TCW High Yield Bond Fund

Quarterly Commentary

Leading up to late June’s “Brexit” referendum to decide the United Kingdom’s future in the European Union, complacency continued to prevail across U.S. markets. While the S&P 500 equity index climbed higher, the corporate bond sector, especially high yield, outpaced stocks as the appetite for risk appeared undiminished. Even after the Leave outcome surprised expectations for a narrow Remain victory, the initially extreme volatility proved short-lived as markets quickly recovered, indicating confidence among investors that the Fed and its fellow global central banks would maintain the dovish policies that have supported asset prices with few interruptions since the 2008 financial crisis. To wit, at its June meeting, the Federal Reserve (Fed) lowered its estimate for the longer-run funds rate to 3% and halved projections of future rate increases from four to two hikes this year. Thus, the circumstances reflected a continuation of the first quarter’s theme of decoupled fundamentals – economic and credit – and technicals, wherein a litany of weak indicators of the former were offset by the latter. And what were those indicators? Notably, on the fundamental side, GDP growth remained at a sluggish pace with Q1’s latest posting at a 1.1% annualized rate, as stunted productivity weighed on the pace of expansion. Further, May job creation came in at a six-year low and even a vastly improved June report failed to lift the monthly average for the quarter above 150,000. Add in the corporate profit stagnation that has begun to exhibit late-cycle signs of reversal and it remains difficult to see the underlying source of market optimism...

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Citigroup High Yield Cash Pay Custom Index – A blend of the Citigroup High Yield Cash Pay Index and the Citigroup High Yield Cash Pay Capped Index. (Citigroup High Yield Cash Pay from inception through 12/31/05 and Citigroup High Yield Capped thereafter.) The Citigroup High Yield Cash Pay Capped Index includes only cash-pay bonds (both registered and Rule 144A) with remaining maturities of at least one year and a minimum amount outstanding of USD 100 million and a cap on the par amount of each issuer in the Index at USD 5 billion.

A Word About Risk

High yield securities may be subject to greater fluctuations in value and risk of loss of income and principal than higher-rated securities. 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.

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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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 Prospectus, please call 800-386-3829 or you may download the PDF TCW Funds Prospectus. Please read it carefully.

The TCW Funds are distributed by TCW Funds Distributors LLC