Market Insights from the Bramshill Investments Team.

2019 February Portfolio Commentary

Posted by Bramshill Investments Team on March 14, 2019

BRAMSHILL BLOG:  From the Desk of Art DeGaetano

The Bramshill Income Performance Strategy returned +1.27% net in February, contributing to a +5.09% YTD net total return. In 2019, the portfolio has benefitted from the opportunistic rotation late last year out of cash/ST US Treasuries into preferreds, credit, and municipal closed end funds. There were very few adjustments made to the portfolio in the past month. We favor credit risk over rate risk because the US economy has demonstrated consistent strength even in the face of potential trade wars and emerging market uncertainty.

Additionally, with the Fed on hold for the near term, it should be a constructive environment for credit spreads. Our largest sector allocation remains in preferred securities which represent approximately 44% of the portfolio. We are positioned primarily in fixed to float preferreds with limited durations. Although we have seen US financial institutions report reduced earnings in 2019, their balance sheets and credit quality remain robust. We are confident about the safety of the coupons on these securities. We still have high conviction in our municipal closed end fund allocation with an approximate 11% position at this time.

If you recall, we allocated to this asset class in recent months when these funds approached the largest discounts to NAV in the past 10 years. Recent performance has been strong in these funds, but we believe substantial upside remains. In particular, these funds will benefit from net inflows into municipal bonds which, during the first 8 weeks of the year, have been the highest in more than a decade. Our high yield bond exposure remains stable at 8.5% as that asset class has almost fully recovered from the drawdown experienced in 4Q18. We reduced our investment grade corporate bond exposure slightly to approximately 9% of the portfolio as one position in SWK FRN’s was called. Our cash/ST US Treasury position now represents 19% of our portfolio. Our portfolio duration moved up slightly from 0.7years to 0.9 years. The current yield on our portfolio is 4.76%, with a yield-to-worst of 4.40%. Overall, we are constructive on risk and looking for further opportunities to deploy capital into stable credits with attractive yield characteristics.



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: Commentary