio of individual bonds, and ongoing professional credit monitoring 
     
 


 


meet your manager

One of the world’s leading global fixed income managers. Founded in 1971, the firm is known for team management, proprietary research and long-term fundamental value approach.


Meet Your Managers

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

To find out more about the Western Asset Corporate Bond Ladders 1-10 Years Portfolios, talk to your Financial Advisor.


 

What I Should Know
Before Investing

All investments involve risk, including loss of principal and there is no guarantee that investment objectives will be met.  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.  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. 

Tapering of the Federal Reserve Board's quantitative easing program and a general rise in interest rates may lead to increased portfolio volatility.

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IMPORTANT INFORMATION: Past performance is no guarantee of future results. Management and performance of individual accounts may vary for reasons that include the existence of different implementation practices and model requirements in different investment programs.

Pure Gross performance shown does not reflect the deduction of investment management fees and certain transaction costs, which will reduce portfolio performance. Net performance includes the deduction of a 3% annual wrap fee for equity and balanced portfolios and a 1.5% annual wrap fee for fixed income portfolios. These deducted fees amounts are the maximum anticipated wrap fees. Actual fees may vary. For fee schedules, contact your financial professional or, if you enter into an agreement directly with Legg Mason Private Portfolio Group, LLC ("LMPPG"), refer to LMPPG's Form ADV disclosure document. Returns reflect the reinvestment of dividends and other earnings.

An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Please see GIPS® endnotes for important additional information regarding the portfolio performance shown and for effects of fees.

Performance Source: Legg Mason

Hypothetical growth of dollars: For illustrative purposes only. Assumes no withdrawals or contributions. The performance results shown were calculated assuming reinvestment of dividends and income and take into account both realized and unrealized capital gains and losses.

IMPORTANT INFORMATION: Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment adviser. 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, and Western Asset Management Company. Management is implemented by LMPPG, the designated sub-adviser or, in the case of certain programs, the program sponsor or its designee.


Professional money management may not be suitable for all investors. Factual information relating to the securities discussed was obtained from sources believed to be reliable, but there can be no guarantee as to its accuracy. It should not be assumed that investments made in the future will be profitable or will equal the performance of the securities discussed in the material.

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Portfolio characteristics and sector weightings are based on a representative account within the composite. Portfolio characteristics and sector weightings of individual client portfolios in the program may differ, sometimes significantly, from those shown above. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the sectors listed and should not be used as a sole basis to make any investment decisions.
Source: Legg Mason

Credit quality is a measure of a bond issuer's ability to repay interest and principal in a timely manner. The credit ratings shown are based on each portfolio security's rating as provided by the following Nationally Recognized Statistical Rating Organizations ("NRSRO"): Standard and Poor's ("S&P"), Moody's Investors Service ("Moody's"), Fitch Ratings, Ltd. In the event a portfolio security is rated by more than one NRSRO, the higher rating is shown. In the case where a security is not rated by an NRSRO, these are listed as "Non Rated". The credit quality of the investments in the Portfolio does not apply to the stability or safety of the Portfolio. These ratings may change over time. The Portfolio itself has not been rated by a NRSRO.

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Western Asset Corporate Bond Ladders (1-10 Year)* – GIPS® Endnotes December 31 ($USD)
Year

Net 
return 
(%)


“Pure” 
gross
return (%)1


Benchmark 
total
return (%)


Gross 
total 
3 Yr.
St. Dev.


Benchmark 
total
3 Yr. 
St. Dev.


Number
of
portfolios


Bundled 
fee
portfolios 
(%)


Internal
dispersion 
(%)


Composite
assets 
($mm)


Firm 
assets 
(%)
2011(2) 0.78 0.90 -na- -na- -na- 1 100 -na- 42 0.01
2012 4.33 5.88 -na- -na- -na- 1 100 -na- 42 0.01
2013 -0.77 0.72 -na- -na- -na- 1 100 -na- 39 0.01
2014 1.15 2.66 -na- 1.77 -na- 7 100 -na- 42 0.01
2015 -0.66 0.84 -na- 1.72 -na- 7 100 0.25 7 0.00
2016 0.70 2.21 -na- 2.14 -na- 5 100 -na- 3 0.00

2Partial period return (December 1, 2011 to December 31, 2011).

Western Asset claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Western Asset has been independently verified for the periods from January 1, 1993 to December 31, 2016. The verification report is available upon request.

Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The verification does not ensure the accuracy of any specific composite presentation.

For GIPS® purposes, the Firm is defined as Western Asset, a primarily fixed-income investment manager comprised of Western Asset Management Company, Western Asset Management Company Limited, Western Asset Management Company Pte. Ltd., Western Asset Management Company Ltd, Western Asset Management Company Pty Ltd, and Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários (DTVM) Limitada, with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Dubai. Each Western Asset company is a wholly owned subsidiary of Legg Mason, Inc. (“Legg Mason”) but operates autonomously, and Western Asset, as a firm, is held out to the public as a separate entity. Western Asset Management Company was founded in 1971. The Firm is comprised of several entities as a result of various historical acquisitions made by Western Asset and their respective performance has been integrated into the Firm in line with the portability requirements set forth by GIPS.

Western Asset – Corporate Bond Ladders (1-10 Year) portfolios are discretionary fixed-income portfolios that seek to provide – to individual and taxable institutional investors –periodic income through investment in a diversified portfolio of investment grade corporate bonds with laddered maturities of 10 years or less. “Laddering” involves building a portfolio of corporate bonds with staggered maturities so that a portion of the portfolio will mature periodically. Individual securities are purchased with the intent to hold such security until maturity unless the firm determines to sell such security due to credit concerns or the sale of such security is needed to fund a client withdrawal of funds. To maintain the ladder, money that comes in from maturing bonds is typically reinvested in bonds with longer maturities within the range of the ladder. The composite is comprised of accounts that are separately managed accounts (SMAs) managed in accordance with the strategy with an account minimum of US $100,000 (prior to 1/1/2017, the composite minimum was US $250,000). The composite employs a 10% significant cash flow policy. The composite was created on April 1, 2015.

For periods prior to 2013, the firm excluded accounts designated by the sponsor as client-restricted.

The composite is not measured against a benchmark as accounts that may comprise the composite are measured on an absolute return basis. There is no benchmark available that appropriately reflects the guidelines of all accounts within the composite.

1“Pure” gross returns are presented as supplemental information to the net returns. The current fee schedule is 1.50% on all assets. Net returns are calculated by deducting the anticipated maximum annual bundled fee applied on a monthly basis from the "pure" gross monthly return. The bundled fee includes all charges for trading costs, portfolio management, custody, and other administrative fees. Bundled fees may vary across different financial firms and across different accounts based upon account size and other factors. Returns and market values are expressed in USD.

Dispersion is calculated using the asset-weighted standard deviation of annual returns of those portfolios that were included in the composite for the entire year (equal-weighted prior to 2014). Periods with five or fewer accounts are not statistically representative and are not presented. The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. Standard deviation is not presented for periods where 36 monthly returns are not available for the composite or the benchmark.

Past investment results are not indicative of future investment results.

Western Asset’s list of composite descriptions and policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Please contact Ellen Cammer at 212-601-6064 or Ellen.Cammer@westernasset.com.

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