Market Insights from the Bramshill Investments Team.

2020 September Portfolio Commentary

Posted by Bramshill Investments Team on October 16, 2020

BRAMSHILL BLOG:  From the Desk of Bramshill Investments


The Bramshill Income Performance Strategy produced a total return of -1.15% in September, putting our YTD return at +1.18%. All liquid markets experienced signif-icant volatility in September due to many conflicting headlines regarding the stimulus package and the US presidential election.

Since March, we have positioned the portfolio for spread tightening in sectors which we believe are undervalued. However, we mentioned in our April commentary that “we do not think it will be a ‘one-way train.’ " Because of our conviction with regard to our positioning, our exposures in the Income Performance Strategy remained fairly stable in September. Our largest exposure in preferred securities was unchanged at approximately 44% of the portfolio. We favor 5-year and 10-year non-call, fixed to reset preferred securities. These preferreds reset at generous spreads (Treasuries+450 to +550, not LIBOR), which in all likelihood, will be higher upon such reset dates. Our investment grade corporate exposure was stable at approximately 15% of the portfolio. Our high yield corporate exposure (most of which is in senior secured tranches of high yield capital structures) was also stable at approximately 18% of the portfolio. The high yield corporate bond market continued to experience significant defaults as the LTM default rate for US High Yield hit 6.8% last month.* Therefore, we remain cautious on adding generic high yield risk, especially at current spreads. We continue to believe it is more attractive to allocate most of the portfolio to subordinated tranches of investment grade names (such as preferred’s) which have demonstrated access to the capital markets, and are in attractive industries less exposed to the repercussions of COVID-19. In municipals, we maintained an approximate 14% position in municipal closed-end funds which remain priced at attractive yields, especially when compared to long duration investment grade corporate bonds. The current yield on the portfolio is 5.56% and the yield-to-worst is 4.50%. The portfolio has a BBB average credit rating and a duration of 3.8 years at this time. In Septem-ber, our turnover in the portfolio was extremely low as some of our positions retraced on very light volumes. As we write this commentary, many of these positions have rallied back on similar light volumes. Although recently markets have been uncertain with regard to the US presidential election and its implications, we are very constructive on our positioning given the simple fact that the Federal Reserve is buying investment grade and crossover credit.


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