Enhanced Income Strategy

Investment Strategies

Consider the Potential to Protect Purchasing Power from Inflation and Rising Interest Rates

  • 2-Part Value Product With 70% Fixed Income And 30% Mega-Cap Equities — Seeks to generate income and capital appreciation
  • Pursues Protection From Rising Interest Rates And Inflation — Using the value approach to bond and stock picking to seek:
    • Higher current yield than blended benchmark
    • Higher long-term return than both blended and fixed-income benchmarks
  • Part #1 – 70% Value Fixed-Income Characteristics
    • Seeks bonds offering potentially high level of income and capital appreciation
    • Diversified across fixed-income sectors
    • Invests across the credit spectrum including investment-grade and non-investment grade issues
    • Invests primarily in U.S. dollar-denominated securities
    • Up to 50% SMART**, a registered investment company offered by Brandes
  • Part #2 – 30% Value Mega-Cap Equity Characteristics
    • Securities of issuers whose market capitalization ranks among the top 250 companies worldwide
    • Seeks relatively low price-to-earnings, price-to-book and price-to-cash flow ratios
    • Pursues attractive dividend yields
    • Diversified across global regions and industries
    • Concentrated portfolio of between 15 and 30 stocks

Get the Enhanced Income Advantage

  • Pursuit of Higher Income and Capital Appreciation — The strategy’s bond and stock holdings seek higher income and capital appreciation than its blended benchmark, 70% Bloomberg Barclays U.S. Aggregate Bond Index and 30% S&P Developed $25 Billion Plus Index.
  • In-Depth Credit Analysis and Equity Valuation — Helps identify potentially mispriced corporate bonds of companies that have the ability to meet their debt obligations, as well as stocks of companies exhibiting low price-to-book, price-to-earnings and price-to-cash flow ratios.
  • Comprehensive Fixed-Income Sector Coverage — Flexibility to invest in non-investment grade securities and in high-quality, highly liquid securities such as U.S. Treasury and Agency bonds and bonds of companies domiciled outside the United States.
  • Country and Industry Diversification — Invests in potentially undervalued equities from a wide range of countries and industries.

A Straightforward, Transparent and Focused Strategy

The firm’s dedicated team of investment professionals analyzes bond and stock investments for the Enhanced Income Strategy using a time-tested, bottom-up value approach. The team’s experience and discipline help identify securities selling at a discount to the team's estimates of their true worth and credit worthiness. Investment decisions are based on company focused research and internal ratings. The result is an easy-to-understand portfolio with typically little direct reliance on third-parties.

**SMART: Brandes Separately Managed Account Reserve Trust is a registered investment company offered by Brandes.
Price/Book: Price per share divided by book value per share.
Price/Cash Flow: Price per share divided by cash flow per share.
Price/Earnings: Price per share divided by earnings per share.
Yield: Annual income from the investment (dividend, interest, etc.) divided by the current market price of the investment.

The typical proportion of equity to fixed income securities is expected to be 30% equity to 70% fixed income. While we have some flexibility to vary this proportion, and market price action may also impact the ratio, the equity proportion of the strategy is likely to remain in the range of 25% to 35%. Not all investment strategies are suitable for all investors. 

Past performance is not a guarantee of future results.

No investment strategy can assure a profit or protect against loss. Diversification does not assure a profit or protect against a loss in a declining market.

The Enhanced Income Index is composed of 70% Bloomberg Barclays U.S. Aggregate Bond Index and 30% S&P Developed $25 Billion Plus Index with net dividends. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. This index is a total return index which reflects the price changes and interest of each bond in the index. The S&P Developed $25 Billion Plus Index measures the performance of developed market equities that have market capitalizations greater than $25 billion (USD).

Unlike bonds issued or guaranteed by the U.S. government or its agencies, stocks and other bonds are not backed by the full faith and credit of the United States. Stock and bond prices will experience market fluctuations. Please note that the value of government securities and bonds in general have an inverse relationship to interest rates. Bonds carry the risk of default, or the risk that an issuer will be unable to make income or principal payment. There is no assurance that private guarantors or insurers will meet their obligations. The credit quality of the investments in the portfolio is no guarantee of the safety or stability of the portfolio. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments.

