TCW Fixed Income Guide: How to Position Your Portfolio for 2025?

Our Market View

Our view is that the U.S. economy is expected to slow more than expected. In that environment, we expect interest rates to fall and volatility, particularly in corporate credit markets, to increase. Learn more here.

Our Current Positioning

Given those expectations for a deeper slowdown, our view is that the Fed will ultimately continue cutting rates, not because they can, but because they must.

Our current positioning includes areas where we find value and those where we express caution:

Longer Duration with an Emphasis on Shorter Maturities:

• We expect rate cuts will be both faster and greater in magnitude than is currently priced.
• In that scenario, the curve is likely to steepen with front-end rates falling faster and more than long-end rates. Investors should look to extend durations generally with an emphasis on shorter maturities. 

Underweight Corporate Credit:

• While a slowdown of some variety is the most likely outcome, credit markets are priced as if there is no chance of anything except a perfect, soft-landing scenario.
• This represents a significant disconnect between market-assessed valuations across credit sectors and the economic realities of a slowing economy that are likely to challenge these valuations, making current spread levels insufficient to justify taking meaningful risk in credit markets.

Overweight Securitized:

• Though spreads have tightened across the securitized landscape, many sectors still trade wide relative to similar quality and similar duration corporates.
• Agency MBS remains one of our highest-conviction trades given current valuations, liquidity and the government guarantee, while parts of the non-agency MBS market backed by legacy collateral provide attractive return potential.
• Meanwhile, the heterogenous makeup of the CMBS and ABS sectors underscores the need for, and potential opportunities created by, disciplined credit selection.

How to Implement TCW Fixed Income Strategies

TCW Fixed Income strategies seek to provide better portfolio outcomes that allow investors to capitalize on attractive alpha opportunities while actively mitigating downside risk. No matter your goal, we offer strategies across the risk spectrum to enhance total return, maximize income and diversify portfolio exposures.

1. Move Out of Cash

Though cash has been a strong performer over the last couple years, with rates expected to fall as the Fed eases monetary policy, returns likely look less attractive going forward. Given that change, we believe now is a good time to extend duration and move further out on the risk spectrum. This allows investors to both pick up some additional yield versus cash, but also to capitalize on the potential benefits of rising bond prices as rates come down.

There are multiple ways to do this, depending on an investor’s risk appetite:

Low

TCW AAA CLO ETF (ACLO)

Allows investors to generate some additional yield and income in a high-quality portfolio while still keeping duration short. Learn more here.

Medium

TCW MetWest Low Duration Bond Fund (MWLIX)

Opens up the investment universe to include more sectors and more potential for alpha while extending duration modestly to capture some upside from falling rates. Learn more here.

High

TCW MetWest Total Return Bond Fund (MWTIX)

High-quality portfolios able to take advantage of multiple opportunities with a longer duration position that is more sensitive to interest rate movements. Learn more here.

2. Maximize Income

Income is a cornerstone of fixed income markets and a key reason why investors of all types seek out fixed income investments. For those investors who wish to maximize their income, moving down the quality spectrum is the most efficient way to capture yield premiums available in higher-risk markets. However, there are several different potential markets that can be exploited for that income depending on an investor’s preferences and their desire to control allocations or to delegate that allocation decision to TCW.

TCW Senior Loan ETF (SLNZ)

Dedicated senior loan investment strategy that focuses on below investment grade corporate loans in the U.S. Seniority in the capital structure provides more downside protection, while the floating rate coupons will change with interest rates. Learn more here.

TCW High Yield Bond ETF (HYBX)

Dedicated high yield bond strategy that focuses on below investment grade corporate bonds in the U.S. and other developed markets. Risk is mitigated by independent credit research and disciplined portfolio construction, while fixed rate coupons provide additional upside when interest rates fall. Learn more here.

TCW Flexible Income ETF (FLXR)

Primarily relatively higher quality, with a maximum 65% of the portfolio invested in assets rated below investment grade, but the most flexible to alter the risk profile and allocate among all different sectors of the bond market depending on the conditions at the time. Learn more here.

TCW Multisector Credit Income ETF (MUSE)

Diversified portfolio of emerging markets, senior loans and high yield bonds with relative allocations managed by TCW’s skilled investment team. Allows exposures to shift toward those parts of the market that provide the best risk adjusted returns and best potential for income over time. Learn more here.

