During August, the Bramshill Income Performance Strategy returned +0.46%, bringing year-to-date performance to -0.30%.
Long-term Treasury yields pushed to multi-decade highs during the month, before Treasury Secretary Bessent's announcement of a buyback program targeting certain outstanding long bonds helped stabilize the long end into month-end. Credit spreads also widened across several pockets of the market — most notably in preferred securities, which reached their widest levels in several years, and in high-quality technology issuers, where elevated debt issuance pressured valuations even as the broader investment grade index remained near multi-year tights. Against this backdrop, we saw attractive entry points to add high-quality duration and credit exposure at cheaper valuations. Within investment grade credit, we meaningfully increased exposure from approximately 49% to 53% of the portfolio. We added a low-dollar-price, long-duration basket of high-quality technology issuers, which we found attractive as spreads on these names widened to levels we estimate reflect approximately 90% cheapness relative to their own history, even as the broader IG index continues to trade tight. We also added a new junior subordinated utility bond issued by ETR, which features a 6.5% coupon floor and a reset-spread feature, protecting investors against both rising or falling rates. We also added to existing baby bond positions that were pulled lower alongside the broader preferred index. In preferred securities, we increased our allocation from approximately 12% to 13% of the portfolio, adding to long-duration fixed-rate preferreds — primarily through an ETF along with select individual names such as MS — as the asset class reached yields of approximately 7.25% and spreads of approximately +210, both the widest levels we have seen in several years. We maintained our high yield corporate exposure at approximately 3% of the Strategy, unchanged across a small number of positions. Our long-duration U.S. Treasury allocation remained stable at approximately 20% of the portfolio; within this allocation, we sold on-the-run 30-year bonds and replaced them with 25-year issues offering approximately 11 basis points of additional yield for five years less duration, trading at a price below $50 — bonds that were subsequently included among those targeted for buyback in the Treasury's subsequent announcement. Municipal exposure remained unchanged at approximately 1% of the portfolio, held in a single closed-end fund. Cash and short-term Treasury balances decreased from approximately 16% to 11% of the portfolio as we deployed approximately 5% of the Strategy into very attractive opportunities. Looking ahead, we believe the recent widening in credit spreads across select sub-sectors, and backup in long-term yields have created some of the most attractive entry points we have seen in several years across preferred securities and select investment grade credit, and we remain focused on deploying capital into high conviction opportunities while maintaining a disciplined, risk-aware approach to income generation, liquidity, and downside protection.
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.