Market Insights from the Bramshill Investments Team.

2023 July Portfolio Commentary

Posted by Bramshill Investments Team on August 11, 2023

BRAMSHILL BLOG:  From the Desk of Bramshill Investments

Logo BlueJuly was a solid month for the Bramshill Income Performance Strategy which returned +1.09% on the month and has now returned +3.11% YTD. In July, we maintained a conservative position both in terms of credit and rate risk. Our duration on the Strategy has remained moderate at approximately 2.4 years. 

This is because the treasury market, with a severely inverted yield curve, has seemed at odds with most risk markets which have been largely rallying and embracing a soft landing economic scenario. While the Fed seems to be nearing the end of its tightening cycle, there has been little incentive to take duration for most of this year. Thus, we have chosen to collect very attractive yields on the Strategy (currently 6.62% YTM and 6.36% YTW) with short duration characteristics until the treasury curve “normalizes”. In late July, the curve began to “disinvert” by bearish steepening. We will closely watch these developments in the weeks and months ahead. In July, our preferred allocation increased modestly to approximately 29% of the Strategy. We added a new position in AXP 3.55% PFD trading at approximately $83.50, which yields 9.9% to ’26 call or the coupon will reset after the call date to T5+285. We also added new position in WFC 5.9% PFD at approximately $98.75 yielding 7.5% to ’24 call. This preferred will reset to a fixed rate of 9.01% if not called after 2024. Additionally, we added to an existing position in C 7.375% PFD which we have highlighted in previous commentary. We moderately decreased our investment grade corporate allocation to 13% of the Strategy as we pared our exposure in an AT&T baby bond and one utility credit both of which were trading fairly tight in spread and yield. We maintained a stable allocation of approximately 8.5% to municipal CEFs, which are currently still attractive as they are trading at 12-14% discounts to NAV. However, our caution in this market is related to the interest rate risk inherent in such positions (highlighted above). Our enthusiasm for municipal CEFs will likely increase once we become more comfortable with duration. Our high yield corporate exposure remains approximately 8% of our portfolio as the spread on the high yield index of +425 over the treasury curve is unattractive in our opinion. Our short-term treasury allocation stands at approximately 40% of the Strategy and yields approximately 5.4% at this time. We expect to re-invest our liquidity during such times of dislocation and volatility. You should expect us to allocate portions of this liquidity in the coming months as we have in past disruptive periods.

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