Western Asset Short-Term Muni Portfolios

Investment Overview

Western Asset Short-Term Muni Portfolios invest in municipal bonds for substantial individual and taxable institutional investors and benchmarks to the Bloomberg Barclays 1-Year Municipal Bond Index. The average maturity of bonds in the portfolio generally ranges between zero and three years, depending on Western Asset’s interest rate outlook.

 

Investment Objective

Seeks to:

Provide total return over a market cycle, consisting of capital gain (taxable) and income that is exempt from regular U.S. income tax, while aiming for a relatively higher degree of stability and liquidity

 

Investment Philosophy

Long-term 

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

Value oriented

  • Seek to identify and favor sectors and issues that are undervalued or out of favor in the market

Diversified strategies

  • Results do not depend on only one or two opportunities; multiple themes are 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 the volatility

Sector rotation

  • The Short-Term Muni Portfolios solely focus on investment-grade securities within the municipal bond market. These securities are similar to those represented within the Bloomberg Barclays 1-Year Municipal Bond Index.
 

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 

Ability to customize the portfolio to meet client constraints

 

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

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

 

 

Investment
Process

Interest rate exposure/duration weighting

Western’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 the 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.

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 Short-Term Muni 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.  Fixed income securities are subject to illiquidity risk, which is the risk that securities may be difficult to sell at certain prices when no market participants are willing to purchase the securities at such prices.  For tax-exempt securities, certain investors may be subject to the Federal Alternative Minimum Tax, and state and local taxes may apply. Capital gains, if any, are fully taxable.  State-specific and state-biased portfolios within this Portfolio focus on individual states and are more vulnerable to losses caused by adverse developments in those states than are national portfolios, which diversify investments across multiple states. 

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. 

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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Sector weightings and portfolio characteristics are based on the aggregate of individual client portfolios in the Current Market Muni program composites and are subject to change at any time. Sector weightings and portfolio characteristics of individual client portfolios in these programs 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 or securities listed and should not be used as a sole basis to make any investment decisions.
Source: InvestorTools.

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 Short-Term Muni 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
(%)
2008 1.62 3.14 4.57 - - 88 100 0.32 167 0.03
2009 0.23 1.73 3.49 - - 84 100 0.32 124 0.03
2010 -0.57 0.92 1.17 - - 97 100 0.28 47 0.01
2011 0.31 1.82 1.58 0.43 0.60 98 100 0.35 76 0.02
2012 -0.22 1.27 0.84 0.45 0.33 90 100 0.34 69 0.01
2013 -0.55 0.94 0.80 0.53 0.22 24 100 0.12 55 0.01
2014 -0.77 0.71 0.58 0.49 0.16 24 100 0.14 55 0.01
2015 -0.78 0.71 0.61 0.47 0.22 24 100 0.06 55 0.01
2016 -1.11 0.37 0.30 0.48 0.47 26 100 0.09 46 0.01
2017  -0.44 1.06 0.92 0.62 0.64 12 100 0.05 28 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 – Short Term Muni portfolios are discretionary fixed-income portfolios that seek total return over a market cycle, consisting of capital gain (taxable) and income that is exempt from regular U.S. income tax, while aiming for a higher degree of liquidity than Current Market Muni portfolios. Depending on Western Asset's interest rate outlook, the average maturity of bonds in Short-Term Muni portfolios generally ranges between zero and three 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 Bloomberg Barclays U.S. Municipal Bond Index, 1 Year.  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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