Strategy Spotlight

Active Management Over Time: US Core and Core Plus Bond Strategies

Why Western Asset’s fundamental value investing approach never goes out of style

About the strategy

Investing with Intention: Our US Core and Core Plus Strategies

Western Asset’s US Core and Core Plus fixed-income strategies are built based on the Firm’s long-standing fundamental value investing philosophy, and seek to outperform their relevant benchmarks while approximating benchmark risk. Driven by the extensive research and experience of Western Asset’s portfolio managers, these strategies have endured the test of time by staying true to their mandates while seeking to generate attractive income and total return for investors. Since 1971, Western Asset has managed risk and sought value in fixed-income through multiple business cycles and economic environments.

The Case for Western Asset's US Broad Market Strategies

Portfolio Manager John Bellows explains why Western Asset believes 2023 will be a year of opportunity for fixed-income investors. Following the difficult year of 2022, which saw declines in almost all risk assets, we expect 2023 will not only see a rebound for fixed-income, but it should also see fixed-income re-establish its traditional role of ballast against equities. Given our US Core and Core Plus strategies’ central tenets of value and diversification, we believe they are well positioned to take advantage of the current market environment for the benefit of our investors.

Insights: US Broad Market Update

As an active value manager, sometimes we find our positioning offsides. We have been in this position before and in each of those instances, we were able to recover and achieve new highs. We’re confident we can do that again.
Read More

Key Convictions 1Q23

Learn more about Western Asset’s highest conviction views for fixed-income markets and opportunities, aggregated in an at-a-glance dashboard.
Read More

A History of Resilience Over Time: US Core and Core Plus

Western Asset has carefully managed risk and sought value in fixed-income by adhering to our long-held principles and time-tested processes that have enabled us to weather rocky markets and come out stronger on the other side—all for the benefit of our clients. Read More

TEST OF TIME

A Generation of Investment Returns

The simplest gauge of an investment’s success is the test of time—specifically, performance over a meaningful period that shows how an investment has fared against a variety of market forces. These charts illustrate how periods of drawdown for both the US Core and Core Plus strategies have correlated with market-moving events. Note that the periods immediately following drawdowns have historically rebounded and recouped investment losses. We are currently in a new drawdown period, and the charts will be updated soon.

Growth of $10,000: Western Asset US Core and Core Plus Strategies vs. US Aggregate Index

Source: Bloomberg, Western Asset. As of 30 Sep 22. Actual monthly return data for the mutual fund is net of fees and expenses for I-share class, assuming reinvested dividends, compounded monthly.

December 31, 2022	Composite (gross)	Composite (net)	Benchmark
1 Year	-16.3	-16.6	-13.0
3 Years	-3.3	-3.6	-2.7
5 Years	0.0	-0.3	0.0
10 Years	1.7	1.4	1.1
Since Inception 01 Apr 74	7.4	7.1	6.7

Source: Bloomberg, Western Asset. As of 30 Sep 22. Actual monthly return data for the mutual fund is net of fees and expenses for I-share class, assuming reinvested dividends, compounded monthly.

December 31, 2022	Composite (gross)	Composite (net)	Benchmark
1 Year	-17.5	-17.7	-13.0
3 Years	-3.6	-3.9	-2.7
5 Years	-0.1	-0.4	0.0
10 Years	1.9	1.6	1.1
Since Inception 01 Feb 93	5.7	5.4	4.5

Source: Bloomberg, Western Asset. As of 30 Sep 22. Actual monthly return data for the mutual fund is net of fees and expenses for I-share class, assuming reinvested dividends, compounded monthly.

US Core Strategy
December 31, 2022	Composite (gross)	Composite (net)	Benchmark
1 Year	-16.3	-16.6	-13.0
3 Years	-3.3	-3.6	-2.7
5 Years	0.0	-0.3	0.0
10 Years	1.7	1.4	1.1
Since Inception 01 Apr 74	7.4	7.1	6.7

US Core Plus Strategy
December 31, 2022	Composite (gross)	Composite (net)	Benchmark
1 Year	-17.5	-17.7	-13.0
3 Years	-3.6	-3.9	-2.7
5 Years	-0.1	-0.4	0.0
10 Years	1.9	1.6	1.1
Since Inception 01 Feb 93	5.7	5.4	4.5

The performance illustrated does not reflect the impact of material economic and market factors on decision-making, nor does it take in to account any changes in the strategy or investment approach that may have occurred over the chosen time period. This presentation was prepared with the benefit of hindsight and is in no way a guarantee of future performance. Past investment results are not indicative of future investment results. Returns for periods greater than one year are annualized. Gross-of-fees returns are presented before management fees, but after all trading expenses. Net-of-fees results are calculated using a model approach whereby the current highest tier of the appropriate strategy's fee schedule is used. Effective January 1, 2020, for annual periods where the actual account weighted fees are higher than the composite model fee, the actual account weighted fees will be used for the net-of-fee composite return calculations. Net-of-fee composite return thecalculations using actual account weighted fees may include fund returns that incur higher fees than those applied to separately managed accounts. Please see the Performance and Risk Disclosures for more information.