3. Diversify Portfolio Exposures

Fixed income investments are often used to diversify portfolios, especially from equity risk that exists elsewhere investors’ portfolios. However, diversification can mean different things to different people, especially those with different risk appetites. Some strategies can, to varying degrees, help to mitigate downside from equity portfolios, or help to more fully offset equity volatility.

TCW High Yield Bond ETF (HYBX)

High yield corporate bonds generally move directionally with equities, since the underlying credit risks are the same as the equity market, but given seniority to equity in the capital structure and higher fixed coupons that generate consistent income, high yield bond volatility is generally much lower than equity markets, providing an opportunity to reduce overall portfolio volatility by swapping equities for high yield while still maintaining attractive return potential. Learn more here.

TCW Corporate Bond ETF (IGCB)

Investment grade corporate bonds again have similar risks to equities and will tend to have positive correlations with equity returns but also much lower volatility and lower expected returns. Learn more here.

TCW Flexible Income ETF (FLXR)

A broader opportunity set that can include securitized and other sectors whose fundamental value drivers are different than those driving corporates/equities, providing greater opportunities for diversification and risk mitigation. Learn more here.

TCW Securitized Bond Fund (TGLMX)

A dedicated securitized strategy with low correlations to equities but higher correlations to long-term Treasury rates. The lack of corporate credit assures different sources of risk and combined with the long duration provides a significant offset for equity volatility. Learn more here.
 

DISCLOSURES

You should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. A Fund’s Prospectus and Summary Prospectus contain this and other information about the Fund. To receive a TCW Funds and/or TCW MetWest Funds Prospectus, please call 877-829-4768 or you may download the Prospectus from the Funds’ website at TCW.com. A copy of the TCW ETFs Prospectus may be obtained from etf.tcw.com. Please read it carefully.

This material is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which positions may change at any time, without notice. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. The information contained herein may include preliminary information and/or "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented. TCW assumes no duty to update any forward-looking statements or opinions in this document. Any opinions expressed herein are current only as of the time made and are subject to change without notice. Past performance is no guarantee of future results. © 2024 TCW

The description of TCW ETF’s investment strategy is intended to be representative but may be changed from time to time by TCW, and TCW may alter the information at its discretion. TCW intends to be focused and directed in the selection of opportunities to actively engage with portfolio companies of the Fund. As we seek to deliver on our client’s financial

objectives, engagement and active ownership are integral components of TCW’s research and investment process. Our data-informed engagement and active ownership practices achieve several objectives. The information elicited from these practices not only helps improve our fundamental research, but our engagement and active ownership practices may also have positive impacts on the company or other entities by suggesting best practices in addressing critical, financially material issues in areas of sustainability, corporate governance, or executive compensation. In TCW’s view, active ownership improves value and informs future investment decisions.

As with any investment, you could lose all or part of your investment in the Fund, and the Fund’s performance could trail that of other investments. The Fund is subject to certain risks, including the principal risks noted below, any of which may adversely affect the Fund’s net asset value (“NAV”) per share, trading price, yield, total return and ability to meet its investment objective.

Investment Risks

TCW High Yield Bond ETF (HYBX) is an actively managed exchange-traded fund which seeks income and to achieve above average total returns with reasonable risk over a full market cycle. The Fund will generally invest, under normal circumstances, in high yield/below investment grade bonds.

TCW High Yield Bond ETF (HYBX) is subject to the following risks: A new fund’s performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new funds may not attract sufficient assets to achieve investment and trading efficiencies. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. High yield securities may be subject to greater fluctuations in value and risk of loss of income and principal than higher-rated securities. Mortgage-backed and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. MBS related to floating rate loans may exhibit greater price volatility than a fixed rate obligation of similar credit quality. With respect to non-agency MBS, there are no direct or indirect government or agency guarantees of payments in pools created by non-governmental issuers. Non-agency MBS are also not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. ETF risk: the risk that the value of the Fund’s investments will fluctuate in response to the performance of the ETFs owned by the Fund. The lack of liquidity in an ETF could result in its value being more volatile than its portfolio securities, and an ETF’s performance may not match the performance of a particular market segment or index it seeks to track. In addition, the Fund’s shareholders will indirectly bear a proportionate share of an ETF’s expenses, in addition to paying the Fund’s expenses. Please see the Fund’s Prospectus for more information on these and other risks.