This material is intended for informational purposes only. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Portfolio holdings and allocations are subject to change at any time. Strategies discussed herein are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Market conditions may impact performance.

The Brandes Enhanced Income Strategy seeks to achieve current income and long-term capital appreciation by investing primarily in a combination of undervalued equity and fixed income securities of both U.S. and non-U.S. issuers. It primarily invests in United States government and agency debt, corporate debt obligations, and cash equivalents, plus equity securities of issuers whose market capitalization ranks in the top 250 companies worldwide. The strategy is not subject to any specific geographic diversification requirements. The typical proportion of equity to fixed income securities is expected to be 30% equity to 70% fixed income. While we have some flexibility to vary this proportion, and market price action may also impact the ratio, the equity proportion of the strategy is likely to remain in the range of 25% to 35%.

The strategy uses a blended benchmark of 70% Bloomberg Barclays U.S. Aggregate Bond Index and 30% S&P Developed $25 Billion Plus Index (rebalanced daily).

In September 2016 the strategy benchmark changed from gross of withholding tax to net of withholding tax, effective back to the inception date of the strategy. The change was made to better reflect our expectation for an investor’s actual experience.

GIPS® Compliant Presentation:

Annualized Performance (Net)

THROUGH September 30, 2018 | REPORTING CURRENCY: USD
 
1 Year
3 Years
5 Years
7 Years
10 Years
Since Inception 9/30/2005
Enhanced Income
1.48%
4.58%
3.12%
4.98%
5.22%
3.97%
Primary Benchmark (a)
2.65%
5.03%
4.39%
5.23%
5.37%
4.89%
Relative Performance
-1.17%
-0.45%
-1.27%
-0.25%
-0.15%
-0.92%

Annualized Performance (Gross)

THROUGH September 30, 2018 | REPORTING CURRENCY: USD
 
1 Year
3 Years
5 Years
7 Years
10 Years
Since Inception 9/30/2005
Enhanced Income
1.93%
5.05%
3.59%
5.45%
5.70%
4.43%
Primary Benchmark (a)
2.65%
5.03%
4.39%
5.23%
5.37%
4.89%
Relative Performance
-0.72%
0.02%
-0.80%
0.22%
0.33%
-0.46%

Annual Periods (Net)

THROUGH September 30, 2018 | REPORTING CURRENCY: USD
 
2017
2016
2015
2014
2013
2012
2011
Enhanced Income
6.79%
7.96%
-3.32%
1.86%
7.92%
10.49%
4.37%
Primary Benchmark (a)
8.94%
4.07%
0.28%
5.61%
5.76%
7.87%
4.61%
 
2010
2009
2008
2007
2006
Enhanced Income
6.85%
20.35%
-22.62%
5.20%
12.42%
Primary Benchmark (a)
7.32%
12.91%
-10.45%
8.08%
8.76%

Quarterly Performance (Net And Gross)

