(PUB) Investing 2016

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5 Morningstar FundInvestor August 2016
Data through July 31, 2016 FINRA members: For internal or institutional use only.
Metropolitan West High Yield Bond M Ticker
MWHYX
Yield
4.0%
SEC Yield
4.03%
Total Assets
$1,046 mil
Mstar Category
High Yield Bond
Benchmark 1: BofAML US HY Master II TR USD
Benchmark 2: Barclays US Agg Bond TR USD
Morningstar Analyst Rating 07-12-16
‰
Morningstar Pillars
Process ¶ Neutral
Performance ¶ Neutral
People ∞ Positive
Parent ¶ Neutral
Price ∞ Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which its
analysts believe lead to funds that are more likely to outperform over the
long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ ‰ Á
Pillar Spectrum
∞ Positive § Negative ¶ Neutral
10.0
12.5
15.0
17.5
20.0
Historical Profile
Return
Risk
Rating
Average
Below Avg
QQQ
Neutral
6 3 3 3 3 3 3 3 Investment Style
Fixed Income
Growth of $10,000
Investment Values of
Fund
Investment Values of
Benchmark 1
) & & & ( ) ( * ( * ) Performance Quartile
(within Category)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 07-16 History
10.95 10.32 7.35 10.20 10.68 9.82 10.42 10.27 9.71 9.11 9.32 NAV
8.74 2.73 -21.59 54.69 13.94 0.35 14.20 6.84 0.33 -2.18 4.64 Total Return %
-3.02 0.54 4.80 -2.83 -1.25 -4.03 -1.39 -0.58 -2.17 2.46 -7.44 +/- Bmark 1
4.41 -4.23 -26.83 48.76 7.40 -7.49 9.98 8.86 -5.63 -2.73 -1.34 +/- Bmark 2
7.92 8.81 8.75 13.39 8.51 7.67 7.36 5.55 4.63 4.18 2.30 Income Return %
0.82 -6.08 -30.34 41.30 5.43 -7.32 6.83 1.29 -4.29 -6.36 2.35 Capital Return %
80 25 23 17 53 87 61 44 73 28 94 Total Rtn % Rank Cat
0.83 0.93 0.87 0.93 0.84 0.79 0.70 0.56 0.46 0.40 0.21 Income $
0.00 0.00 0.00 0.04 0.05 0.12 0.05 0.28 0.14 0.00 0.00 Capital Gains $
1.10 1.05 0.98 0.99 0.88 0.85 0.85 0.81 0.82 0.89 0.85 Expense Ratio %
7.25 8.01 8.15 10.24 9.29 7.73 7.14 6.20 5.20 4.41 4.19 Income Ratio %
111 97 120 107 40 34 54 74 66 61 139 Turnover Rate %
37 41 38 393 1,017 1,156 1,234 1,352 834 498 484 Net Assets $mil
Performance 07-31-16
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
2012 4.73 1.19 5.06 2.57 14.20
2013 3.08 -1.58 2.17 3.08 6.84
2014 2.17 1.96 -2.23 -1.49 0.33
2015 1.17 -0.59 -2.50 -0.25 -2.18
2016 0.82 2.79 — — —
Trailing Total
Return%
+/- Bmark
1
+/- Bmark
2
%Rank
Cat
Growth of
$10,000
3 Mo 1.94 -2.44 -0.52 93 10,194
6 Mo 5.24 -8.64 0.70 94 10,524
1 Yr 1.15 -3.77 -4.78 77 10,115
3 Yr Avg 2.06 -2.34 -2.17 82 10,631
5 Yr Avg 3.81 -2.16 0.24 87 12,053
10 Yr Avg 6.56 -1.03 1.50 35 18,871
15 Yr Avg — — — — —
Tax Analysis Tax Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated) -0.30 68 2.31 32
5 Yr (estimated) 1.28 83 2.44 44
10 Yr (estimated) 3.61 40 2.76 73
Potential Capital Gain Exposure: -13% of assets
Rating and Risk
Time
Period
Load-Adj
Return %
Morningstar
Rtn vs Cat
Morningstar
Risk vs Cat
Morningstar
Risk-Adj Rating
1 Yr 1.15
3 Yr 2.06 -Avg -Avg QQ
5 Yr 3.81 -Avg -Avg QQ
10 Yr 6.56 Avg -Avg QQQQ
Incept 8.63
Other Measures Standard Index Best Fit Index
Alpha 0.2 -0.8
Beta 0.46 0.64
R-Squared 8 84
Standard Deviation 4.21
Mean 2.06
Sharpe Ratio 0.48
Portfolio Analysis 06-30-16
Total Fixed Income: 219
Date of
Maturity Amount 000
Value
$000
%
Assets
Metropcs Wireless 6.625 11-15-20 18,348 19,168 1.89
Tenet Healthcare 6% 10-01-20 17,119 18,403 1.82
Hca 6.5% 02-15-20 14,786 16,795 1.66
Delta Air Pt 2002-1 6.7 07-02-24 11,994 14,089 1.39
Homer City Generation L 10-01-26 22,781 13,824 1.36
Engy Transfer Prtnrs L 11-01-66 23,007 13,629 1.34
Regionalcare Hosp Partn 05-01-23 12,250 12,792 1.26
Reynolds Grp Issuer 144 07-15-21 12,500 12,568 1.24
Cco Hldgs Llc / Cco Hld 01-31-22 10,371 11,256 1.11
Amer Air Pt Tr 2013-1 5 07-15-22 10,514 11,099 1.10
Sirius Xm Radio 144A 5. 08-01-21 10,017 10,670 1.05
Vrx Escrow 144A 6.125% 04-15-25 12,945 10,620 1.05
