BRAMSHILL BLOG: From the Desk of Art DeGaetano
Market Insights from Bramshill Investments: The fixed income markets experienced significant volatility in September. For most of 2016, we have highlighted interest rate risk as the biggest threat to principal loss.
Our portfolio held up fairly well on the month when 10-year Treasury yields traded in a 20bp range. Our portfolio produced a total return of -.17% putting our YTD returns at +6.98%. During the month, we maintained our defensive position of the past few months and made very few asset allocation changes to the portfolio. In addition to our concerns about interest rates, we have been focused on some of the macro issues like the US presidential election, a potential Fed rate hike and the pending Italian referendum on the banking system. Additionally, we have been waiting for more favorable entry points for risk. We have our lowest allocation to municipals since inception at 2.14%, as investors are not being paid for the duration risk in that market. We moved our preferred allocation from 17% to 15% on the month. Most of our investments in preferreds are concentrated in short callable structures with little interest rate sensitivity. We reduced our high yield exposure from 19% to 15% on the month by exiting Lennar 4.75% ’21. The majority of our high yield exposure is allocated to two closed end FRN senior loan funds which are attractive from both a yield and discount to NAV basis. Overall our portfolio duration decreased to 1.6 years, our shortest duration since inception. We are closely monitoring inflation measures as the economy remains resilient and unemployment reaches full status. We are very conscious of interest rates tailing, as happened during the summer of 2013, which could weigh upon all asset classes. We will likely stagger our entry points for risk in all fixed income over the next couple months.
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This commentary is provided by Bramshill Investments, LLC for information purposes only and may contain information that is not suitable for all investors. Certain views and opinions expressed herein are forward-looking and may not come to pass. Investing involves risk, including the potential loss of principal. Past performance may not be indicative of future results, which are subject to various market and economic factors. No statement is to be construed as an offer to sell or solicitation to buy securities or the rendering of personalized investment advice.