During the fourth quarter, the iMGP Dolan McEniry Corporate Bond Fund had a return of 5.88% versus the Bloomberg U.S. Intermediate Credit benchmark return of 5.60%.
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.
Market Review
During the fourth quarter, strong returns were seen across the fixed-income and equity markets. Markets began pricing in interest-rate cuts in 2024 as economic data began to soften and inflation showed further signs of easing. Despite the soft landing currently priced into markets, Dolan McEniry continues to be vigilant in monitoring downside risks and investing in healthy, creditworthy companies.
The Federal Reserve maintained the Federal Funds benchmark rate between 5.25% and 5.50%. The Federal Reserve views the current rate as adequately restrictive but is prepared to raise rates further should inflation begin increasing again.
During the quarter, Treasury rates decreased, and the curve remained inverted as the 10-year U.S. Treasury yield decreased from 4.57% to 3.88%, the 5-year yield decreased from 4.61% to 3.85% and the 2-year yield decreased from 5.05% to 4.25%.
Per Bloomberg data, spreads of corporate investment grade bonds tightened 22 basis points during the quarter to an average option adjusted spread (“OAS”) of +99 basis points. The OAS of the Bloomberg Corporate High Yield Index tightened 71 basis points to +323 basis points at quarter end.
On a relative basis, the iMGP Dolan McEniry Corporate Bond Fund outperformed the Bloomberg U.S. Credit Intermediate Index by 17 basis points. The Fund’s outperformance was driven by the Fund’s overexposure to, and outperformance in both 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 client portfolios are positioned to provide reasonable absolute and relative returns going forward. Dolan McEniry’s core competence is credit analysis, and they focus on a company’s ability to generate generous amounts of free cash flow over time in relation to its indebtedness. Investment prudence and risk mitigation are of primary importance as they continue to search for undervalued fixed income securities. As of December 31, the iMGP Dolan McEniry Corporate Bond Fund had an +48 basis point yield premium and similar duration versus the Bloomberg U.S Intermediate Credit. Dolan McEniry believes 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 |
December 2023 | +2.71% | +2.73% |
4th Quarter 2023 | +5.87% | +5.60% |
Year to Date | +7.37% | +6.94% |
12/31/23 Stats | iM Dolan McEniry Corporate Bond Fund | Bloomberg U.S. Intermediate Credit |
Yield to Worst | 5.37% | 4.89% |
Yield to Maturity | 5.38% | 4.89% |
Effective Duration | 3.33 years | 3.94 years |
Average Coupon | 4.10% | 3.66% |
Attribution Commentary
Yield Curve and Duration: The yield curve positioning and duration had a minimal effect on the performance versus the benchmark.
Commentary:
During the quarter, the iMGP Dolan McEniry Corporate Bond Fund outperformed the Bloomberg U.S. Credit Intermediate Index by 17 basis points. The Fund’s outperformance was driven by the Fund’s overexposure to and outperformance in both the corporate investment grade and high yield sectors.
Security Selection
Top Performers | Bottom Performers |
Qurate Retail Inc. | U.S. Treasuries |
Dick’s Sporting Goods Inc. | Western Digital Corp. |
Sirius XM Holdings Inc. | Zimmer Biomet Inc. |