BRAMSHILL BLOG:  From the Desk of Bramshill Investments

April was a challenging month in liquid markets. For the month, our portfolio produced a total return of -0.72%, putting our YTD returns at +1.05%. Most risk assets suffered a shock on “Liberation Day”, April 2nd, the day on which the Trump administration announced significant tariffs on imports to the US.

This year we have consistently highlighted the risk that tight credit spreads were not compensating investors for potential volatility. Capital preservation and risk management is an over-arching theme within our Firm and within this Strategy. As a result, we have largely avoided high yield corporates (currently less than 3% of our position) because we believed that credit spreads were not compensating investors for the equity correlation within that asset class. In early April, high yield corporate spreads widened to approximately +475bps (from +275bps in January). During this spread widening, we put about 5 % of capital to work across HY, PFD, MUNI, and IG while moderately decreasing our Treasury exposure. However, with a large snap back towards the end of the month, we quickly monetized most of this allocation across credit and thus raised our exposure to dry powder. In preferred securities, we have also chosen to take very little spread duration exposure as the average duration of our preferred allocation (currently 18%, down from 24% in January) is approximately 3 years. In early April, PFF the benchmark preferred ETF was down as much as -6% YTD. Fortunately, our preferred exposure only experienced a very shallow and brief drawdown and held up extremely well during such market volatility. In April, we also reduced our investment grade corporate exposure from 40% to 37% of the Strategy as we sold some of our short duration front end corporates to increase liquidity. Finally, we reduced our long duration treasury exposure from approximately 24% to 20%. While we still have conviction with this position, prudent risk management warranted a lower allocation at this time. As a result of these shifts, we have increased our allocation to short-term treasuries and cash from 11% to 19% as a liquidity buffer while the credit markets are in the process of correcting. The combination of our short-dated investment grade corporate allocation plus our short-term treasuries and cash now total approximately 33% of the Strategy. While we believe the tariffs are a focus of the headlines, we believe the slowdown in the US economy which we highlighted back in early January has been accelerated by the uncertainty of policy for both businesses and consumers. We still believe the Fed will likely cut 2 to 3 times in 2H25. We believe this will be the result of the economy significantly slowing, and thus beneficial for longer duration high quality US fixed income.