09 14 Legg Mason Western Asset

0914
Monthly Commentary
Legg Mason Global Funds plc
Legg Mason Western Asset
Emerging Markets Bond Fund
1
Performance to 30/09/14
QUICK VIEW
Key performance drivers
1
 The Fund fell 3.25% in US dollar terms in
September, while its benchmark, the JP
Morgan Emerging Markets Bond Index
Global, was down 2.41%.
 Country selection detracted.
 Corporate sector exposure added value.
 Overweight exposure to local currency bonds
was detrimental.
 Security selection had a negative impact.
Views and positioning
 In September, the manager added exposure
to external sovereigns in El Salvador and
Ghana and reduced exposure to corporate
bonds in Russia and Chile.
 The manager continues to like unhedged
local bond exposure in Mexico and Brazil.
 The Fund remains overweight in sovereigns
in Indonesia and Peru, and underweight in
Lebanon, the Philippines and Ukraine.
 The Fund maintains its overweights in
corporate issues in Brazil, Colombia, India
and Mexico.
 Sector-wise, the manager continues to favour
oil and gas, metals and mining and
telecommunications.
Current activity and manager outlook
 The manager believes that the main risk to
emerging markets remains the global
environment.
 The manager expects the end of quantitative
easing, which began to taper in December, to
continue resulting in periodic bouts of
volatility.
 The manager will also continue to monitor
closely China’s economic data which, albeit a
bit softer, still supports the manager’s
expectation of a soft landing.
Legg Mason Western Asset
Emerging Markets Bond
Fund
JP Morgan Emerging Markets
2
Bond Index Global
1
3
Month Months
YTD
1
Year
5
Years
-3.25% -2.70% 5.77%
5.75%
6.04%
-2.41% -1.65% 7.30%
8.28%
7.93%
Past performance is no guide to future returns and may not be repeated.
Market Review
Geopolitical tensions, though remaining a concern, eased in September. A
ceasefire agreement in Ukraine helped reduced market anxiety. An
international force launched airstrikes on various targets of ISIS. In Hong
Kong, protests erupted over China’s level of control of local elections. As
the end of summer approached, bond market volatility increased. US
Treasury yields climbed higher and global credit and emerging market
(EM) spreads widened across sectors. EM fixed income debt was generally
weaker across all sectors during the month. US dollar-denominated
sovereign bonds (the JP Morgan Emerging Market Bond Index Global)
returned -2.41%, while US dollar-denominated EM corporate bonds (the JP
Morgan Corporate Emerging Market Bond Index Broad) were down 0.99%.
Local-currency-denominated sovereign bonds (the JP Morgan Global Bond
Index – Emerging Market Global Diversified) fell 5.11% in US dollar terms.
EM currencies were generally lower versus the US dollar, and the price of
crude oil dropped below US$100 per barrel.
Fund Review
1
The Legg Mason Western Asset Emerging Markets Bond Fund fell 3.25%
in US dollar terms in September, while its benchmark, the JP Morgan
Emerging Markets Bond Index Global, was down 2.41%.
In terms of country selection, the Fund’s large underweight to higherperforming countries, such as China and Lebanon, detracted.
Exposure to the corporate sector in Mexico and Brazil contributed to
performance while overweight exposure to local currency bonds detracted.
Local currency bonds in Mexico and Brazil were weaker as the Mexican
peso and the Brazilian real weakened versus the US dollar during the
month.
Issue selection in the corporate sector hurt performance with issuers in
Brazil such as Virgolino and Petrobras underperforming in September.
During the month, the manager added exposure to external sovereigns in
El Salvador and Ghana and reduced exposure to corporate bonds in
Russia and Chile.
The manager continues to like unhedged local bond exposure in Mexico
and Brazil.
The Fund remains overweight to external sovereigns in Indonesia and
Peru, and underweight to Lebanon, the Philippines and Ukraine.
The Fund remains overweight to corporates in Brazil, Colombia, India and
Mexico as the manager believes external corporates remain more
attractive than external sovereigns.
Within the corporate sector, the manager continues to favour corporate
industries related to oil and gas, metals and mining and
telecommunications.
PLEASE REFER TO THE IMPORTANT INFORMATION ON THE FINAL PAGE.
Brandywine Global • ClearBridge Investments • LMM • Martin Currie • Permal • QS Batterymarch • QS Legg Mason Global Asset Allocation
Royce & Associates • Western Asset Management
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0914
Monthly Commentary
Legg Mason Global Funds plc
Legg Mason Western Asset
Emerging Markets Bond Fund
Outlook
The manager believes that the main risk to EM remains the global environment. The continued normalisation of US monetary policy
will likely pressure some of the more vulnerable EM countries into making tough policy choices, including tighter fiscal policy,
structural reforms, tighter monetary policy or weaker exchange rates. The manager expects the end of quantitative easing, which
began to taper in December, to continue resulting in periodic bouts of volatility. The manager will also continue to monitor closely
China’s economic data which, albeit a bit softer, still supports the manager’s expectation of a soft landing. The Chinese have
significant tools available to provide stimulus as necessary and have developed a detailed plan to convert the country’s exportdriven economy to a consumer-driven one over the next decade. Recent increased tension in the Middle East and Eastern Europe
continues to be a wildcard as a contributor to uncertainty in the global environment. During this period of heightened volatility, the
manager will continue to look for ideas in the EM debt space and will seek to take advantage of relative value opportunities that
arise.
This Fund is managed by Western Asset Management.
¹ Source: Legg Mason, as of 30 September 2014. Class A Acc USD performance is net of fees and is calculated on a NAV to NAV
basis (USD), with any income and dividends reinvested, if any, without any initial charges but reflecting annual management
fees. Performance figures inclusive of sales charge is -8.09% for 1 Month, -7.57% for 3 Months, 0.48% for YTD, 0.46% for 1 Year
and 4.95% for 5 Years. Performance for periods above one year is annualised. Investment involves risks. Past performance
is not indicative of future results.
² Prior to 01/01/2013, the benchmark was JP Morgan Emerging Markets Bond Index Plus.
IMPORTANT INFORMATION
The Fund may invest in certain types of derivatives for investment and/or efficient portfolio management purposes.
Please refer to the prospectus for more information.
Source: Western Asset Management. This document is issued by Legg Mason Asset Management Singapore Pte. Limited in
Singapore (“Legg Mason”) and is for information only and does not constitute an offer or invitation to the public to purchase any
shares in any fund in Singapore.
This document is for information only and is not intended to provide investment advice. All data, opinions, estimates and other
information are provided as of the date of this document and may be subject to change without notice. The prospectus of the fund is
available and may be obtained from Legg Mason or its authorised distributors. Investors should check with Legg Mason or its
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