Structured Product Resources
Western Asset is one of the world’s leading investment management firms. Its sole business is
managing fixed-income portfolios, an activity the Firm has pursued for over 38 years. From offices
in Pasadena, New York, Sao Paulo, London, Singapore, Hong Kong, Tokyo and Melbourne, Western
Asset’s 1,022 employees perform investment services for a wide variety of global clients. The Firm’s
clients include charitable, corporate, health care, insurance, mutual fund, public and union organizations, and client portfolios range across an equally wide variety of mandates, from money market to
emerging markets. Western Asset’s client base totals 667, representing 45 countries, 1,336 accounts,
and over $473.4 billion in assets under management.
Western Asset has utilized mortgage-backed securities (MBS) as a vital component within its investment strategy since the Firm’s inception, through several housing and credit cycles. As of March 31,
2009, the Firm’s total mortgage exposure is $72,706 million, of which $49,759 million was invested
in agency mortgage-backed securities, $19,797 million in non-agency residential mortgage-backed
securities (RMBS), and $3,150 million in commercial mortgage-backed securities (CMBS).
Investment Team
Western Asset’s portfolios are managed by a team of portfolio managers, sector specialists and other
investment professionals. The Firm aligns its structured product, RMBS and agency MBS efforts to
take advantage of synergies across research, trading and portfolio management for these sectors. All
investment and disposition decisions on behalf of Western Asset are made by the Firm’s structured
products team, which consists of 25 professionals. This team is led by Mr. Ronald Mass, CFA, who is
responsible for the day-to-day strategic oversight of the portfolio’s investments.
Commercial Mortgage-Backed Securities (CMBS)
Western Asset has been an active participant in the CMBS market since its inception, and Western
Asset was one of the largest buyers of Resolution Trust Corporation (RTC) CMBS securitizations in the
early 1990s. The Firm invests across the capital structure in large diverse conduit deals, single borrower
and single property deals as well one-off deals such as credit tenant lease transactions. The level of
analysis for different securities will vary based on the risk profile of the investment being evaluated. To
manage risk appropriately for troubled CMBS, Western Asset evaluates the potential for losses based
on both the structure of the security or loan, as well as how the cash flows and values of the underlying properties will contribute to potential defaults and ultimate recoveries.
Residential Mortgage-Backed Securities (RMBS)
Western Asset has been active in the non-agency RMBS markets for over 20 years. During this time,
the Firm has developed proprietary models and research strategies to evaluate RMBS in the current
unprecedented housing environment and under these difficult market conditions. When projecting
future performance, many assumptions must be made. Western Asset uses in-house quantitative
research from loan level data to project mortgage pool cash flows, analyze security structures and
© Western Asset Management Company 2009. This publication is the property of Western Asset Management Company and is intended for the sole use of its clients and their investment consultants. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced
or used in any form or medium without express written permission.
Structured Product Resources
ultimately assess the risk in its RMBS positions. Western Asset also makes qualitative adjustments to
reflect the current state of the housing market, securities market liquidity and potential implications
of policy changes and macroeconomic conditions.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset Management. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any
security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset Management
may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this
information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable
laws and regulations of your country of residence.
Western Asset Management Company Limited is authorised and regulated by the Financial Services Authority. Western Asset Management Company Distribuidora de Títulos e Valores
Limitada is authorized and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder
of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund
management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered financial instruments dealer whose business is investment advisory or agency business, investment management, and Type II Financial Instruments Dealing business with the registration number KLFB (FID) No. 427, and a member of
JSIAA (membership number 011-01319).
Western Asset
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June 2009