The Bramshill Income Performance Strategy returned +0.13% in November, resulting in a +5.48% YTD total return.
We made very few changes to the portfolio in November. This was mainly because we are comfortable with our positioning which is more favorable to rate risk and less favorable to credit risk at this time. Recent Fed communication has increasingly pointed to a more accommodative policy stance. With core inflation easing and labor market momentum softening, markets have grown more confident that the next phase of policy will involve further rate cuts, which historically supports the long end of the Treasury curve. In this context, elevated real yields on longer-dated Treasuries appear attractive, offering both income and meaningful upside should growth decelerate further or financial conditions tighten. Thus, we have maintained the duration in our portfolio. Our largest asset class allocation remains within investment grade corporate bonds which held steady at 43% of the portfolio. Within our IG book, we added slightly to our positions in OXY 4.5% ’44, VZ 6% ’65, and a long duration CG bond. If you recall, within our IG allocation, we continue to favor an approximate 10% allocation to junior subordinated utility hybrids, which have fixed coupons, and reset to a spread above treasuries at either 5-year or 10-year call dates. In preferreds, we maintained our 14% allocation, predominantly in fixed-reset structures with limited durations of approximately 3 years on average. We reduced our position in a preferred ETF and added to our position in AGNC 8.75% PFD. In high yield corporates, we maintained a 9% allocation in the Strategy. We reduced our position in SHYG ETF and added to our position in a closed end fund which is oversold at this time. We continue to have an approximate 2% allocation to municipals via a few closed end funds which screen attractive. As we have stated in prior months, long duration municipals are currently screening moderately cheap in our quantitative models and thus may warrant a further allocation in the weeks ahead. Our long duration treasury exposure remained stable at approximately 20% of the Strategy. We modestly increased our allocation to cash and short-term treasuries from approximately 11% to 12% as we want to maintain higher liquidity going into year end. As the Fed appears well positioned to guide inflation toward target without reigniting price pressures, long-duration positioning offers a compelling opportunity for capital appreciation alongside diversification benefits.
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.
