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Doubleline Asset Allocation Webcast Recap

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Doubleline Asset Allocation Webcast Recap DoubleLine Asset Allocation Webcast Recap About this Webcast Recap On May 5, 2020, Deputy Chief Investment Officer Jeffrey Sherman, CFA held a webcast discussing the DoubleLine Core Fixed Income (DBLFX/DLFNX), DoubleLine Flexible Income (DFLEX/DLINX) and DoubleLine Low Duration Bond (DBLSX/DLSNX) Funds. This recap is not intended to represent a complete transcript of the webcast. It is not intended as solicitation to buy or sell securities. If you are interested in hearing more of Mr. Sherman’s views, please listen to the full version of this webcast on www.doublelinefunds.com on the “Webcasts” tab under “Latest Webcast”. You can use the “Jump To” feature to navigate to each slide. DoubleLine Core Fixed Income Fund Performance Annualized Quarter-End Returns Since Inception March 31, 2020 1Q2020 Year-to-Date 1 Year 3 Years 5 Years (6-1-10 to 3-31-20) I-share (DBLFX) -3.29% -3.29% 1.42% 2.54% 2.35% 4.67% N-share (DLFNX) -3.45% -3.45% 1.17% 2.29% 2.07% 4.41% Bloomberg Barclays U.S. Aggregate Index 3.15% 3.15% 8.93% 4.82% 3.36% 3.75% Gross Expense Ratio: I-share 0.48%; N-share 0.73% DoubleLine Flexible Income Fund Performance Annualized Quarter-End Returns Since Inception March 31, 2020 1Q2020 Year-to-Date 1 Year 3 Years 5 Years (4-7-14 to 3-31-20) I-share (DFLEX) -12.56% -12.56% -9.06% -0.90% 0.63% 1.16% N-share (DLINX) -12.63% -12.63% -9.30% -1.19% 0.36% 0.90% ICE BAML 1-3 Year Eurodollar Index -0.40% -0.40% 2.96% 2.46% 2.02% 1.89% LIBOR USD 3 Month 0.43% 0.43% 2.14% 2.03% 1.46% 1.27% Gross Expense Ratio: I-share 0.76%; N-share 1.01% DoubleLine Low Duration Bond Fund Performance Annualized Since Inception Quarter-End Returns (9-30-11 to 3-31- March 31, 2020 1Q2020 Year-to-Date 1 Year 3 Years 5 Years 20) I-share (DBLSX) -4.40% -4.40% -1.59% 1.10% 1.45% 1.87% N-share (DLSNX) -4.47% -4.47% -1.84% 0.85% 1.20% 1.61% ICE BAML 1-3 Year U.S. Treasury Index 2.81% 2.81% 5.42% 2.70% 1.85% 1.33% Bloomberg Barclays U.S. Agg 1-3 Yr Index 1.79% 1.79% 4.63% 2.63% 1.93% 1.56% Gross Expense Ratio: I-share 0.43%; N-share 0.68% Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Current performance of the fund may be lower or higher than the performance quoted. Performance current to the most recent month-end may be obtained by calling (213) 633-8200 or by visiting www.doublelinefunds.com. While the Fund is no-load, management fees and other expenses still apply. Please refer to the prospectus for further details Mutual fund investing involves risk; Principal loss is possible. 1 DoubleLine Asset Allocation Webcast Recap Originally aired on May 5, 2020 Slide # Recap 10 Post-War U.S. Economic Expansions • Economic forecasts generally predict U.S. gross domestic product (GDP) to contract this year for the first time since 2008. • This would bring the longest U.S. economic expansion in the post-World War II (WWII) era to an end. - While the economic expansion that transpired over 43 quarters is the longest in duration, it ranks as only the fifth-best in terms of cumulative growth. • Real U.S. GDP grew 25.5% cumulatively over this period, below its long-term trend growth rate since 1947. - Based on estimates by the International Monetary Fund (IMF) as of April 14, 2020, U.S. real GDP growth is projected to stay below its long-term trend in the near-term. 12 Initial Jobless Claims – 4 Week Moving Average • The four week moving average of initial jobless claims shows over 30 million people in the U.S. have applied for unemployment insurance since the COVID-19 crisis began, through the week ending April 25, 2020. • While this total dwarfs any other initial jobless claims number reached during the previous seven recessions since 1967, the headline number does not tell the whole story. - Typically, the conversion rate for those individuals who apply for unemployment benefits and those that actually receive benefits is approximately 25%. - Today the conversion rate is closer to approximately 60%, translating to 18 million continuing jobless claims for the week ending April 18, 2020. 