The Fund was also upgraded from ‘Bronze’ to ‘Silver’ by Morningstar in their latest review of the Fund.

The Morningstar Analyst Rating for Western Asset Global Bond Fund Class A is ‘Silver’ as of 25/02/2022

In their reports, both investment research houses highlight the strength and stability of Western Asset’s team, its consistency of process and proven track record over the long term.

Western Asset is a global active fixed income manager and part of the Franklin Templeton group.

In its report, Zenith notes: “Western Asset’s investment philosophy is premised on long-term fundamental value investing with a focus on capturing multiple return sources. It has consistently applied the same investment philosophy over multiple decades with proven success. The Fund has a range of excess return sources which can be opportunistically deployed, depending on the prevailing environment.”

According to Morningstar Global Fund Report published on 25 February 2022: “The process here is simple but effective. The team aims to identify mispricings within regions, sectors, and securities, allocating risk to areas in which it has conviction while ensuring diversification to damp volatility across market environments.”

The Fund provides investors with exposure to an actively managed portfolio of global fixed income securities. Around half the securities in the portfolio are government bonds and close to 20% are investment grade corporate bonds. More than half (57%) of the portfolio is in US securities. The Fund can hold up to 15% of its assets in sub-investment grade securities. The Fund is diversified, holding between 400 and 500 securities.

Western Asset believes in sourcing investment opportunities from a broad fixed interest opportunity set and has the ability to invest in securities that are not included in the Fund’s benchmark, the Bloomberg Global Aggregate Bond Index (hedged into Australian dollars).

The Fund’s objective is to outperform the Bloomberg Global Aggregate Bond Index (hedged to AUD) over rolling three to five-year periods.  As of 28 February 2022, the fund comprised AUD $486 million in funds under management.

Matthew Harrison, Managing Director, Franklin Templeton Australia says: “These new ratings showcase the ongoing strength of Western Asset’s investment team and its well-structured process. The foundation of Western Asset’s process is its Global Investment Strategy Committee, which provides centralised views on key decisions, such as duration, yield curve, country selection and currency positioning. In addition, specialist sector teams use their best ideas to populate targeted exposures with security selections.

“The investment team is led by Chief Investment Officer Ken Leech, who has been with Western Asset for 31 years, and responsible for building a long and successful track record,” Mr Harrison says.

Western Asset is among the largest global specialist fixed income managers, with operations in eight countries and employing 133 investment professionals. Global funds under management stands at A$685 billion. Western Asset is one of Franklin Templeton’s specialised investment managers.

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Ken Leech

Western Asset, a Legg Mason affiliate and one of the world’s leading fixed income specialists, in a recent global outlook says that despite unspectacular global growth and cautionary signs in many economies they remain optimistic that global growth of around 3% is sustainable.

Ken Leech, Western Asset Chief Investment Officer noted that “The slowing in overall growth will soon be apparent to the Fed and could lead it to be more cautious about further rate hikes. We continue to favour long US government bonds, while we are less keen on European, UK and Japanese sovereigns.”

Leech added “Global inflation appears to have stopped declining as the extraordinary monetary policy effort seen in developed nations finally seems to be bearing fruit. Our view, however, remains that this will be a very slow process, taking many years and continuing to require meaningful monetary and even fiscal support.”

“This view suggests that spread sectors will continue to be preferable to holding developed market government bonds. It also suggests, however, that any meaningful or swift increase in inflation or interest rates is not imminent.”

“We have downgraded our outlook for US growth based on recent lack of growth in capital spending, export activity and related flattening out in US factory sector activity.”

Speaking about Europe Leech expects “the Eurozone to grow at around 1.7% to 2.0% in 2017, notwithstanding the uncertainty caused by the UK’s decision to leave the European Union (EU). With deflation risks in the Eurozone dissipating, however, the market’s focus has shifted to when and how the European Central Bank (ECB) will normalize its monetary policy stance. While underlying measures of core inflation remain sub­dued, we believe the ECB will continue to keep interest rates low and we expect asset purchases to continue into 2018.”

“In Japan, we expect growth to improve to around 1% to 1.5% in the context of the current fiscal and monetary policy mix, the delay in the consumption tax increase and the improving global economy. Inflation remains low although it should increase gradually due to a tighter labor market. We expect the Bank of Japan (BoJ) to continue with its accommodative monetary policy for some time to meet its inflation goal. With 10-year nominal yields capped around 0% by the BoJ, we expect real yields to decline further and maintain exposure to Japanese inflation-linked bonds. We still expect the yen to continue its weakening trend versus the US dollar.”

“Our base case view for credit spreads remains a modestly tighter destination in the near-to-midterm, but the aggressive move tighter in spreads over the past several months has valuations nearing what can only be described as fair.”

Leech concluded “We continue to be constructive on emerging market (EM) debt and believe there is room for further spread compression versus developed markets.”

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Ken Leech

Keeping in mind the enormous amount of policy uncertainty there is around the world and particularly in the US, upside growth prospects are coming amidst challenging secular headwinds and a constrained global growth background, says Ken Leech, chief investment officer, Western Asset Management, a Legg Mason affiliate and one world’s leading fixed-income managers.

He notes “Our base case is for steady but unspectacular global growth, and US growth and inflation may rise with fiscal stimulus.

“It is encouraging to see that global inflation has stopped declining. However, central banks, which have been a big source of accommodation for the global recovery, are becoming a little less accommodative. Nonetheless, government bonds should remain underpinned by low policy rates and we believe spread sectors should outperform over the longer term.”

Leech highlights that there are few material issues that investors need to consider such as demographics, productivity and debt burdens.

“With Brexit and the election of Donald Trump, one could argue that we are seeing a deceleration of globalisation and the political ascendency of nationalism. These trends we should continue to watch very carefully, and we remain thoughtful about how positions may need to change.”

“There is no doubt that these trends will impact investment portfolios in 2017

“Last year was a terrific year for spread sectors, particularly high-yield and emerging markets (EMs). Within investment-grade, an asset class that returned 440 basis points (bps) for the year, the biggest returns were within energy and metals and mining, where there has been significant deleveraging.

“Positioning within sectors is becoming more and more important, since the returns can vary greatly depending on where a sector is in the credit cycle.
“2016 was also a championship year for long credit and the asset class ended up with 904 bps of excess return in 2016. We believe investment-grade credit should offer attractive income in 2017, but we have trimmed the overweights across all spread products because the valuations are not as attractive as they were last year.

“US credit spreads appear attractive at long-term averages given our economic outlook.

“In high-yield, valuations are on the tighter side and we intend to have smaller overweights while remain­ing very thoughtful about positioning and quality ratings. There is a strong case to be made for high-yield, and we expect better earnings in 2017, particularly for energy companies. In addition, the prospects for corporate tax reform are straightforwardly positive.

“We believe the mortgage-backed bond sector continues to look attractive on a risk-adjusted basis. Con­sumer and housing fundamentals remain constructive, house prices are projected to grow at 2%–3% over the next 12 months and the pent-up demand for housing should be a positive.

“In EMs, valuations look attractive on a historical basis and relative to developed markets. While the pos­sibility of protectionism and border taxes can be very difficult, the spread between EMs and developed market continues to be very near the wides that we saw in the financial crisis.
“Our EM balance sheet strength continues to be a pillar of support. We intend to remain very thoughtful about opportunities in the EM sector. We continue to like Russia, India, Brazil and Mexico,” he says.

In recent months, Legg Mason has expanded their local fund range to provide access to the global fixed income expertise of Western Asset through the launch of both the Legg Mason Western Asset Global Bond Fund and also the hugely successful Macro Opportunities strategy.

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