Risk Management

Tailored Fixed-Income Solutions

Each portfolio is continually evaluated to ensure consistency with clients' investment objectives and risk tolerances.

Risk management is embedded throughout Western Asset's investment process and integrated directly into portfolio construction and ongoing oversight. Risk professionals work alongside various teams to assess market, credit, and liquidity risks, drawing on proprietary analytics, quantitative tools, and deep investment expertise.

The integrated framework promotes disciplined decision-making, ensures risk exposures are intentional and appropriately sized, and supports consistency across market environments. Clear escalation protocols and governance structures reinforce accountability and transparency while preserving the independence of the risk function.

A unique risk PLATFORM

WISER: The Benefits of a Proprietary Risk Platform

Western Asset employs an integrated approach to active risk management that uses our proprietary risk system, WISER, the Western Asset Information System for Estimating Risk. It was developed in house and benefits from the constant dialogue between risk managers and portfolio managers to provide comprehensive and powerful analysis and reporting. Derivative risks are evaluated via full valuation and market and credit risks are simultaneously estimated through Monte Carlo simulation of interest rate, spread and FX movement, and obligor default probabilities.

Market risk is addressed through limits on risk measures such as tracking error, volatility, value at risk (VaR), expected shortfall (ES), etc., and through scenario analysis and stress testing.
Credit risk is addressed through size limits, concentration limits and default sensitivities.
Counterparty and liquidity risk are addressed using models most suited for long-term investors.

Common Language

Our risk platform enables the adoption of a common risk language across the Firm

Consistency

Consistency of modeling framework and assumptions

Coverage

Coverage across a variety of asset classes and securities

Best in Class Modeling

Modeling cutting edge models that we can enhance as needed

Responsiveness

Ability to swiftly react to shifts in the market

Tailored

Customized to our clients' objectives

Western Asset's Risk Management & Quantitative Solutions Department has established a dedicated Sustainability Risk Research Team. The team developed several proprietary tools to manage climate-related risks, including climate-risk stress tests that measure both transition and physical risks for corporate issuers in different temperature anomaly scenarios. The team also created specialized optimizers, which we use to design Net Zero and Decarbonization pathways tailored to our clients' specific targets.

Risk Management: Thorough, Ongoing, Dynamic Communication

Risk Management, Investment Management and Client Service Teams communicate carefully, incisively and dynamically on a daily, weekly and monthly basis to assess and integrate information and relevant context as it emerges and evolves. The Firm's established escalation process involves a defined protocol that includes the notification and involvement of our most senior executives, including the heads of relevant departments as well as portfolio and risk managers.