Market Insights from the Bramshill Investments Team.

2018 August Portfolio Commentary

Posted by Bramshill Investments Team on September 20, 2018

BRAMSHILL BLOG:  From the Desk of Art DeGaetano

The Bramshill Income Performance Strategy returned +0.32% for the month of August, putting YTD returns at 3.06% (net of fees).  We believe the current positive economic outlook is favorable for risk assets.  Therefore, we continue to take credit risk over rate risk at this point in the cycle.

Our view has allowed us to significantly outperform in this challenging environment for fixed income.  We have maintained 43% of our portfolio in fixed-to-float preferred securities which have performed very well so far this year with stable income at attractive yields and minimal price volatility.  In August, we deployed 6% of our portfolio out of our short-term Treasury/cash allocation into attractive credit opportunities.  Among such investments, most of this allocation went toward short duration investment grade corporate bonds which have started to become attractive relative to other segments of US fixed income.  We increased this sector allocation from 2% to 7% of the portfolio.  Our high yield exposure remained stable at 13% of the portfolio, mainly in two loan closed-end funds, trading at what we see as attractive discounts to NAV. The average credit rating of the portfolio is BBB+.  We slightly increased our allocation to municipal CEF’s (5% of portfolio) which have cheapened quite a bit this year.  Interest rates moved slightly lower on the month, with 10-year US Treasuries trading in a tight 10bp range.  The duration of our portfolio is -0.38 years, which will continue to insulate the portfolio from expected increased rate volatility in the coming months.  The portfolio’s current yield during the month moved up to 4.33%, and the yield to worst is now 3.70%.   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 2018. We have tried to accomplish this by selecting credits and industries that should benefit in the event of a rise in rates.  Our allocation to short term US Treasuries now stands at 23% of the portfolio.  As our investors know, our core investments are generated from our “bullpen” list of credits which we have researched and monitor real-time.  As fixed income markets continue to cheapen, a number of these securities are beginning to look attractive and could warrant starting positions in our portfolio.

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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 a solicitation of an offer to buy securities or the rendering of personalized investment advice. Stated performance is reflective of realized/unrealized capital gains/losses and investment income achieve in composite accounts, net of investment management fees and expenses for trading, custody and fund maintenance (where applicable). Returns reflect the reinvestment of dividends and other such distributions and performance for January 2009 through April 2012 depicts actual returns generated by the strategy while managed by the Firm’s Chief Investment Officer at an unaffiliated investment firm. All information is accurate as of the date of publication and is subject to change without notice.

Topics: From the Desk of Art DeGaetano, Commentary