Market Insights from the Bramshill Investments Team.

2020 May Portfolio Commentary

Posted by Bramshill Investments Team on June 15, 2020

BRAMSHILL BLOG:  From the Desk of Bramshill Investments


The Bramshill Income Performance Strategy returned +1.58% net in May and has returned -2.68% YTD.   In the past two months, the portfolio has recovered substan-tially and benefitted from an opportunistic rotation in early April out of cash/ST US Treasuries into investment grade corporate bonds, 1st lien high yield corporate bonds and preferred securities.   Historic Federal Reserve’s announcements in late March restored liquidity in the credit markets.  This has been a linchpin for allowing companies to access the capital markets.

We have been more active in the new issue calendar because many companies issued debt with better covenants and greater discounts to secondary levels than we have seen in years. Since March, we reduced our cash/ST US Treasury position from approximately 46% to 24% of the portfolio.  In the past two months, we increased our investment grade corporate exposure from approximately 11% to 21% of the portfolio.  A  portion of this invest-ment grade corporate allocation has gone to names which we believe are attractively priced, less cyclical and will likely generate some principal gains in addition to yield in the months ahead.  The other portion of our investment grade corporate allocation is allocated to short-dated bonds with very little credit risk and minimal expected price volatility, intended to simply increase yield and carry on the liquidity portion of our portfolio.  We increased our high yield corporate exposure from 8% to 12% of the portfolio.  We do not favor generic high yield risk as there will be significant defaults in that market in certain sectors affected by the pandemic.  We are selecting high yield names which are senior in the capital structure and less susceptible to prolonged economic downturns.  Many of our newer high yield positions are secured tranches of recent new issues which came to market at opportune prices and yields for investors.  We increased our preferred exposure from 30% to 38% of the portfolio.  Because we are less concerned with interest rate risk than in prior years, we have rotated most of our preferred exposure from structures that float off LIBOR to structures which are fixed for several years and then reset to a spread off of treasuries.  Our allocation to the municipal bond sector remained stable at approximately 5% of the portfolio, as we only saw certain value in a few closed end funds in that sector.  Our portfolio duration moved up slightly in the month to 3.55 years. The current yield on our portfolio is 5.01%, with a yield-to-worst of 4.14%. Overall, the credit markets have some of the greatest potential for total return than we have seen in many years.  While defaults for troubled borrowers will be on the rise, there are ample opportunities to deploy capital into stable credits with very attractive yield characteristics and price appreciation.  We will continue to do our analysis and deploy capital judiciously.


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