The Bramshill Income Performance Strategy returned +1.76% in June, resulting in a +2.43% YTD total return. The portfolio benefitted from the additional duration which we added to the portfolio earlier this year.
Over the past six months, we have deliberately extended duration, which ultimately counters the prevailing market narrative. We believe it aligns with where value lies under current market conditions. We see Treasury policy, such as recent announcements regarding more limited supply of long treasuries, as being favorable toward bringing yields lower. Policies such as these, may prove to be more market-impactful than Federal Reserve action. While we agree that the Fed will likely cut rates, the two-year note’s current pricing already reflects much of the expected rate-cutting path. Consumer trends are weakening, and we expect softer employment, and GDP over the next year. Inflation appears contained near 2%, with AI trends likely bringing further deflationary pressure through corporate efficiency gains and potential job displacement. Geopolitical risks remain unpredictable, and while markets seem unfazed, we are staying vigilant and liquid, especially after April’s brief but severe liquidity event. While the timing of the next Fed rate cut is uncertain, we favor rate risk over deep credit risk at this time. Corporate and preferred spreads are tight. Relative value and risk-adjusted positioning always remain key to our investment process. In our opinion, credit beta is not attractive, thus, we are avoiding levered credit exposure. Instead, we favor liquidity, absolute yield, and scenario-resilient assets that can perform under various macro-outcomes. Our largest asset class allocation remains within investment grade corporate bonds. We increased this allocation from approximately 38% to 42%. We added to short duration positions in WFC, BAC, and a short IG ETF. We also added to certain long duration IG corporates when the 30-year treasury approached 5%. In preferreds, we reduced our allocation from approximately 18% to 16%, when our position in RF 5.75% PFD Fixed-Reset structure was called away. Our high yield and municipal allocations remained stable on the month at approximately 3% and 1%, respectively. Our long duration treasury exposure also remained stable at approximately 20% of the Strategy. We reduced our allocation to cash and short-term treasuries from approximately 20% to 17% as we moderately deployed this liquidity to purchase IG corporates. Fixed income is an essential allocation in our view, offering strong risk-adjusted returns which will likely include principal gains this year and uncorrelated coupon income. Given current yields and market conditions, we’re leaning positively toward our space, even as we remain selective, and scenario driven.
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.
