Market Insights from the Bramshill Investments Team.

2023 February Portfolio Commentary

Posted by Bramshill Investments Team on March 21, 2023

BRAMSHILL BLOG:  From the Desk of Bramshill Investments

Logo BlueIn February, 10-year US treasury yields spiked +42bps and the Bloomberg US Aggregate Index returned -2.59% on the month.  The Bramshill Income Performance Strategy returned -0.83% on the month, putting our YTD return at +2.07%. 

 If you recall, we maintained caution around interest rate risk even in the midst of a swift January rally when many were calling for the end of Fed rate hikes. The Fed seems poised to continue its restrictive policies until the economy shows signs of a meaningful slowdown and inflation subsides.  We maintained a defensive stance during the month. While our allocation to cash + short-term Treasuries decreased from 39% to 37% of the portfolio, this position continues to buffer the portfolio from volatility while allowing our investment team to deploy capital into less liquid markets.  In February, our preferred allocation remained stable at approximately 30% of the portfolio, as we sold our position in a PFD CEF into the rally and replaced that allocation with a position in C 5% PFD, yielding approximately 8% to a 2024 call, or if not called, will float at SOFR +381, currently an 8.36% coupon.  We still maintain most of our PFD exposure in fixed-reset PFD structures which we highlighted in our Bramshill Monthly Insights published earlier this month.  Our high yield corporate allocation increased to approximately 8% of the portfolio as we added a position in secured NLSN 9.29% ‘ 29 (yielding approximately 9.5%).  Our municipal allocation remained stable at approximately 7% of the portfolio. Our investment grade corporate allocation was stable at approximately 17% of the portfolio.  While the YTW on the Strategy is 5.90% (YTM 6.33%) as of the end of February, the yield to maturity on the invested capital in the Strategy outside of short-term treasuries is 7.24%.  Our portfolio duration is 2.55 years and the portfolio's average credit quality continues to be single A. We highly favor the yield and duration dynamics of our portfolio over the yield and duration indices like the Bloomberg US Aggregate Index 4.81% yield; 6.3yr duration) and we think there is risk in such passive allocations. We believe recent fixed income volatility has created more opportunities, and therefore, greater return potential for our Bramshill Income Performance Strategy than we have seen over the past year.


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