Legg Mason Brandywine Global Fixed Income Fund

Monthly Commentary
Legg Mason Global Funds plc
Legg Mason Brandywine
Global Fixed Income Fund
Key performance drivers
 The Fund fell 1.50%¹ in December, and
underperformed its benchmark index, which
was down 0.66%.
 Underweight exposure to the euro
contributed but exposures to Mexico,
Hungary and South Africa detracted.
 On the whole, currency positions proved
Views and positioning
 In December, the manager increased
exposure to floating-rate US Treasuries.
 At the end of the month, US dollar exposure
was 44.6%.
Current activity and manager outlook
 The manager sees better-than-expected
growth in developed markets being led by the
 The manager also believes European
economies should improve in 2015.
 In the manager’s opinion, US economic
strength could bring about a modest repricing in US Treasury yields.
Performance to
Month Months YTD
Legg Mason Brandywine
-1.50% -0.60% 2.92% 2.92%
Global Fixed Income Fund
Citigroup World Government
-0.66% -1.49% -0.48% -0.48%
Bond Index
Past performance is no guide to future returns and may not be repeated.
Market Review
Government bond markets recorded mixed returns in local currency terms
over December, with strong positive returns coming from bond markets
such as Norway, Australia, UK, Spain, Germany and Italy.
Most currency performance across developed and emerging markets (EM)
versus the US dollar in December was negative as the US dollar
strengthened sharply. Amongst the few positive currency returns were the
South Korean won, Chilean peso and New Zealand dollar.
The Russian ruble fell the most over the month, down 17.3% in December
versus the US dollar. Other currencies that underperformed included the
Mexican peso, Hungarian forint, South African rand, Norwegian krone,
Polish zloty, Brazilian real and the Australian dollar.
Fund Review
The Legg Mason Brandywine Global Fixed Income Fund decreased by
1.50%¹ in US dollar terms in December, underperforming its benchmark,
the Citigroup World Government Bond Index, which fell 0.66%.
Underweight exposure to the euro contributed. The single currency fell
over the month after European Central Bank quantitative easing became
an unavoidable and near-term reality in the context of expected negative
inflation data in early January. There were no other notable contributors for
the month.
Overweight exposure to the Mexican peso from unhedged Mexican bonos
positions detracted. Risk spreads between Mexican and US Treasury
yields widened on falling oil prices, which led investors to expect less
foreign direct investment in Mexico’s recently liberalised oil sector. The
Mexican peso fell precipitously on the collapse in oil prices and strong US
data, which contributed to fears of prolonged policy-rate divergence
between the economies.
Overweight exposure to the Hungarian forint was detrimental. Hungary’s
forint and sovereign debt traded off in sympathy with the Russian ruble’s
unraveling in mid-December. Hungary has meaningful ties to Russia and
experienced rising bond yields in December despite the deflationary
malaise in Europe.
Overweight exposure to the South African rand and South African
sovereign bonds weighed on relative performance. Falling global oil prices
and worries over global growth prospects drew investor concerns resulting
in the rand weakening and South African yields rising over the month.
In terms of changes during the month, the manager increased exposure to
floating-rate US Treasuries by 1.2% as part of cash management, leaving
total exposure to the US dollar at 44.6% as of month-end.
Brandywine Global • ClearBridge Investments • LMM • Martin Currie • Permal • QS Batterymarch • QS Legg Mason Global Asset Allocation •
Royce & Associates • Western Asset Management
Monthly Commentary
Legg Mason Global Funds plc
Legg Mason Brandywine
Global Fixed Income Fund
The manager continues to anticipate better-than-expected growth in developed markets with the US leading the recovery and the
UK poised to follow with better external support. In the absence of further policy paralysis, the manager believes that European
economies should also firm up in 2015. Despite better developed market growth, the manager expects long-term safe-haven rates
to remain capped as a result of the still formidable debt overhang, a benign global inflation environment, institutional equity derisking, a low terminal level expected for policy rates, weak credit growth and entrenched concerns of global economic fragility.
At current prices, however, the manager believes US Treasury yields may be overpriced by 30-50 basis points and sees latent US
economic strength as a catalyst that could bring about a modest re-pricing. Meanwhile, the manager continues to believe that
emerging markets sovereigns and currencies offer attractive sources of yield in 2015.
This Fund is managed by Brandywine Global Investment Management
¹ Source: Legg Mason, as of 31 December 2014. Class A Dis (S) 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 -6.42% for 1 Month, -5.57% for 3 Months, -2.23% for YTD, -2.23% for 1 Year and
3.49% for 5 Years. Performance for periods above one year is annualised. Investment involves risks. Past performance is not
indicative of future results.
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: Brandywine Global Investment 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 maybe obtained from Legg Mason or its authorised distributors. Investors should check with Legg Mason or its
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