TCW Multi-Sector Fixed Income Fund

WSP commentary

Draft commentary, machine-generated from the fund's key information document (PRIIPs) dated 28.11.2025; monthly factsheet, not yet reviewed by WSP.

Investment rationale

TCW Multi-Sector Fixed Income Fund is an open-ended UCITS fixed income sub-fund designed to provide positive long-term returns irrespective of general securities market conditions. The PRIIPs summary risk indicator is 2 out of 7, and the recommended holding period is 5 years, so the fund is positioned for investors prepared to accept a relatively moderate level of risk of loss to original capital in pursuit of higher potential return over a medium- to long-term horizon. The documents say it is designed to form part of a portfolio of investments rather than as a standalone allocation. It is a distinct choice because it uses a flexible, benchmark-agnostic global credit approach across multiple fixed income sectors, including investment grade, high yield, emerging markets, mortgage-related and asset-backed securities, and derivatives.

Investment strategy

The stated objective is to provide investors with positive long-term returns irrespective of general securities market conditions. The sub-fund invests directly at least 80% of net assets in securities and instruments qualifying as bonds in the U.S. and abroad, including Emerging Market Countries, and in derivatives that provide exposure to such securities; investments may include corporate bonds, notes, collateralized bond obligations, collateralized debt obligations, mortgage-related and asset-backed securities, bank loans subject to the 10% limitation under Article 41(2)(a) of the 2010 Law, money-market securities, swaps, futures, municipal securities, options, credit default swaps, private placements and restricted securities. It may invest in both investment grade and high yield securities, but no more than 50% of total assets at the time of investment may be in below-investment-grade securities; it may also invest up to 10% of net assets in UCITS and/or other UCIs, and up to 100% of net assets in MBS and ABS, alongside convertible bonds, equity and equity-linked instruments, deposits and other financial derivative instruments. Under normal market conditions, the average portfolio duration of the fixed-income portion will vary from 0 to 5 years, with no limit on weighted average maturity; the sub-fund is actively managed and does not track an index, while the Bloomberg US 1-3 Month T-Bill Index / Bloomberg U.S. Treasury Bills 1-3 Months Index is used for comparison purposes only, and portfolio managers may deviate significantly from it in sector allocation, duration, credit quality and currency exposure.

Investment philosophy

• The fund follows a flexible global multi-sector fixed income approach, investing at least 80% of net assets in bond-qualifying securities and related derivatives across U.S. and non-U.S. markets, including emerging markets.

• It is actively managed and benchmark-agnostic: the Bloomberg U.S. Treasury Bills 1-3 Months Index is used only as a reference, and the managers have full discretion over sector allocation, duration, credit quality and currency exposure.

• The investment universe spans corporate bonds, government securities, high yield and investment grade debt, non-agency and agency RMBS, CMBS, ABS, CBOs, CDOs, bank loans, municipal securities, money-market instruments, convertible bonds, equity and equity-linked instruments, private placements, restricted securities and derivatives such as swaps, futures, options and credit default swaps.

• Portfolio construction is subject to explicit limits including no more than 50% of total assets in below-investment-grade securities at the time of investment, up to 10% in UCITS/other UCIs, bank loans subject to the 10% limitation under the 2010 Law, and average duration of the fixed-income portion normally between 0 and 5 years.

• As of 31 August 2026, the portfolio held 410 positions, with the largest country exposure in the United States at 90.97%; sector weights were led by non-agency RMBS at 32.34%, agency RMBS at 23.02%, investment grade credit at 14.37%, CMBS at 10.47% and ABS at 7.31%, and top holdings included a U.S. Treasury bill and multiple UMBS, GNMA and FHLMC mortgage securities.

Management team

The named portfolio managers are Bryan T Whalen, CFA, Jerry Cudzil, Ruben Hovhannisyan, CFA, and Steven J Purdy. The documents identify them as the portfolio management team for the sub-fund. The marketing material also states that the strategy leverages deep team experience in adjusting credit risk across market cycles.

The asset manager

The management company and PRIIP manufacturer is Carne Global Fund Managers (Luxembourg) S.A., authorised in Luxembourg and regulated by the CSSF. The fund itself is TCW Multi-Sector Fixed Income Fund, a sub-fund of TCW Funds, a Luxembourg-domiciled UCITS SICAV. The documents identify TCW as the investment manager and source of portfolio information and describe the product as part of TCW Funds. The custodian bank is Société Générale Luxembourg.

Strengths

The fund is differentiated by a flexible global credit mandate that is not managed to track an index and can allocate across a broad range of sectors including mortgage-backed, asset-backed, structured credit, corporate and emerging market debt. The documents highlight three specific features: a flexible global approach intended as an alternative to traditional bond funds, active risk management aimed at maintaining low correlation to traditional fixed income while enhancing diversification and return potential, and sustainability integration alongside financial objectives. The structure is open-ended with daily forward pricing and dealing on days when both Luxembourg banks and the New York Stock Exchange are open, which supports liquidity for investors. Costs stated for the IU share class include no exit fee, no performance fee, and ongoing charges/annual cost impact around 0.7% in the PRIIPs cost table, while the marketing factsheet lists management fees of 0.35% and ongoing charges of 0.40%.

Risks

The PRIIPs summary risk indicator is 2 out of 7, classified as a low risk class, though the documents state investors could lose some or all of their investment and that cashing in early may lead to getting back less. The fund is exposed to fixed income risks including interest rate risk, issuer default risk, issuer credit risk and price volatility risk, with additional sensitivity created by its ability to invest in high yield securities, structured credit, bank loans, emerging markets and foreign-currency-denominated securities. Specific structural risks named include volatility and loss risk in high yield bonds, extreme volatility in emerging market securities markets, and particular risks in mortgage-backed and other asset-backed securities, including floating-rate MBS price volatility and the lack of government or agency guarantees for non-agency MBS. The documents also note risks related to derivatives and counterparty default, state that no compensation or guarantee scheme is in place if the manufacturer or depositary defaults, and describe sustainable investing and sustainability data risks, including subjective assessments, changing methodologies and incomplete or estimated ESG data.