Market Insights from the Bramshill Investments Team.

2020 November Portfolio Commentary

Posted by Bramshill Investments Team on December 10, 2020

BRAMSHILL BLOG:  From the Desk of Bramshill Investments


The Bramshill Income Performance Strategy performed well in the month of November, with a total return of +3.56% resulting in a +5.25% YTD return. Since the March selloff, the portfolio has benefitted from the opportunistic rotation out of cash/short-term US Treasuries into preferreds, credit, and closed end funds.

There were very few adjustments made to the portfolio in the past month as it has been positioned for spread tightening. The US economy has begun to demonstrate momentum even in the face of record numbers of COVID cases and political uncertainty. Further federal stimulus has been a political football with no resolution as of yet. What has been consistent is the actions of the Fed which have been accommodative and will continue to be supportive of risk markets for the near and intermediate term. This should prove to be a constructive environment for credit spreads. Our largest sector allocation remains in preferred securities which represent approximately 41% of the portfolio. This is down slightly from last month as we exited one position in HBAN 5.625% PFD. We are still positioned primarily in fixed reset structures with limited durations. One benefit to this asset class last month came from the performance of financial equities which rallied approximately 18% in November. Although we have seen US financial institutions report reduced earnings in recent quarters, their balance sheets and credit quality remain robust and they will benefit from an expected economic recovery in 2021. Our investment grade corporate exposure remained stable at 13% of the portfolio. There are very few opportunities in IG corporates at this time. Our high yield corporate exposure was reduced to 16% as we had two HY closed end funds get tendered. Both HIO and HIX tendered for 25% of their shares at 99.5% of NAV. Bramshill was the largest holder of HIO and the 4th largest holder of HIX. These funds had traded between 5-15% discounts to NAV over the past year. Because other holders did not fully tender their shares, Bramshill was able to receive the tender price for over 50% of its holdings as a result of this event. In municipals, we still have high conviction in our municipal closed end fund allocation with an approximate 14% position at this time. The nominal yields in the underlying municipal market are not attractive but the large discounts to NAV, attractive financing rates and search for yield will likely contribute to the total return of these funds in the coming months. Recent performance has been strong in these funds, but we believe substantial upside remains. Our cash/short-term US Treasury position now represents 16% of our portfolio, although we anticipate this percentage migrating lower as we approach year end. Our portfolio duration tightened slightly from 3.7years to 3.4years. The current yield on our portfolio is 4.93%, with a yield-to-worst of 3.67%, and an average credit rating of BBB. 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