16 Personal Consumption • U.S. GDP personal consumption dropped at a seasonally-adjusted, annualized rate of 7.6% in the first quarter of 2020. - That is the biggest contraction in personal consumption since the second quarter of 1980. • There are two concerning elements to the drop in personal consumption. - Personal consumption accounts for approximately 70% of U.S. GDP. - The first quarter print only accounts for the first few weeks of shelter-in-place policies, which resulted in the large-scale shutdown of the economy. • Surveys of the services sector of the U.S. economy, a leading indicator, corroborate the weakness depicted in the first quarter GDP data. - The Institute for Supply Management (ISM) Non-Manufacturing and Services Index (NMI) is signaling contraction at 41.8, as of April 30, 2020. A reading below 50 is associated with a contraction in the non-manufacturing sector. • Historically, when the ISM Manufacturing Index printed below 50 this led to recessions. - Today the U.S. economy is more heavily dependent on the services sector, indicating the importance of the NMI figure in signaling potential recessions. 2 DoubleLine Asset Allocation Webcast Recap Originally aired on May 5, 2020 Slide # Recap 20 U.S. Federal Reserve Balance Sheet • As financial markets weakened throughout March, the U.S. Federal Reserve took major steps to respond through monetary policy. • The Fed has dramatically increased the size of its balance sheet to $6.66 trillion, as of April 29, 2020. - By adding nearly $3 trillion to its balance sheet in less than a year, the Fed has seemingly embarked on a new Quantitative Easing (QE) program. • A breakdown of the Fed’s System Open Market Account (SOMA) holdings growth reveals a similar playbook to that used after the Global Financial Crisis (GFC) in 2009 to expand its balance sheet via QE. - As of April 29, 2020, the bulk of the Fed’s holdings within its SOMA are comprised of Treasury notes and Treasury bonds, at approximately $3.35 trillion. - The next largest holdings are Agency mortgage-backed securities (MBS) totaling $1.60 trillion. QE as a Percentage of GDP and Treasury Market 22 • Not only is the breakdown of the Fed’s Treasury and Agency MBS holdings as a percentage of its overall balance sheet similar to previous QE programs, the amount of Treasuries the Fed purchased as a percentage of the overall market is also similar. - The Fed’s purchases of Treasuries as part of its current “QE 4” program represent about 9% of the outstanding Treasury market. - This surpasses the most recent total for the QE 3 program (2012-2014) and is nearly identical to the share of the Treasury market represented by purchases during QE 2 (2010-2011). • As a percentage of GDP, the magnitude of the Fed’s recent purchases of Treasuries appears more clearly when compared relative to previous QE programs. - The only program which represented a greater amount of Fed purchases of Treasuries as a percentage of GDP was during WWII. 22 Year-to-Date (YTD) Fixed Income Sector Returns • Fixed income performance YTD through May 4, 2020, has been a story of “haves” and “have-nots” in terms of support from the Fed, Treasury Department, and Congress for certain sectors of the market. • The top two performing fixed income sectors YTD are Governments and Agency MBS (as measured by the ICE BAML U.S. Treasury & Agency Index and the ICE BAML U.S. MBS Index). - These are two examples of sectors directly granted support from the Fed in the form of asset purchases. • Investment grade corporate bonds have a positive YTD return of 0.67%, as measured by the ICE BAML US Corporate Index, as of May 4, 2020. - Investment grade corporate bonds initially deteriorated along with other credit assets throughout March as the market reacted to the COVID-19 pandemic spreading throughout the U.S. - The drawdown by investment grade corporate bonds was followed by a swift retracement largely as a result of various announcements by the Fed detailing support in the form of new facilities designed to maintain liquidity and lower financing costs. 3 DoubleLine Asset Allocation Webcast Recap Originally aired on May 5, 2020 Slide # Recap • Some of the worst performing sectors in fixed income YTD have been high yield corporate debt (as measured by the ICE BAML U.S. Cash Pay High Yield Index) and international sovereign debt rated below investment grade (as measured by the ICE BAML BBB & Lower Sovereign USD External Debt Index). 26 Fixed Income Sector Yield-to-Maturity (YTM) • The yields of various sectors of fixed income rose substantially beginning in late February 2020. • Generally, most sectors of fixed income reached their peak YTM since the Global Financial Crisis in March 2020. - March 23, 2020, represents the first of two pivotal days in 2020 for credit markets, and the peak in terms of yield for various sectors.
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