Western Asset GSM 3-Year Portfolios

Investment Overview

The Western Asset GSM 3-Year Portfolios actively manage U.S. Treasury bills, notes, bonds and U.S. government agency securities to seek to maximize total return. GSM 3-Year has a maximum individual security limit of five years and a maximum average portfolio maturity of three years. It is benchmarked to the Merrill Lynch 1-3 Year Treasury Bond Index.

 

Investment Objective

Seeks to produce total returns over complete market cycles that exceed appropriate benchmark returns. As part of this total return investment approach, the portfolios seek to preserve principal.

 

Investment Philosophy

  • Long-term
  • Active duration management
  • Sector rotation between Treasuries and Agencies
  • Strive to add incremental value over time and potentially reduce volatility
  • The GSM 3-Year Portfolios predominantly focus on U.S. government debt (including Treasuries and Agencies)
     

Key Differentiators

  • Leverage Western Asset Management resources
  • Institutional-caliber buying power and trading expertise
  • Access to proprietary credit research team
  • Exclusive focus on fixed income management
 

There is no guarantee that the Portfolio's objectives will be met.

 

 

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 seeks to add value to a portfolio by actively rotating between the Treasury and Agency sectors.

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. There is no guarantee investment objectives will be achieved.

 

 

meet your managers

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 GSM 3-Year 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.  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. 

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 bond weightings are subject to change at anytime and are based on a model portfolio. Portfolio characteristics and bond weightings of individual client portfolios in the program may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed. (Source: BondEdge)

 

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Western Asset GSM 3-Year GIPS® Endnotes December 31 ($USD)
Year Net
return
(%)
“Pure”
gross
return (%)1
Benchmark
total
return
(%)
Gross
total
3 Yr.
St. Dev.
Benchmark
3 Yr.
St. Dev.
Number
of
portfolios
Bundled
fee
portfolios
(%)
Internal
dispersion
(%)
Composite
assets
($ mm)
Firm
assets
(%)
2008 5.12 6.69 6.61 - - 105 100 0.05 67 0.01
2009 0.42 1.92 0.78 - - 126 100 0.03 79 0.02
2010 0.79 2.30 2.35 - - 126 100 0.03 87 0.02
2011 -0.07 1.43 1.55 0.99 1.03 107 100 0.05 68 0.02
2012 -0.87 0.62 0.43 0.67 0.74 83 100 0.09 31 0.01
2013 -1.14 0.35 0.36 0.45 0.51 29 100 0.38 21 0.00
2014 -0.82 0.67 0.62 0.38 0.44 32 100 0.04 30 0.01
2015 -0.94 0.55 0.54 0.50 0.57 29 100 0.02 20 0.00
2016 -0.63 0.86 0.88 0.68 0.77 33 100 0.03 22 0.01
2017  -0.92 0.57 0.42 0.69 0.75 51 100 0.09 27 0.01

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 GSM – 3 Year portfolios are discretionary fixed-income portfolios that offer - to individual and taxable institutional investors - tailored management of U.S. Treasury and federal agency securities with average maturities of three years or less. These portfolios seek to produce total returns over complete market cycles that exceed appropriate benchmark returns. The portfolios also seek to preserve principal. The GSM 3 Year strategy has a maximum maturity of five years. The composite is comprised of accounts that are separately managed accounts (SMAs) managed in accordance with the strategy. The composite employs a 10% significant cash flow policy. The composite was created on January 1, 2006.

Effective January 1, 2013, the number of portfolios reflects a change from prior periods due to an aggregation of accounts as reported by one sponsor. For periods prior to 2013, the firm excluded accounts designated by the sponsor as client-restricted.

For comparison purposes, composite returns are shown against returns of the BofA Merrill Lynch 1-3 Year U.S. Treasury Bond Index. An investor cannot invest directly in an index.

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.  

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

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