Market Insights from the Bramshill Investments Team.

2020 December Portfolio Commentary

Posted by Bramshill Investments Team on January 14, 2021

BRAMSHILL BLOG:  From the Desk of Bramshill Investments


During the last six months of 2020, Bramshill showed the importance of an active approach to fixed income. During the month of December, our portfolio performed extremely well returning +1.66%, bringing YTD net returns to +7.00%. Many fixed income strategies struggled to produce returns late in the year. Since June 30, 2020, the Bramshill Income Performance Strategy returned +8.15% while during this same period, standard bond proxies such as the Bloomberg Barclays Aggregate Bond Index returned 1.29% and the 10-year US Treasury returned +1.07%.

Our risk/reward assessment of fixed income asset classes and security selection has led us to underweight duration in our Treasury exposure and to avoid corporate bonds that are spread tightly over treasuries and are highly correlated to shifts in US Treasury duration. Therefore, investors must look to alternative avenues for yield. Strategic allocations to preferreds and closed-end funds are attractively priced overweights currently in our portfolio. Although the Income Performance Strategy allocations were relatively stable in December, our largest allocation remains to the preferred sector at approximately 40% of the portfolio. We did make an allocation shift out of HBAN 5.625% PFD and into a new issue, C 4% PFD. Investment grade corporate bonds moved down slightly to 12% of the portfolio as our position in ETR 1st lien bonds were called. Our high yield corporate exposure was also fairly stable at 16% of the portfolio. Closed-end funds were substantial performers within the portfolio in December. Our entire 14% allocation to municipals is currently in closed-end funds trading at substantial discounts to NAV and that look very attractive relative to IG corporate bonds as many of these municipal closed-end funds are higher in yield by approximately 200 basis points. One note, in December we did allow our liquidity position to grow as we became somewhat cautious ahead of the Georgia Senate run-off elections. Cash and short-term US Trea-suries now represent approximately 17% of the portfolio. Currently, our portfolio has a duration of 3.4 years, a 5.11% current yield, and a BBB average credit rating. We are constantly adding to our bullpen of targeted securities to purchase. We will keep you abreast as opportunities become apparent.
One final note, the Bramshill Income Performance Strategy just completed its 12th year of performance. One hallmark of our Strategy is that, at times, valuations warrant a dramatic shift in positioning. The sixth dramatic shift in our Strategy in 12 years took place in 2Q20 when extremely attractive valuations became apparent to our investment team and we deployed a substantial amount of capital based on such valuations. Our goal remains to provide investors with a reasonable, steady return, with controlled downside and as little correlation to equity-like risk as possible. We appreciate your support and the opportunity to employ our Strategy for many years to come.


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