MWTIX Commentary – Q2 2020
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.
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Overview
In the second quarter of 2020, MWTIX outperformed the benchmark (Barclays U.S. AGG) by 117bps. This outperformance was largely due to strong sector positioning and opportunistic repositioning. The relatively suppressed Treasury rates had little impact on performance, while an overweight to long-duration corporate credit carried returns through the second quarter. The small allocation to high-yield and EM debt also contributed to performance. Weights to securitized debt and TIPS also helped the fund outperform its benchmark for the quarter.
Q2 2020 Summary
– MWTIX returned 4.07%, while the U.S. AGG returned 2.90%
– Quarter-end effective duration for MWTIX was 5.4 and 6.04 for the U.S. AGG
– With much uncertainty in the future the fund will continue to seek attractive entry points to add exposures to high quality sectors that are resilient and can benefit from Fed action
o Decrease to corporate credit – long-dated high-quality focus
o Limited exposure to high yield – swelling of downgrades
o Trimming MBS
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 uncertain of what may come
o Increased debt and industry disruptions will prevent a quick economic recovery
o Stimulus and re-opening trends may help increase economic growth
– 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