TCPNX Commentary – Q2 2020
Thesis
TCPNX is a smaller fund that does not have as many assets under management compared to our other core mangers, enabling them to make more nimble and tactical decisions. By making small allocations to undervalued “riskier” asset classes (high-yield and non-dollar denominated debt), TCPNX diversifies our fixed income portfolio and generates superior returns to the benchmark (Barclays U.S. AGG). We like that the fund utilizes a bottom-up investment process through proprietary framework analysis, fundamental security review, and portfolio risk management.
[more]
Overview
In the second quarter of 2020, TCPNX outperformed the benchmark (Barclays U.S. AGG) by 61bps. The overweight to spread sectors were the largest contributor to performance. Allocation to other asset classes such as securitized credit also helped performance, while a neutral weight to credit relative to the index did not help relative performance much. Overall, the fund tends to invest in higher quality assets which were a headwind for this quarter, while low-rated, highly volatile bonds were stronger performers.
Q2 2020 Summary
– TCPNX returned 3.51%, while the U.S. AGG returned 2.90%
– Quarter-end effective duration for TCPNX was 5.80 and 6.04 for the U.S. AGG
– Three largest contributors
o U.S. Small Business Administration DCPC, Structure Settlements, and High Yield bonds
– The top detractors
o Airline Enhanced Equipment Trust Certificates, U.S. Treasury STRIPS, and long duration Multi-Family CMOs
Optimistic Outlook
– We continue to hold this fund and believe in our thesis due to the fund’s consistent and defensive approach that we expect to generate alpha through times of low volatility
– The fund believes that Fed involvement will keep the economy and market afloat and positive, yet if this support fades then the future could be very volatile
– TCPNX is focusing on increasing quality names – recently exited oil and exploration companies
[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