The Bramshill Income Performance Strategy returned +1.46% in February, bringing year-to-date performance to +1.75%.
Fixed income markets benefited from modestly lower interest rates during the month, with long-duration assets outperforming as Treasury yields declined, and the curve bullish flattening to start the year. Credit markets remained constructive, though valuations across many spread sectors, in our opinion, continue to screen as historically tight. As we have discussed in recent commentaries and during our 1Q26 Outlook Webinar, we believe long-term Treasury yields remain attractive at current levels, particularly given real yields that are still elevated relative to long-run inflation expectations. Technical factors, including issuance dynamics, positioning among large bond managers, and demand for high-quality duration, continue to support our view that long-end yields may trend lower over time. As a result, we have maintained a moderate duration posture, which contributed meaningfully to performance during February. This positioning remains atypical for the firm, but we believe the current environment justifies a greater emphasis on rate risk over credit risk. In February, we reduced our high yield allocation from 12% to 4%. The leveraged loan market has been under pressure for the past few months, and this divergence recently caused high yield corporate spreads to hit multi-year tights when compared to loan spreads, thus confirming our decision to decrease HY exposure. We increased our largest allocation to high-quality investment grade corporate bonds from 43% to 47% of the portfolio. Within this allocation, we continue to favor two subsectors that we believe offer compelling risk-adjusted returns. First, we maintain exposure to low-dollar-price, long-duration IG bonds, which provide above-average carry and positive optionality in a rate rally. Second, we continue to favor junior subordinated utility bonds with fixed-to-reset structures and coupon floors. These securities are typically investment grade rated yet offer yields comparable to or exceeding BB-rated high yield, while providing structural protection in both rising and falling rate environments. One such new issue which we purchased this month was ES 6.30%. We added to our positions in CG and KKR junior subordinated bonds which were pressured when the companies' equities sold off. We also added to short duration BAC bonds which traded slightly wide for the structure. While we remain cautious on credit spreads, we believe targeted exposure in investment grade corporates can enhance income without materially increasing portfolio risk. We continue to maintain an approximate 20% allocation to long-duration U.S. Treasuries, which offer attractive income, convexity, and total return potential should yields decline further. In preferred securities, we maintained an allocation of approximately 14%, with an emphasis on fixed-to-reset structures that provide resilience across rate scenarios. We reduced our positions in AGNC and NLY PFDs. We added slightly to our C PFD positions. We reduced our municipal bond allocation from approximately 2% to 1% as we monetized some of the strong rally in municipal CEFs. Our cash plus short-term treasury position increased from approximately 9% to 14% of the portfolio. Overall, the portfolio remains positioned to benefit from declining yields while maintaining a conservative credit profile. We continue to believe that as inflation moderates toward the Fed’s target and fiscal dynamics evolve where long-duration fixed income offers an attractive balance of income and potential capital appreciation.
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.