TCW Multisector Credit Income ETF (MUSE) is an actively managed exchange-traded fund which seeks long-term income and is a multisector portfolio of fixed income securities and instruments. The Fund will generally allocate its assets among several fixed income sectors, including high yield securities, bank loans, and foreign securities, including emerging market securities. 

TCW Multisector Credit Income ETF (MUSE) is subject to the following risks: This fund will commence operations on its listing date; there is no prior performance history for this fund. A new fund’s performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new funds may not attract sufficient assets to achieve investment and trading efficiencies. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. High yield securities may be subject to greater fluctuations in value and risk of loss of income and principal than higher-rated securities. Mortgage-backed and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. MBS related to floating rate loans may exhibit greater price volatility than a fixed rate obligation of similar credit quality. With respect to non-agency MBS, there are no direct or indirect government or agency guarantees of payments in pools created by non-governmental issuers. Non-agency MBS are also not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. Asset-backed securities involve the risk of loss as a result of impairment of the value of the underlying financial assets, prepayment risk and extension risk. Issuers of asset-backed securities may have limited ability to enforce the security interest in the underlying assets, and credit enhancements provided to support the ABS, if any, may be inadequate to protect investors in the event of default. Floating rate loans entail special risks. The market for floating rate loans may be illiquid, making it difficult for the Fund to determine the true value of a loan, or to sell its interest in a failing loan promptly or at a profitable price. The collateral for secured loans may be insufficient to cover a default, and the Fund may have limited remedies when a borrower defaults. High-yield (unrated or rated below-investment grade) loans and bonds have greater credit risk and more volatility than debt instruments rated investment grade. Loans made to distressed borrowers or to finance leveraged corporate acquisitions may be especially vulnerable to adverse changes in economic and market conditions. The risk of loss is even greater for unsecured loans. The Fund’s use of leverage (borrowing) and derivatives may increase the volatility of the Fund’s returns. Although the floating rate loans are intended to provide creditors with protection against rising interest rates, some of the debt securities in which the Fund invests will be subject to interest rate risk and may decline in value when interest rates rise. Foreign securities are subject to special additional risks, such as changing currency values, lack of regulation, and political and economic environments in the countries where the Fund invests. ETF risk: the risk that the value of the Fund’s investments will fluctuate in response to the performance of the ETFs owned by the Fund. The lack of liquidity in an ETF could result in its value being more volatile than its portfolio securities, and an ETF’s performance may not match the performance of a particular market segment or index it seeks to track. In addition, the Fund’s shareholders will indirectly bear a proportionate share of an ETF’s expenses, in addition to paying the Fund’s expenses. The Fund’s investments denominated in foreign currencies will decline in value if the foreign currency declines in value relative to the U.S. dollar. Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where the investments are made. The securities markets of emerging market countries can be extremely volatile. Please see the Fund’s Prospectus for more information on these and other risks.

TCW AAA CLO ETF (ACLO) is an actively managed exchange-traded fund which seeks to provide capital preservation and current income by investing principally in U.S. dollar-denominated AAA-rated collateralized loan obligations.