Please click here for important Performance Disclosures

The performance illustrated does not reflect the impact of material economic and market factors on decision-making, nor does it take in to account any changes in the strategy or investment approach that may have occurred over the chosen time period. This presentation was prepared with the benefit of hindsight and is in no way a guarantee of future performance. Past investment results are not indicative of future investment results. Returns for periods greater than one year are annualized. Gross-of-fees returns are presented before management fees, but after all trading expenses. Net-of-fees results are calculated using a model approach whereby the current highest tier of the appropriate strategy's fee schedule is used. Effective January 1, 2020, for annual periods where the actual account weighted fees are higher than the composite model fee, the actual account weighted fees will be used for the net-of-fee composite return calculations. Net-of-fee composite return thecalculations using actual account weighted fees may include fund returns that incur higher fees than those applied to separately managed accounts. Please see the Performance and Risk Disclosures for more information.

These strategies aim to deliver returns through active investment in a high-quality US Core fixed-income portfolio with opportunistic investments in high-yield, non-US bonds and emerging market debt.

Team-Based, Time-Tested
For over 50 years, our active management process that relies on fundamental value investing has persevered across many market cycles despite periods of drawdown.
Long-Term Focus
The strategies have withstood the test of time across many market cycles by tapping into multiple drivers of returns designed to cushion volatility.
Rigorous Risk Management Process
The strategies benefit from our in-depth risk mitigation process, which includes robust communication and escalation procedures, to help best match with client risk tolerances.

Western Asset Core Bond Strategy seeks to maximize total return from a high-quality, US-dollar-denominated Core fixed-income portfolio. Historically, the Core strategy has exceeded its benchmark return by 75 basis points annually over the course of a market cycle while approximating benchmark risk.

Western Asset Core Plus Bond Strategy seeks to maximize total return from a high-quality, US domestic core fixed-income portfolio that can be enhanced by allocations to sectors such as high-yield, non-US and emerging market debt. Historically, the Core Plus strategy has exceeded the benchmark return by 150 basis points annually over the course of a market cycle while approximating benchmark risk.

Western Asset investment strategy profiles include overviews, objectives, performance, risk information and more.

Western Asset Core Bond Strategy

Western Asset Core Plus Bond Strategy

Meet the Western Asset Team

We employ a team-based approach to navigating fixed-income markets around the globe; all investment decisions are thoroughly debated by Western Asset’s deep bench of investment professionals.

The value of investments and the income from them may go down as well as up and you may not get back the amount you originally invested.

Investment Risks

The strategy does not offer any capital guarantee or protection and you may not get back the amount invested. The strategy is subject to the following risks which are materially relevant but may not be adequately captured by the indicator:

Asset-Backed Securities:The timing and size of the cash-flow from asset-backed securities is not fully assured and could result in loss for the strategy. These types of investments may also be difficult for the strategy to sell quickly.

Bonds: There is a risk that issuers of bonds held by the strategy may not be able to repay the investment or pay the interest due on it, leading to losses for the strategy. Bond values are affected by the market’s view of the above risk, and by changes in interest rates and inflation.

Counterparties: The strategy may suffer losses if the parties that it trades with cannot meet their financial obligations.

Credit: The risk that a issuer will be unable to pay principal and interest when due. Derivatives: The strategy makes significant use of derivatives. The use of derivatives can result in greater fluctuations of the portfolio's value.

Emerging Markets: The strategy may invest in the markets of countries which are smaller, less developed and regulated, and more volatile than the markets of more developed countries.

Inflation: The value of bonds held by the strategy that are intended to protect against inflation may be negatively affected by changes in interest rates.

Interest Rates: Changes in interest rates may negatively affect the value of the strategy. Typically as interest rates rise, bond values fall.

Liquidity: In certain circumstances it may be difficult to sell the strategy’s investments because there may not be enough demand for them in the markets, in which case the strategy may not be able to minimize a loss on such investments.

Mortgage-Backed Securities: The timing and size of the cash-flow from mortgage-backed securities is not fully assured and could result in loss for the strategy. These types of investments may also be difficult for the strategy to sell quickly.