PHILADELPHIA, Sept. 30, 2014 /PRNewswire/ -- With an improving economy, yields in the U.S. bond market are likely to be pushed slowly higher. This could create opportunities in fixed income, but the long-time Co-Chief Investment Officer of Brandywine Global's fixed income business believes investors should be cautious and well-informed before making aggressive moves in today's complex markets.

"Global bonds are a unique 'opportunity class' that can produce solid returns, provide diverse sources of alpha, and reduce the overall volatility of a purely domestic bond portfolio," said David Hoffman, Brandywine Global's Co-CIO of fixed income. "What investors should realize is that bond markets around the world are not consistently correlated to the U.S. bond market, but instead react to a variety of factors, many of which are specific to that country's economic and policy conditions."

"The year in the fixed income markets has turned out much better than we expected, and next year should be the same," Mr. Hoffman continued. "Active global bond investors have an intrinsic advantage due to an expanded opportunity set. Investors who focus on government bonds in a single country are limited largely to binary duration decisions, while global managers who have the skill to manage currencies can capture much more complex relationships. In allowing managers to invest globally, investors diversify their source of return and, in our view, allow greater potential for outperformance."

In a complicated, multinational sector like fixed income, Mr. Hoffman believes it essential to rely upon the active investment judgment of experienced professional managers.

"Active is how we make money for clients," he said. When discussing passive, index-based products, "There is no fixed income index that makes sense in the long-term. We have been index-agnostic for 20 years."

Closed-end funds can offer significant benefits. "They can offer different solutions for investors seeking growth and income without as much downside," Mr. Hoffman said. "Each kind of investor needs to assess return to risk in their portfolio."

Along with Steve Smith and Jack McIntyre, Mr. Hoffman leads the global fixed income team of Brandywine Global, managing an extensive suite of active, value-based global bond strategies. The team's investment strategies broadly seek attractive long-term total returns by targeting elevated real yields globally and limiting investment to only the few countries and currencies that the team expects to outperform given their macroeconomic outlook.

"The aftermath of the financial crisis of 2008 makes global bond markets even more appealing at this time," Mr. Hoffman advised. "The U.S. and other G3 markets appear more synchronized and riskier than ever before. Comparatively, the non-G3 and developing markets have seldom been more appealing from a risk/reward perspective. Many of these countries are adopting pro-capitalistic policies and are well positioned for independent economic growth and prosperity.

"An appropriately positioned strategy is critical to success when investing in global bonds. In our view, global fixed income investment portfolios built around indexes are less likely to provide strong returns. This is because index weights are directly proportional to the size of a country's debt issuance. Therefore, investors in index-oriented strategies are led to increase holdings in countries with huge deficits, not huge opportunities."

Mr. Hoffman also advises that investing in developing and non-G3 countries has never made more sense. "Recent epic economic shifts make investing outside of the U.S. and other major developed-country bond markets even more compelling from a risk perspective," he said.

"Investors who believe in recovery might be enticed by commodity-linked countries like Australia, New Zealand, and Canada. Those who are wary of the euro can find opportunity elsewhere in Europe through countries like Poland, Sweden, and the U.K. Investors wanting to capture the upside of exposure to China, yet who are uncertain about direct investment, can purchase investment-grade debt in Singapore and Malaysia. All of these developed countries, in our opinion, offer compelling long-term opportunity relative to G3 sovereign markets."

About David F. Hoffman, CFA, Managing Director & Portfolio Manager
David is co-lead portfolio manager for the firm's global fixed income and related strategies. He joined Brandywine Global in 1995. He is a member of the firm's Executive Board, currently serving as the Board's chair. Previously, David was president of Hoffman Capital, a global financial futures investment firm (1991-1995); head of fixed income investments at Columbus Circle Investors (1983-1990); senior vice president and portfolio manager at INA Capital Management (1979-1982), and fixed income portfolio manager at Provident National Bank (1975-1979). David is a CFA® charterholder and earned a B.A. in Art History from Williams College.

About Jack P. McIntyre, CFA, Portfolio Manager, Senior Research Analyst
As portfolio manager and senior research analyst for the firm's global fixed income and related strategies, Jack provides analytical and strategic insight. He joined Brandywine Global in 1998. Previously, he held positions as market strategist with McCarthy, Crisanti & Maffei, Inc. (1995-1998); senior fixed income analyst with Technical Data, a division of Thomson Financial Services (1992-1995); quantitative associate with Brown Brothers Harriman & Co. (1990), and investment analyst with the Public Employee Retirement Administration of Massachusetts (1987-1989). Jack is a CFA® charterholder and earned an M.B.A. in Finance from the Leonard N. Stern Graduate School of Business at New York University and a B.B.A. in Finance from the University of Massachusetts, Amherst.

About Stephen S. Smith, Managing Director & Portfolio Manager
Steve is co-lead portfolio manager for the firm's global fixed income and related strategies. He joined Brandywine Global in 1991 to diversify the firm's investment strategies and start the global fixed income product. He is a member of the firm's Executive Board. Previously, Steve was with Mitchell Hutchins Asset Management, Inc. as managing director of taxable fixed income (1988-1991); Provident Capital Management, Inc. as senior vice president overseeing taxable fixed income (1984-1988); Munsch & Smith Management as a founding partner (1980-1984), and First Pennsylvania Bank as vice president and portfolio manager in the fixed income division (1976-1980). Steve earned a B.S. in Economics and Business Administration from Xavier University, where he is currently chair of the university's foundation and is a member of the board of trustees. Steve is also a member of the Board of Trustees at St. Mary's Villa for Children and Families, a provider of services for abused and neglected children, and the Winterthur Museum & Country Estate, a non-profit, educational institution.

About Brandywine Global
Brandywine Global Investment Management, LLC ("Brandywine Global"), has built up significant experience across fixed income, equity and global portfolios that invest in US and international markets. Founded in 1986 by a group of highly experienced portfolio managers, the firm has been a wholly owned affiliate of Legg Mason, Inc. since 1998 but operates independently. The firm is headquartered in Philadelphia with office locations in San Francisco, Montreal, Toronto, Singapore, and London¹.

Brandywine pursues one investment approach: value investing. Through practical experience, Brandywine has determined that value-style investing -- whether in equity or fixed income markets, in the US or internationally -- can provide solid risk-adjusted returns over full investment cycles, and it is a particularly important strategy in today's global markets.

For more information on investments offered through Brandywine Global, call your financial adviser or visit www.leggmason.com.

Legg Mason, Inc. is a global asset management firm with assets under management of $711 billion as of August 31, 2014. The Company provides active asset management in many major investment centers throughout the world. Legg Mason is headquartered in Baltimore, MD and its common stock is listed on the New York Stock Exchange (symbol: LM).

© 2014 Legg Mason Investor Services, LLC, member FINRA, SIPC. Brandywine Global Investment Management, LLC and Legg Mason Investor Services, LLC, are subsidiaries of Legg Mason, Inc.TN14-086

¹ Brandywine Global Investment Management (Canada), ULC; Brandywine Global Investment Management (Asia) Pte. Ltd.; Brandywine Global Investment Management (Europe) Limited is authorized and regulated by the Financial Conduct Authority (the "FCA"). (FRN 472774). Registered in England and Wales, No. 06324517

Fixed income securities involve interest rate, credit, inflation, and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. High yield bonds possess greater price volatility, illiquidity, and possibility of default. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

SOURCE Legg Mason, Inc.