Market Insights from the Bramshill Investments Team.

2017 April Portfolio Commentary

Posted by Arthur DeGaetano on May 16, 2017

BRAMSHILL BLOG:  From the Desk of Art DeGaetano

Market Insights from Bramshill Investments: The Bramshill Income Performance Strategy was +26 bps in April and its YTD return is now up +2.26% (net of fees). Interest rates moved slightly lower in April, yet traded in a volatile 23 bp range during this time period. 

We believe the current positive economic outlook is favorable for risk assets. Therefore, we would rather take credit risk than rate risk at this point in the cycle. In April, we deployed over 20% of our portfolio out of our short-term Treasury/cash allocation into attractive credit opportunities.

Among such investments, most of the allocation went toward various preferreds and we marginally added to closed end funds. In preferreds, we allocated to five energy names with solid credit metrics at what we believe to be attractive entry points. In credit, we added to our two loan closed-end funds and initiated positions in two additional high yield closed-end funds, trading at what we see as attractive discounts to NAV (total loan and high yield exposure ended the month at 15%). The average credit rating of the portfolio remains investment grade, as it has since inception.

The team at Bramshill Investments maintained a significant underweight in municipals due to their current high interest rate sensitivity and relatively low yields in that sector. The duration of our portfolio is 2.3 years, which will continue to insulate the portfolio from rate volatility. The portfolio’s current yield during the month moved up from 4.14% to 4.73%.

Due to the high credit quality and low duration of our portfolio, we have been able to collect predictable income while not being impacted by the rate volatility seen thus far in 2017. We intend to continue our positioning of the portfolio in a way that we believe will produce income and consistent total returns in both stable and increasing rate environments. We have tried to accomplish this by selecting credits and industries that should benefit in the event of a rise in rates and whose structures can withstand higher rates through a combination of low duration and high current yield. This conservative portfolio construction also gives us the flexibility to deploy capital when the risk-reward opportunities in fixed income are more favorable.

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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.

Topics: From the Desk of Art DeGaetano, Commentary