IMPORTANT DISCLOSURE
This material may include estimates, projections and other “forward-looking” statements. Actual events may differ substantially from those presented. TCW assumes no duty to update any such statements.
This material reflects the current opinions of the author but not necessarily those of TCW and such opinions are subject to change without notice. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which positions may change at any time, without notice. This material may include estimates, projections and other “forward-looking” statements. Actual events may differ substantially from those presented. TCW assumes no duty to update any such statements. All projections and estimates are based on current asset prices and are subject to change.
Annual fund operating expenses as stated in the Prospectus dated March 1, 2024, excluding interest and acquired fund fees and expenses, if any.
The performance data presented represents past performance and is no guarantee of future results. Returns assume all income items are reinvested. Current performance may be lower or higher than the performance data presented. Performance data current to the most recent month end is available on the Fund’s website at TCW.com. Investment returns and principal value will fluctuate with market conditions. The value of an investment in the Fund, when redeemed, may be worth more or less than its original purchase cost.
The annualized since inception return for the index reflects the inception date of the Class I Share Fund. For period 2/1/1990-3/31/2024. Since inception returns include the performance of the predecessor limited partnership for periods before the Fund’s registration became effective. The predecessor limited partnership was not registered under the Investment Company Act of 1940 (“1940 Act”) and therefore, was not subject to certain investment restrictions imposed by the 1940 Act. If the limited partnership was registered under the 1940 Act, its performance may have been adversely affected. Effective March 1, 2024, the Fund’s investment advisor has agreed to waive fees and/or reimburse expenses to limit the Fund’s total annual operating expenses (excluding interest, brokerage, extraordinary expenses and acquired fund fees and expenses, if any) to 0.44% of average daily net assets with respect to Class I shares. The contractual fee waiver/expense reimbursement will remain in place through March 1, 2025 and before that date, the investment advisor may not terminate this arrangement without approval of the Board of Directors.
FTSE 1-Year Treasury Index – Represents the return of the one-year treasuries each month (auctioned monthly). It is determined by taking the 1-year T-bill at the beginning of each month and calculating its return. Effective May 1, 2018, Citigroup 1-Year Treasury Index became FTSE 1-Year Treasury Index. The index is not available for direct investment; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio. The securities in the index may be substantially different from those in the Fund.
Source: TCW, FactSet, State Street B&T
Investment Risks
It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. Mortgage-backed and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. MBS related to floating rate loans may exhibit greater price volatility than a fixed rate obligation of similar credit quality. With respect to non-agency MBS, there are no direct or indirect government or agency guarantees of payments in pools created by non-governmental issuers. Non-agency MBS are also not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. Please see the Fund’s Prospectus for more information on these and other risks.
Glossary of Terms
AAA Rating– Rating issued to investment-grade debt that has a high level of creditworthiness with the strongest capacity to repay investors. Agency MBS– The purchase of mortgage-backed securities issued by government-sponsored enterprises such as Ginnie Mae, Fannie Mae or Freddie Mac. Amortization– The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Asset-Backed Securities– A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. Basis Point (bps)– One hundredth of one percent, used chiefly in expressing differences of interest rates. Bloomberg Barclays U.S. Aggregate Bond Index– A market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year. The index is not available for direct investment; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio. The securities in the index may be substantially different from those in the Fund. Portfolio characteristics and securities are subject to change at any time. Bond– A fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. A bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. CMBS (Commercial Mortgage-Backed Securities)– A debt obligation that represents claims to the cash flows from pools of mortgage loans on commercial property. CLO(Collateralized Loan Obligations) – A special purpose vehicle (SPV) with securitization payments in the form of different tranches. Financial institutions back this security with receivables from loans. Collateral – Property or other assets that a borrower offers a lender to secure a loan. Corporate – Of or relating to a bond issued by a corporation as opposed to a bond issued by the U.S. Treasury, a non-U.S. government or a municipality. CPI (Consumer Price Index)– Measures the average change in prices over time that consumers pay for a basket of goods and services. Credit– A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest. Credit also refers to the creditworthiness or credit history of an individual or company. Cyclical– A cyclical stock is a stock highly correlated to changes in the economy. Drawdown– A decline in an investment or fund. Duration– A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. Expense Ratio– A measure of what it costs an investment company to operate a mutual fund. Federal Reserve(the Fed) – The central bank of the United States which regulates the U.S. monetary and financial system. Floating Rate– Any interest rate that changes on a periodic basis. The change is usually tied to movement of an outside indicator, such as the prime interest rate. FTSE (Financial Times Stock Exchange)– The Financial Times Stock Exchange (FTSE), now known as FTSE Russell Group, is a British financial organization that specializes in providing index offerings for the global financial markets. GDP (Gross Domestic Product)– The market value of all final goods and services produced within a country in a given period of time. High Yield– A bond that is rated below investment grade. Inflation– A condition of a rise in the general level of prices of goods and services in an economy over a period of time. Investment Grade– A bond that is rated Baa3/BBB- or higher by Moody’s, Standard & Poors and Fitch. Liquidity– The ability to convert an asset to cash quickly. MBS(Mortgage- Backed Securities) – A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution. Monetary Policy– The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Mutual Funds– An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money-market instruments and similar assets. Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus. Non-agency – Mortgage backed securities made up of mortgage loans that are not guaranteed by a government-supported agency. Non-Agency MBS– Mortgage backed securities sponsored by private companies other than government sponsored enterprises such as Fannie Mae or Freddie Mac. Non-cyclical– Non-cyclical stocks repeatedly outperform the market when economic growth slows. Non-cyclical securities are generally profitable regardless of economic trends because they produce or distribute goods and services we always need, including things like food, power, water, and gas. QE (Quantitative easing)– A form of monetary policy in which a central bank, like the U.S. Federal Reserve, purchases securities from the open market to reduce interest rates and increase the money supply. Recession– Two consecutive quarters of negative economic growth as measured by a country’s gross domestic product. Risk Premium(or Yield Premium) – The minimum rate of return demanded by holders of a risky asset in excess of the return on a risk-free asset with similar maturity and duration profile. S&P 500– The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The index actually has 503 components because three of them have two share classes listed. Securitized– When a bank pools together different kinds of loans to clear them off its balance sheet, to free up credit for new lenders, and to create new securities that can be marketed and sold to investors. Soft Landing– A soft landing is the goal of a central bank when it seeks to raise interest rates just enough to stop an economy from overheating and experiencing high inflation, without causing a severe downturn. Spread– The difference between the bid and the ask price of a security or asset. Tightening– Short for tight monetary policy. A situation in which a central bank enacts relatively high target interest rates to lower the available of credit. Effectively “tightening” the supply of credit. Total Return– The rate of return on a security, including income from dividends and interest, as well as appreciation or depreciation in the price of the security, over a given time period of time. U.S. Treasuries (U.S. Treasury Securities) – Bills, notes and bonds that are debt obligations of the U.S. government. Valuations– The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective. Volatility– A measure of the risk of price moves for a security calculated from the standard deviation of day to day logarithmic historical price changes. Yield– The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. Yield Curve – A curve on a graph in which the yield of fixed-interest securities is plotted against the length of time they have to run to maturity.
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