Market Insights from the Bramshill Investments Team.

2023 January Portfolio Commentary

Posted by Bramshill Investments Team on February 21, 2023

BRAMSHILL BLOG:  From the Desk of Bramshill Investments

Logo BlueBramshill displayed the importance of an active approach to fixed income last month. In the month of January, our portfolio performed extremely well returning +2.93%, bringing YTD returns to +2.93%. Volatility has been pervasive throughout the last year due to aggressive Fed tightening and uncertain economic conditions.  

Many of our peers struggled to limit drawdowns in 2022.   We maintained a conservative approach through this challenging environment and our portfolio held up relatively well. Conversely in 2023, as the market has begun to recover, our portfolio was able to capture significant positive performance due to the structures and credit quality of our investments.  In November we stated, “Most of the liquid credit indices are screen¬ing at fair or only slightly cheap levels in our models. Nevertheless, we are finding significant compelling value in individual security selection which is the result of illiquidity in the credit markets. We believe credit differentiation will be paramount if the economy heads into recession in 2023.”  We have been building a portfolio to withstand interest rate volatility, but to capture upside in months where credit performs.  In January, we moderately increased our preferred allocation to approximately 32%.  Preferred’s rallied in January and this accounted for a large portion of our performance.  We added to our position in FITB 4.5% PFD, which trades at 7%+ YTC (coupon resets in ’25 at UST 5Y +422), an attractive structure which had lagged the rally.  Our high yield allocation now stands at approximately 6% of the portfolio as we added two new positions in high yield corporates, NCLH 8.375% secured notes which are secured by the cruise ships of Norwegian Cruise Lines and SEE 6.125% which is a BB-rated credit which has been in our bullpen for many months.  Our municipal allocation moved up slightly to 8% of the portfolio. While we kept this allocation stable, we saw it tick up moderately on market value as our purchases of municipal CEFs in late December performed well in January.   Our investment grade allocation was stable at approximately 17% of the portfolio.    Our cash plus short-term treasury allocation has been reduced to approximately 39% of the portfolio.  This has been paired from a peak of 48% last summer.  The optionality which this allocation allows in the portfolio will continue to enable our team to build new positions line by line as they reach our price targets.  While the YTW on the Strategy is 5.60% (YTM 6.00%) as of the end of January, the yield to maturity on the invested capital in the Strategy outside of short-term treasuries is 6.89%.  One final note, our portfolio duration at this time is 2.59 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 (4.30% yield; 6.3yr duration) and we think there is risk in such passive allocations. 


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