Market Insights from the Bramshill Investments Team.

2020 July Portfolio Commentary

Posted by Bramshill Investments Team on August 12, 2020

BRAMSHILL BLOG:  From the Desk of Bramshill Investments


The Bramshill Income Performance Strategy produced a total return of +3.22% in July and has returned +0.94% YTD. During July, the credit markets showed signs of recovery and our portfolio exhibited substantial performance. On the month, the Bloomberg Barclays US Aggregate Index gained +1.12%; the Bloomberg Barclays US Corporate Index gained +2.89%; and the Bloomberg Barclays US High Yield Index gained +3.93%.

If you recall in early 2020, we were cautiously awaiting an oppor-tunity in the credit markets as valuations were not attractive at that time. While we did not anticipate such extreme volatility in March, our portfolio was positioned defensively because of our risk-reward discipline. Since March, we have reduced our cash/ST US Treasury position from approximately 46% to 9% of the portfolio. As discussed in our most recent quarterly letter, the portfolio benefited from a strategic shift in our asset class mix (the 6th shift in 11 years) during late March. It was during this time that we began to take advantage of what we believe to be a significant opportunity in credit by allocating to securities with attractive spreads. Our team has assessed many credits over the past few months with the following dynamics: low default risk, high recovery rates, proven business models and substantial liquidity. We do not favor generic credit risk as we anticipate a significant number of defaults in certain sectors such as energy, restaurants and retail. However, we have found many intriguing opportunities with excellent risk-reward dynamics that have begun to recover and continue to have substantial upside. During July, we increased our preferred exposure from 41% to 43% as we added FITB 4.5% PFD to the portfolio. We increased our HY exposure from 15% to 17% as we added an-other senior secured bond (X 12% ‘25) with a reasonable LTV to our portfolio. We modestly reduced our IG corporate exposure from 19% to approximately 17% of the portfolio. We also increased our exposure to municipal closed end funds from 10% to 14% of the portfolio as these funds are currently trading at attractive discounts to NAV with yields over +100bps behind BBB-rated corporate bonds. The duration of our portfolio decreased slightly to 3.97 years. Because the Fed has indicated a willingness to “peg” yields, we are generally complacent about interest rate risk at this time. Our portfolio has very attractive yield characteristics (5.48% current yield, 4.45% YTW) with significant potential for further principal gains in the months ahead. In the coming weeks, we will continue to cautiously redeploy capital in the credit markets as we see compelling opportunities.


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