THROUGH September 30, 2018 | REPORTING CURRENCY: USD
Year
 
1Q
2Q
3Q
4Q
YTD
2018
NET
GROSS
Primary Benchmark (a)
00 -0.94%
00 -0.83%
00 -1.39%
-00 0.46%
-00 0.57%
-00 0.41%
-00 0.82%
-00 0.93%
-00 1.77%
-0000000
-0000000
-0000000
-00 0.33%
-00 0.67%
-00 0.77%
2017
NET
GROSS
Primary Benchmark (a)
-00 1.81%
-00 1.92%
-00 2.50%
-00 1.58%
-00 1.69%
-00 2.21%
-00 2.10%
-00 2.22%
-00 2.08%
-00 1.14%
-00 1.26%
-00 1.86%
-00 6.79%
-00 7.27%
-00 8.94%
2016
NET
GROSS
Primary Benchmark (a)
-00 2.04%
-00 2.16%
-00 1.90%
-00 2.60%
-00 2.72%
-00 1.83%
-00 2.51%
-00 2.63%
-00 1.70%
-00 0.58%
-00 0.70%
00 -1.39%
-00 7.96%
-00 8.45%
-00 4.07%
2015
NET
GROSS
Primary Benchmark (a)
-00 1.79%
-00 1.91%
-00 1.67%
00 -0.42%
00 -0.31%
00 -1.07%
00 -3.54%
00 -3.43%
00 -1.68%
00 -1.13%
00 -1.02%
-00 1.41%
00 -3.32%
00 -2.89%
-00 0.28%
2014
NET
GROSS
Primary Benchmark (a)
-00 1.72%
-00 1.83%
-00 1.59%
-00 2.51%
-00 2.61%
-00 2.83%
00 -1.70%
00 -1.59%
00 -0.33%
00 -0.63%
00 -0.49%
-00 1.43%
-00 1.86%
-00 2.32%
-00 5.61%
2013
NET
GROSS
Primary Benchmark (a)
-00 2.41%
-00 2.51%
-00 2.01%
00 -0.25%
00 -0.14%
00 -1.42%
-00 3.20%
-00 3.31%
-00 2.63%
-00 2.37%
-00 2.51%
-00 2.48%
-00 7.92%
-00 8.40%
-00 5.76%
2012
NET
GROSS
Primary Benchmark (a)
-00 4.91%
-00 5.02%
-00 3.49%
00 -0.16%
00 -0.06%
-00 0.27%
-00 3.63%
-00 3.74%
-00 3.29%
-00 1.79%
-00 1.91%
-00 0.64%
-0 10.49%
-0 10.96%
-00 7.87%
2011
NET
GROSS
Primary Benchmark (a)
-00 3.46%
-00 3.57%
-00 1.78%
-00 1.86%
-00 1.98%
-00 1.73%
00 -4.28%
00 -4.17%
00 -2.37%
-00 3.46%
-00 3.58%
-00 3.50%
-00 4.37%
-00 4.84%
-00 4.61%
2010
NET
GROSS
Primary Benchmark (a)
-00 2.73%
-00 2.84%
-00 2.02%
00 -3.44%
00 -3.33%
00 -1.97%
-00 6.68%
-00 6.80%
-00 5.82%
-00 0.98%
-00 1.09%
-00 1.42%
-00 6.85%
-00 7.33%
-00 7.32%
2009
NET
GROSS
Primary Benchmark (a)
00 -5.01%
00 -4.90%
00 -3.50%
-0 13.04%
-0 13.17%
-00 7.02%
-0 10.28%
-0 10.40%
-00 7.78%
-00 1.63%
-00 1.74%
-00 1.43%
-0 20.35%
-0 20.89%
-0 12.91%
2008
NET
GROSS
Primary Benchmark (a)
00 -5.83%
00 -5.73%
00 -1.38%
00 -1.53%
00 -1.43%
00 -1.32%
00 -8.59%
00 -8.52%
00 -4.56%
00 -8.71%
00 -8.56%
00 -3.59%
0 -22.62%
0 -22.27%
0 -10.45%
2007
NET
GROSS
Primary Benchmark (a)
-00 1.77%
-00 1.88%
-00 1.32%
-00 2.27%
-00 2.39%
-00 1.85%
-00 0.93%
-00 1.05%
-00 2.98%
-00 0.14%
-00 0.26%
-00 1.71%
-00 5.20%
-00 5.67%
-00 8.08%
2006
NET
GROSS
Primary Benchmark (a)
-00 2.59%
-00 2.68%
-00 1.07%
-00 0.78%
-00 0.87%
-00 0.05%
-00 4.88%
-00 5.00%
-00 4.29%
-00 3.68%
-00 3.80%
-00 3.13%
-0 12.42%
-0 12.88%
-00 8.76%
2005
NET
GROSS
Primary Benchmark (a)
-0000000
-0000000
-0000000
-0000000
-0000000
-0000000
-0000000
-0000000
-0000000
00 -0.55%
00 -0.46%
-00 1.02%
00 -0.55%
00 -0.46%
-00 1.02%

