BRAMSHILL BLOG:  From the Desk of Bramshill Investments

The Bramshill Income Performance Strategy produced a total return of +0.65% in June, putting our YTD returns at +1.58%. All liquid markets experienced significant volatility in June due to many conflicting economic headlines regarding the trajectory of the US economy and their impact on the Federal Reserve. 

Particularly, volatility in the treasury market was a result of speculation that a more likely Trump victory in the US Presidential election could lead to more inflationary policies. However, even in the wake of such volatility, we have not wavered in our opinion that the US economy is decelerating, consumer spending is waning and employment trends are not favorable. Thus, we have maintained a longer duration bias in the portfolio than in recent years, as we believe rates will gravitate lower this year. We made very few asset allocation changes to the portfolio in June and we allowed our liquidity position to grow. Our largest allocation remains in investment grade corporate bonds at approximately 33% of the portfolio. The only meaningful change was that we continued adding to a new position in D 6.875% '55 junior subordinated bonds. This bond is nc5 fixed-to-reset, however comes with a unique feature of a coupon floor which protects the investor in a situation of rising and falling rates. Our allocation to preferred securities decreased slightly to 27% of the portfolio as our position in WFC 5.9% PFD was called away. This position returned approximately 7% annualized for the past year. In high yield corporates, we maintained an approximate 12% position as we added slightly to our ET 8% ’54 position and reduced slightly our HY CEF position. There was no major change to our municipal CEF exposure which remains approximately 2% of the portfolio, as we reduced our position in 1 municipal CEF, but still hold 2 more liquid CEFs which we find relatively attractive. Our treasury allocation is approximately 24% of the Strategy, with 12% allocated to long duration treasuries and the balance in short-term treasuries. We maintained our long treasury exposure because we believe rates will rally in the weeks and months ahead based on softer economic data. The YTM on the portfolio is 6.65% and the YTW is 5.96%. The portfolio has a BBB+ average credit rating and a duration of 5.03 years at this time. This is an advantageous time for the Strategy when rate volatility is likely to decrease and spreads are likely to be rangebound, which should translate into an attractive total return potential for the Strategy this year.