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By Michael Herbst | 02-16-2010 04:05 PM

Dialing Down Bond Risk

Western Asset CIO and manager Steve Walsh describes the firm's reasoning for reducing risk in the Core and Core Plus bond funds.

Michael Herbst: Hello, I'm Michael Herbst, mutual fund analyst with Morningstar. Today in our studio we're visiting with Steve Walsh, Chief Investment Officer of Western Asset Management and also portfolio manager on the Western Asset Core and Core Plus funds. Good day, Steve.

Steve Walsh: Good afternoon, Mike.

Herbst: Steve, as we were speaking a little bit earlier today, in the recent months Western Asset has been speaking quite a bit about some of the risk reduction efforts that it has taken, especially in the Core and Core Plus accounts, and I'm wondering if you could describe to our audience what those efforts have been and what the thinking was behind those moves.

Walsh: Sure. Obviously over the course of the last three or four months, I've begun a process to pretty meaningfully bring down the risk exposure in the portfolios. Western Asset has, as I'm sure you're aware, got into risk a little bit before the crisis, so a little bit early, and we stayed with that in the early part of 2009. But as 2009 progressed, and given the huge run-up in price in most of these asset classes, we felt it appropriate to begin to reduce risk.

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