TCW AAA CLO ETF (ACLO) is subject to the following risks: This fund will commence operations on its listing date; there is no prior performance history for this fund. A new fund’s performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new funds may not attract sufficient assets to achieve investment and trading efficiencies. CLOs are securities backed by an underlying portfolio of loan obligations. CLOs issue classes or “tranches” of debt that vary in risk and yield and may experience substantial losses due to actual defaults, decrease of market value due to collateral defaults and exhaustion of subordinate tranches, market anticipation of defaults and investor aversion to CLO securities as a class. The risks of investing in CLOs depend largely on the tranche invested in and the type of the underlying loans in the tranche of the CLO in which the Fund invests. Subordinate tranche investments involve greater risk of loss than more senior tranches. CLOs also carry risks including, but not limited to, interest rate risk and credit risk. To the extent that the Fund invests in unrated CLO tranches, the Fund’s ability to achieve its investment objective will be more dependent on the Adviser’s credit analysis than would be the case when the Fund invests in rated CLO tranches. The CLOs in which the Fund invests are managed by investment advisers independent of the Adviser. CLO managers are responsible for selecting, managing and replacing the underlying bank loans or bonds within a CLO. CLO managers may have limited operating histories and may be subject to conflicts of interest, including managing the assets of other clients or other investment vehicles, or receiving fees that incentivize maximizing the yield, and indirectly the risk, of a CLO. Adverse developments with respect to a CLO manager, such as personnel and resource constraints, regulatory issues or other developments that may impact the ability and/or performance of the CLO manager, may adversely impact the performance of the CLOs in which the Fund invests . The risk of investing in senior loans may be greater than the risk of investing in other types of securities, as a result of, among other factors, less readily available, reliable information about most senior loans than is the case for many other types of securities; possible loss of significant value before a default occurs; possible decline in value or illiquidity of collateral; and lack of an active trading market for certain senior loans. During periods of falling interest rates, an issuer of a callable security held by the Fund may “call” or repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in securities with greater risks or with other less favorable features. CLOs are typically structured such that, after a specified period of time, the majority investor in the equity tranche can call (i.e., redeem) the securities issued by the CLO in full. The Fund may not be able to accurately predict when or which of its CLO investments may be called, resulting in the Fund having to reinvest the proceeds in unfavorable circumstances, which in turn could cause in a decline in the Fund’s income. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. ETF risk: the risk that the value of the Fund’s investments will fluctuate in response to the performance of the ETFs owned by the Fund. The lack of liquidity in an ETF could result in its value being more volatile than its portfolio securities, and an ETF’s performance may not match the performance of a particular market segment or index it seeks to track. In addition, the Fund’s shareholders will indirectly bear a proportionate share of an ETF’s expenses, in addition to paying the Fund’s expenses. Please see the Fund’s Prospectus for more information on these and other risks.

TCW Corporate Bond ETF (IGCB) is an actively managed exchange-traded fund which seeks to maximize long-term capital appreciation using a diversified portfolio of corporate bonds.

TCW Corporate Bond ETF (IGCB) is subject to the following risks: A new fund’s performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new funds may not attract sufficient assets to achieve investment and trading efficiencies. It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. The Fund’s investments denominated in foreign currencies will decline in value if the foreign currency declines in value relative to the U.S. dollar. Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where the investments are made. The securities markets of emerging market countries can be extremely volatile. ETF risk: the risk that the value of the Fund’s investments will fluctuate in response to the performance of the ETFs owned by the Fund. The lack of liquidity in an ETF could result in its value being more volatile than its portfolio securities, and an ETF’s performance may not match the performance of a particular market segment or index it seeks to track. In addition, the Fund’s shareholders will indirectly bear a proportionate share of an ETF’s expenses, in addition to paying the Fund’s expenses. Please see the Fund’s Prospectus for more information on these and other risks.

TCW Senior Loan ETF (SLNZ) is an actively managed exchange-traded fund which primarily seeks current income and secondarily seeks long-term capital appreciation.

TCW Senior Loan ETF (SLNZ) is subject to the following risks: A new fund’s performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new funds may not attract sufficient assets to achieve investment and trading efficiencies. It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. Floating rate loans entail special risks. The market for floating rate loans may be illiquid, making it difficult for the Fund to determine the true value of a loan, or to sell its interest in a failing loan promptly or at a profitable price. The collateral for secured loans may be insufficient to cover a default, and the Fund may have limited remedies when a borrower defaults. High-yield (unrated or rated below-investment grade) loans and bonds have greater credit risk and more volatility than debt instruments rated investment grade. Loans made to distressed borrowers or to finance leveraged corporate acquisitions may be especially vulnerable to adverse changes in economic and market conditions. The risk of loss is even greater for unsecured loans. The Fund’s use of leverage (borrowing) and

