MWTIX Commentary – Q4 2019
Thesis
MWTIX is an actively managed fund that provides a sector-based strategy while still maintaining fundamental research driven through issue selection. When compared to the benchmark (Barclays U.S. AGG), the holdings have similar duration and exposure, yet selection is focused around areas where other managers are not looking. Through sector rotation and active weighting, we expect MWTIX to generate alpha over time.
Overview
In the last quarter of 2019, MWTIX was in line with the benchmark (Barclays U.S. AGG). Largely due to a neutral position, duration and yield curve management had little impact to performance. Over the quarter, MWTIX benefitted from consumer non-cyclicals, communications, and finance companies on both sector allocation and issue selection. Being underweight in technology and banking corporates, as well as non-U.S. sovereign debt resulted in a drag. Lastly, issue selection in the residential MBS space decreased returns during the quarter but ended up bringing positive relative performance over the year.
Q4 2019 Summary
– MWTIX returned 0.19%, while the U.S. AGG returned 0.18%
– Year-end effective duration for MWTIX was 5.92 and 5.87 for the U.S. AGG
o Long-duration corporate bonds produced the strongest returns during all of 2019 in Fixed Income market
– Agency MBS spreads tightened in the last month of the year which helped bring positive returns
– Asset-backed securities also brought positive returns during the quarter
– Commercial MBS returns were in the negative for the fourth quarter
Optimistic Outlook
– We continue to hold this fund and believe in our thesis due to the fund’s defensive approach and minimal exposure to more vulnerable issuers and industries
– Going forward MWTIX is focusing on areas that are non-cyclical and emphasizing names with greater quality
o Quality names in the pharmaceutical, healthcare, and/or food and beverage industries
– Historically, MWTIX has displayed in line returns with a more defensive stance compared to the index
– MWTIX has positioned itself to take advantage of relatively attractive prices during times of high volatility to generate strong returns
[Category Mutual Fund Commentary]
Micah Weinstein
Research Analyst
Direct: 617.226.0032
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109