Composite Characteristics

THROUGH September 30, 2018 | REPORTING CURRENCY: USD
Year
#Accts
Assets
(mil)
Dispersion
% of non-fee
paying assets
Total Firm
Assets (mil)
2018
-000,00 9
-000,00 4
-000,
-000,
-0 22,449
2017
-000,00 9
-000,00 4
-00 0.68
-0 13
-0 25,578
2016
-000,00 5
-000,00 2
-00, N/A
-0 31
-0 22,971
2015
-000,00 5
-000,00 1
-00, N/A
-0 30
-0 20,666
2014
-000,00 8
-000,00 3
-00 0.60
-0 31
-0 20,722
2013
-000,0 11
-000,00 9
-00 0.38
-0 13
-0 21,464
2012
-000,0 12
-000,00 9
-00, N/A
-0 12
-0 22,171
2011
-000,00 2
-000,00 6
-00, N/A
-0 16
-0 26,658
2010
-000,00 2
-000,0 17
-00, N/A
-0 43
-0 38,659
2009
-000,00 2
-000,0 17
-00, N/A
-0 43
-0 42,152
2008
-000,00 5
-000,0 28
-00, N/A
-0 22
-0 40,591
2007
-000,00 3
-000,0 19
-00, N/A
-0 41
-0 83,242
2006
-000,00 3
-000,0 17
-00, N/A
-0 44
-0 85,974
2005
-000,00 1
-000,00 6
-00, N/A
- 100
- 101,874
THROUGH September 30, 2018 | REPORTING CURRENCY: USD

The results for individual accounts and for different periods may vary.  Investors should not rely on prior performance results as a reliable indication of future results. Market conditions may impact performance. The performance results presented were achieved in particular market conditions which may not be repeated. Moreover, the current market volatility and uncertain regulatory environment may have a negative impact on future performance.
As of September 30, 2013, Brandes Investment Partners includes the non-SMA Division of Brandes Investment Partners L.P., Brandes Investment Partners (Europe) Limited, Brandes Investment Partners (Asia) Pte Ltd and the Brandes Investment Partners & Co. assets sub-advised by Brandes Investment Partners, L.P. The firm was redefined to reflect the expansion of the organization. As of January 1, 2006, Brandes Investment Partners was divided into two separate divisions: the SMA Division of Brandes Investment Partners, which acts as a discretionary manager to SMA or “wrap fee” program clients, including those who may invest in an SMA product; and the non-SMA Division of Brandes Investment Partners (Brandes), which acts as a discretionary manager for all other types of clients which may include pooled investment vehicles, institutional accounts and high net worth clients outside of wrap fee programs. Although the divisions may share portfolio management and other personnel, each division serves a particular target market, may trade in a different manner and may offer investment advice which differs from the other depending upon the individualized needs of the clients served. The performance data presented does not contain any SMA Division accounts.
The Brandes Enhanced Income Composite seeks to achieve current income and long-term capital appreciation by investing primarily in a combination of undervalued equity and fixed income securities of both U.S. and non-U.S. issuers. The composite primarily invests in United States government and agency debt, corporate debt obligations, and cash equivalents, plus equity securities of issuers whose market capitalization ranks in the top 250 companies worldwide. The typical proportion of equity to fixed income securities is expected to be 30% equity to 70% fixed income. The composite may invest in a mutual fund (Separately Managed Account Reserve Trust, or “SMART”) that is available only within the Brandes Income Strategies program. Generally SMART is predominantly invested in corporate debt, including non-dollar denominated and non-investment grade debt obligations, but may invest in other types of securities as well. The firm believes this fixed income composite to be aggressive with regard to certain risks, especially credit risk. Generally, no more than 10% of the value of the composite’s total assets, measured at the time of purchase, may be invested in securities of companies located in emerging and frontier countries throughout the world.
Brandes claims compliance with the Global Investment Performance Standards (GIPS®). To receive a list of composite descriptions and/or presentation that complies with GIPS standards, contact client service at 800-237-7119 or write 11988 El Camino Real, Suite 600, P.O. Box 919048, San Diego, California 92191-9048 or email ClientService@Brandes.com.
(a) Enhanced Income Index (rebalanced monthly): 70% Bloomberg Barclays U.S. Aggregate Bond Index, 30% S&P Developed $25 Billion Plus Index with net dividends. The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. This index is a total return index which reflects the price changes and interest of each bond in the index. The S&P Developed $25 Billion Plus Index measures equity market performance of the developed markets throughout the world that have market capitalizations greater than $25 billion (USD). The benchmark returns are not covered by the report of independent verifiers.
Brandes Investment Partners® is a registered trademark of Brandes Investment Partners, L.P. in the United States and Canada.