2025 December Portfolio Commentary

The Bramshill Income Performance Strategy returned -0.45% in December, resulting in a +5.00% YTD total return.

While the FOMC lowered the Fed Funds rate by 25bps at the December meeting, there are mixed opinions on the Committee about further rate cuts at future meetings. As we enter 2026, we think the Fed will continue its path of becoming less restrictive over the course of the year. While the Fed could cut two or three times later this year, we align more closely with the outlook indicated by the futures market which has them on hold in the near term. We do think the Trump administration will have some innovative policies such as their recent announcement regarding FNMA and FHLMC which will purchase up to $200 billion in mortgages. This signals the administration’s focus on reducing long-term interest rates rather than just a focus on Fed Funds. The administration has already signaled its willingness to keep long-term issuance capped as well as increasing the SLR at US banks. We believe these types of policies should have a beneficial effect on reducing the term premium. In this context, elevated real yields on longer-dated Treasuries appear attractive, offering both income and meaningful upside. Thus, we have maintained the duration in our portfolio. Spreads in high yield corporates and preferreds have remained historically tight and we are mindful of the potential for volatility and probability of loss in those asset classes. At this time, we believe credit spreads in most of our markets are overvalued. For this reason, over the course of 2025, we increased the credit quality of our portfolio. Within investment grade corporates, we increased this allocation from approximately 36% to 43% at this time. We are particularly excited about our allocation to junior subordinated utility hybrids (issued by, for example, Dominion, Southern Company and NextEra) which now represent over 10% of our 43% IG allocation. In December, we also added to a Carlyle Finance bond which we find attractive. In high yield we increased this allocation from as low as 2% in mid-2025 to approximately 10% at this time. While the overall US high yield corporate market is trading inside +265 spread, short-dated high yield corporates trade at closer to +340 spread. We have added to both a short dated ETF and a high yield closed end fund which was oversold in 4Q25. In preferreds. we reduced our preferred allocation from 24% to 14% over the course of the year. Many of our fixed reset preferreds were called last year, and we did not find compelling new issue or secondary opportunities to redeploy capital in this asset class. In December, we did add to AGNC 8.75% PFD. In municipals, we slightly increased our allocation to one closed end fund which was trading at an attractive discount to NAV and long duration municipals appear moderately attractive relative to corporates. We have maintained our approximate 20% allocation to long term treasuries as we prefer rate risk over credit risk at this time. Our cash plus short term treasury allocation was reduced from 12% to 11% of the portfolio. On January 13, 2026 we conducted our 1Q26 Outlook Webinar with commentary on positioning and performance, please find the Replay (here).