Western Asset uses a wide variety of third-party and internally developed systems to enhance its quantitative and research capabilities. These systems also provide comprehensive portfolio and security analyses on an individual account level and across accounts. This enhances the level of detail and the number of tools with which Western manages portfolios. Despite using a large number of independent models to evaluate the risk of different portfolios, the Firm understands that quantitative models are only as good as the assumptions on which they are based. Therefore, the high-quality analysis and observation that come with experience are applied to all model output, increasing the usefulness of the data.

Western portfolio managers use a variety of reports to evaluate risk in client portfolios and to ensure that accounts with comparable guidelines and benchmarks are structured similarly. Primary risk management reports monitor duration, yield curve and sector risk by investment strategy. Other daily reports show exposure (in both absolute terms and relative to the benchmark) to currencies, sectors and subsectors, broken down by maturity bands, duration bands and credit quality.

Western Asset performs data analysis throughout the trading day. These analyses occur across multiple global offices and involve thorough reviews of portfolio holdings. Analysis covers sector and subsector concentrations, factor analysis and key rate duration. The Firm uses a comprehensive set of risk systems to monitor portfolio concentrations and exposure to various sectors, securities, duration levels and changes in the yield curve. The team also regularly performs scenario analyses, including stress-testing, sensitivity and worst case, to analyze portfolio exposure to various market factors. Western Asset also monitors tracking error on both a historical and predictive basis.