derivatives may increase the volatility of the Fund’s returns. Although the floating rate loans are intended to provide creditors with protection against rising interest rates, some of the debt securities in which the Fund invests will be subject to interest rate risk and may decline in value when interest rates rise. Foreign securities are subject to special additional risks, such as changing currency values, lack of regulation, and political and economic environments in the countries where the Fund invests. Equity investments entail equity risk and price volatility risk. The value of stocks and other equity securities will change based on changes in a company’s financial condition and in overall market and economic conditions. The value of the Fund’s share price will fluctuate up or down based on the value of the portfolio holdings, which can be affected by these risks. ETF risk: the risk that the value of the Fund’s investments will fluctuate in response to the performance of the ETFs owned by the Fund. The lack of liquidity in an ETF could result in its value being more volatile than its portfolio securities, and an ETF’s performance may not match the performance of a particular market segment or index it seeks to track. In addition, the Fund’s shareholders will indirectly bear a proportionate share of an ETF’s expenses, in addition to paying the Fund’s expenses.

TCW Flexible Income ETF (FLXR) seeks a high level of current income with a secondary objective of long-term capital appreciation. The Fund is an actively managed exchange traded fund that seeks to pursue its objective by utilizing a flexible investment approach that allocates investments across a range of global investment opportunities related to credit, currencies and interest rates.

TCW Flexible Income ETF (FLXR) is subject to the following risks: High yield securities may be subject to greater fluctuations in value and risk of loss of income and principal than higher-rated securities. It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. The Fund’s investments denominated in foreign currencies will decline in value if the foreign currency declines in value relative to the U.S. dollar. Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where the investments are made. The securities markets of emerging market countries can be extremely volatile. Mortgage-backed and other asset-backed securities often involve risks that are different from or more acute than risks associated with other types of debt instruments. MBS related to floating rate loans may exhibit greater price volatility than a fixed rate obligation of similar credit quality. With respect to non-agency MBS, there are no direct or indirect government or agency guarantees of payments in pools created by non-governmental issuers. Non-agency MBS are also not subject to the same underwriting requirements for the underlying mortgages that are applicable to those mortgage-related securities that have a government or government-sponsored entity guarantee. Liquidity Risk. Lack of a ready market or restrictions on resale may limit the ability of the Fund to sell a security at an advantageous time or price. The liquidity of the Fund’s assets may change over time. Derivatives Risk. A derivative is a financial contract, the value of which depends on or is derived from, the value of an underlying asset such as a security or an index.

TCW MetWest Low Duration Bond Fund, TCW MetWest Total Return Bond Fund, and TCW Securitized Bond Fund – It is important to note that the Fund is not guaranteed by the U.S. Government. Fixed income investments entail interest rate risk, the risk of issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal. Floating rate loans entail special risks. The market for floating rate loans may be illiquid, making it difficult for the Fund to determine the true value of a loan, or to sell its interest in a failing loan promptly or at a profitable price. The collateral for secured loans may be insufficient to cover a default, and the Fund may have limited remedies when a borrower defaults. High-yield (unrated or rated below-investment grade) loans and bonds have greater credit risk and more volatility than debt instruments rated investment grade. Loans made to distressed borrowers or to finance leveraged corporate acquisitions may be especially vulnerable to adverse changes in economic and market conditions. The risk of loss is even greater for unsecured loans. The Fund’s use of leverage (borrowing) and derivatives may increase the volatility of the Fund’s returns. Although the floating rate loans are intended to provide creditors with protection against rising interest rates, some of the debt securities in which the Fund invests will be subject to interest rate risk and may decline in value when interest rates rise. Foreign securities are subject to special additional risks, such as changing currency values, lack of regulation, and political and economic environments in the countries where the Fund invests. Equity investments entail equity risk and price volatility risk. The value of stocks and other equity securities will change based on changes in a company’s financial condition and in overall market and economic conditions. The value of the Fund’s share price will fluctuate up or down based on the value of the portfolio holdings, which can be affected by these risks.

Please see the Fund’s Prospectus for more information on these and other risks.

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE The TCW and TCW MetWest Funds are offered through TCW Funds Distributors LLC, Member FINRA and SIPC. The TCW ETFs are distributed by Foreside Financial Services, LLC.

Effective October 13, 2023, TCW acquired the Transform ETF business from Engine No. 1 and the Transform Funds' adviser became TCW Investment Management Company LLC. Prior to that date, the Transform Funds' adviser was Fund Management at Engine No. 1 LLC.