Western Asset Mortgage Capital Corp.

Our Manager's investment philosophy is to identify assets with the greatest risk-adjusted value potential and provide clients with diversified, long-term value-oriented portfolios. This approach stems from its singular focus on fixed-income asset management and has proved resilient over a variety of credit cycles and market conditions. In making investment decisions on our behalf, our Manager incorporates its macroeconomic views, outlook for the mortgage markets, and in-depth relative value analysis of individual assets.

We rely on our Manager's expertise in asset allocation and identifying attractive assets within our investment strategy and expect to benefit from the breadth and depth of our Manager’s overall investment philosophy and process. Our core investment strategy is focused on residential real estate related investments, including non-qualified mortgage loans, non-agency RMBS and other related investments. The Company expects to transition out of the commercial investments in the portfolio over the next 12-18 months, though it may from time to time make small commercial investments on an opportunistic basis. Our Manager’s expertise in related investment disciplines such as Agency MBS, Agency CMBS, commercial MBS and ABS provides our Manager with valuable investment insights into our whole loan and securities investment selection and relative value analysis.

Team-Based Investment Approach

Our investment process is based on a collaborative team approach utilizing a combination of bottom-up research and top-down macroeconomic analysis. This approach begins with the development of a global investment outlook that includes forecasting economic growth, interest rates, inflation and credit spreads. Strategies are then driven by the difference between our interpretation of market fundamentals and what has been generally priced into securities in the market. Using a disciplined investment approach, our Manager sets targets for asset allocation, duration and credit quality for each sector of the fixed-income market. This view is then carefully laid against expectations already priced into the markets in order to arrive at an investment strategy and portfolio structure.