During the quarter, the iMGP Dolan McEniry Corporate Bond Fund had a return of +1.52% versus the Bloomberg U.S. Intermediate Credit benchmark return of +2.47%.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the funds may be lower or higher than the performance quoted. Short term performance is not a good indication of the fund’s future performance and should not be the sole basis for investing in the fund.To obtain standardized performance of the funds, and performance as of the most recently completed calendar month, please visit www.imgpfunds.com. There are contractual fee waivers in effect through 4/30/2024. In the absence of such waivers, total return would be reduced.
During the first quarter of 2023, positive returns were seen in many fixed income and equity markets despite dramatic volatility. The market volatility was sparked by the second largest bank failure in U.S. history that led to concerns about the industry as a whole, specifically regional banks. As a result, interest rate volatility was the highest it’s been in 15 years as the market contemplated how the Federal Reserve will balance persistent inflation versus financial stability.
Despite concerns about the banking sector, the Federal Reserve raised the Federal Funds Rate +0.25% during the quarter to a range of 4.75%-5.00%. The Federal Reserve has increased the Federal Funds rate by 4.75% in a little over a year. As a result, yields are the highest they have been in over a decade.
During the quarter, treasury rates decreased, and the curve remained inverted as the 10-year U.S. Treasury yield decreased from 3.88% to 3.47%, the 5-year yield decreased from 4.01% to 3.58% and the 2 year yield decreased from 4.43% to 4.03%.
Per Bloomberg data, spreads of corporate investment grade bonds widened 8 basis points during the quarter to an average option adjusted spread (“OAS”) of +138 basis points. The OAS of the Bloomberg Corporate High Yield Index tightened 14 basis points to +455 basis points at quarter end.
On a relative basis, the iMGP Dolan McEniry Corporate Bond Fund underperformed the Bloomberg U.S. Credit Intermediate Index by 95 basis points. The Fund’s underperformance was driven by security selection in the corporate investment grade and high yield sectors. The yield curve positioning and duration had a minimal effect on relative performance versus the benchmark.
Outlook and Strategy
Dolan McEniry believes that the Fund is well positioned to provide reasonable absolute and relative returns. Dolan McEniry’s core competence is credit analysis, and we focus on a company’s ability to generate generous amounts of free cash flow over time in relation to its indebtedness. Investment safety and risk mitigation are of primary importance as we continue to search for undervalued fixed income securities. As of March 31st, the iMGP Dolan McEniry Corporate Bond Fund had a +64-basis point yield premium and similar duration versus the Bloomberg U.S Intermediate Credit. We believe these stats will allow the portfolio to perform well versus the benchmarks over time.
Performance and Stats
|Performance||iM Dolan McEniry Corporate Bond Fund||Bloomberg U.S. Intermediate Credit|
|1st Quarter 2023||+1.52%||+2.47%|
|Year to Date||+1.52%||+2.47%|
|3/31/23 Stats||iM Dolan McEniry Corporate Bond Fund||Bloomberg U.S. Intermediate Credit|
|Yield to Worst||5.60%||4.96%|
|Yield to Maturity||5.61%||4.96%|
|Effective Duration||3.49 years||4.06 years|
Yield Curve and Duration: The yield curve positioning and duration had a minimal effect on the performance versus the benchmark.
During the quarter, the iMGP Dolan McEniry Corporate Bond Fund underperformed the Bloomberg U.S. Credit Intermediate Index by 95 basis points. The Fund’s underperformance was driven by security selection in the corporate investment grade and high yield sectors.
|Top Performers||Bottom Performers|
|Qurate Retail Inc.||DaVita Inc.|
|Tegna Inc.||Bloomin Brands Inc.|
|Olin Corp.||Warner Bros Discovery Inc.|