Ardagh Packaging 144A F 05-15-21 10,050 10,200 1.01
Intl Lease Fin 144A 7.1 09-01-18 8,584 9,636 0.95
Ngpl Pipeco 144A 7.119% 12-15-17 8,602 9,038 0.89
Reynolds Grp Issuer 5.7 10-15-20 8,281 8,682 0.86
Vrx Escrow 144A 5.875% 05-15-23 10,637 8,722 0.86
Churchill Downs 144A 5. 12-15-21 8,238 8,608 0.85
Cott Beverages 6.75% 01-01-20 7,890 8,571 0.85
Sprint Nextel 144A 9% 11-15-18 8,000 8,617 0.85
Current Investment Style
Quality High Med Low
Duration
Ltd Mod Ext
1 figure provided by
fund
Avg Eff Duration1 2.6 Yrs
Avg Eff Maturity 4.7 Yrs
Avg Credit Quality B
Avg Wtd Coupon 5.84%
Avg Wtd Price 100.56% of par
Coupon Range % of Bonds
0% PIK 0.0
0% to 4% 10.3
4% to 6% 52.6
6% to 8% 26.4
8% to 10% 9.8
More than 10% 0.9
Credit Analysis % bonds 06-30-16
AAA 4 BB 37
AA 13 B 32
A 1 Below B 9
BBB 5 Not Rated 0
Sector Breakdown % Assets
Government 0
Government Related 0
Corporate 80
Agency MBS 0
Non-Agency Residential MBS 0
Commercial MBS 0
Covered Bond 0
Asset Backed 4
Municipal 0
Cash & Equivalents 16
Other 0
Composition - Net
Cash 15.1 Bonds 81.1
Stocks 0.0 Other 3.9
Special Securities
Restricted/Illiquid Secs 35
Emerging-Markets Secs 0
Options/Futures/Warrants 0
Morningstar's Take by Karin Anderson 07-12-16
Metropolitan West High Yield Bond benefits from an
experienced group of managers, including Steve Kane,
Laird Landmann, and Jamie Farnham, who've been at the
helm since its 2002 inception, in addition to a well-
resourced team of credit analysts and traders. While
generally a stable team, this fund's management saw a
change in April 2016 when longtime comanager Gino
Nucci transitioned off the fund.
The fund's process hinges on individual credit
analysis, attractive valuations, and portfolio positioning
basedon the team'sviewson thecreditcycle.Manyhigh-
yield bond funds stick with a specific niche of the market,
whether the cautious, moderate, or aggressive portions
of the quality spectrum. But this fund's managers will
make big adjustments depending on their view of the
current stage of the credit cycle. This worked especially
well around 2008's credit crisis, as the team grew more
conservative with its Tier 3 bonds (roughly equivalent to
CCCs)bymid-2008and then tripled thatstakeby the time
the market turned in March 2009.
This approach can thrive around market turning
points but has less of an impact during the in-between
periods, as credit spreads gradually tighten. Given the
team's belief that the economy is in the late stage of the
credit cycle, it has kept a light stake in what it believes
are richly valued Tier 3 credits (5% as of May 2016
compared with the Barclays U.S. High Yield 2% Issuer
Cap Index's 16% weighting). That's held the fund back
compared with more-aggressive peers in risk-fueled
rallies, but it has also had missteps in issue selection as
well as industry and cash positioning. For example, the
fund held three coal companies that defaulted, which
weighed heavily on returns in 2014 and in 2015. The team
has also struggled with energy positioning: The fund's
20%-plus energy stake in late 2014 hurt as oil prices
plummeted, while the team's decision to cut that stake
to roughly 6% and hold a 23% cash stake as of March
2016 meant the fund missed out on the second quarter's
rally. Therefore, the fund's Morningstar Analyst Rating is
downgraded to Neutral from Bronze.
Address: METROPOLITAN WEST ASSET MANAGEMENT Minimum Purchase: $5000 Add: $0 IRA: $1000
LOS ANGELES CA 90017 Min Auto Inv Plan: $5000 Add: $100
800-241-4671 Sales Fees: No-load
Web Address: Management Fee: 0.50%
Inception: 09-30-02 Actual Fees: Mgt:0.50% Dist:0.25%
Advisor: Metropolitan West Asset Management, LLC. Expense Projections: 3Yr:$279 5Yr:$486 10Yr:$1082
Subadvisor: None Income Distribution: Monthly
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