TCW Global Bond Fund

Quarterly Commentary

September 30, 2017

Geopolitical and idiosyncratic risks continued to be simultaneously heightened and severely discounted by investors in the third quarter. Notwithstanding brief bouts of market volatility resulting from heated rhetoric between the U.S. and North Korea, devastating natural disasters in the southeast, and contentious political discourse, the overarching theme was one of upward-trending markets propagated by still-accommodative central banks even as the number of potential catalysts to overturn frothy valuations grew. Meanwhile, market volatility measures such as the VIX hovered near historical lows during the quarter, illustrative of the apparent complacency supporting price levels. While late 2016/early 2017 sentiment held that the new administration in Washington DC was poised to spur a faster pace of economic growth with passage of long-absent fiscal stimulus, political reality (and intransigence) has frustrated much in the way of legislative progress. As a result, no acceleration in GDP has occurred, job gains and wage growth remain limited, and a lack of inflationary pressure persists, the combination of which reveals little fundamental support for the lack of risk aversion in evidence. Though corporate earnings have been resilient and modestly growing, indications are that profit momentum has been sustained more by financial engineering than robust top-line growth...

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Media Attachments

Bloomberg Barclays U.S. Aggregate Bond Index – A market capitalization-weighted index of investment-grade, fixed-rate debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of at least one year.

A Word About Risk

The primary risks affecting this Fund are “foreign investing risk,” “liquidity risk,” “credit risk,” “interest rate risk” (including “extension risk” and “prepayment risk”), “price volatility,” and “foreign currency risk.” Foreign investing risk refers to the likelihood that foreign investments may be riskier than U.S. investments because of many factors, some of which include: a lack of political or economic stability, foreign controls on investment and currency exchange rates, withholding taxes, and a lack of adequate company information. Because the Fund invests in the securities of emerging market countries, these risks are more pronounced. Liquidity risk refers to the possibility that the Fund may lose money or be prevented from earning capital gains if it cannot sell a security at the time and price that is most beneficial to the Fund. Credit risk refers to the likelihood of the Fund losing money if an issuer is unable to meet its financial obligations, such as the payment of principal and/or interest on an instrument, or goes bankrupt. Interest rate risk refers to the possibility that the value of the Fund’s portfolio investments may fall when interest rates rise. Price volatility refers to the possibility that the value of the Fund’s portfolio will change as the prices of its investments go up or down. Foreign currency risk refers to the risk that the value of the Fund’s investments denominated in foreign currencies will decline in value because the foreign currency has declined in value relative to the U.S. dollar. Extension risk is the possibility that rising interest rates may cause owners of the underlying mortgages to pay off their mortgages at a slower than expected rate. This particular risk may effectively change a security which was considered short or intermediate term into a long-term security. Long-term securities generally drop in value more dramatically in response to rising interest rates than short or intermediate-term securities. Prepayment risk refers to the possibility that falling interest rates may cause owners of the underlying mortgages to pay off their mortgages at a faster than expected rate. This tends to reduce returns since the funds prepaid will have to be reinvested at the then lower prevailing rates.

About Performance
The performance data presented represents past performance and is no guarantee of future results. Total returns include reinvestment of dividends and distributions. Current performance may be lower or higher than the performance data presented. Performance data current to the most recent month end is available on the product detail page for each Fund. Investment returns and principal value will fluctuate with market conditions. The value of an investment in the Fund, when redeemed, may be worth more or less than its original purchase cost.
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The TCW Funds are distributed by TCW Funds Distributors LLC