During the quarter, the iMGP Dolan McEniry Corporate Bond Fund had a return of -0.63% versus the Bloomberg U.S. Intermediate Credit benchmark return of -0.92%.
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 third quarter, negative returns were seen in fixed-income and equity markets. Treasuries remained volatile as the market grapples with economic data, which will ultimately shape the Federal Reserve’s decisions, including potential additional interest-rate increases and how long interest rates must remain in restrictive territory. Inflation has continued to cool but remains elevated relative to the central bank’s target rate of 2.00%.
The Federal Reserve increased the Federal Funds Rate +0.25% to a benchmark rate between 5.25% and 5.50% in July. The Federal Reserve continues to indicate they are prepared to keep a restrictive monetary policy until inflation is firmly under control.
During the quarter, US Treasury rates increased, and the curve remained inverted as the 10-year U.S. Treasury yield increased from 3.84% to 4.57%, the 5-year yield increased from 4.16% to 4.61% and the 2-year yield increased from 4.90% to 5.05%.
Per Bloomberg data, spreads of corporate investment-grade bonds tightened 2 basis points during the quarter to an average option adjusted spread (“OAS”) of +121 basis points. The OAS of the Bloomberg Corporate High Yield Index widened 4 basis points to +394 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 29 basis points. The Fund’s outperformance was driven by security selection in the corporate investment grade sector. 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 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 September 30th, the iMGP Dolan McEniry Corporate Bond Fund had a +69 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
|9/30/23 Stats||iM Dolan McEniry Corporate Bond Fund||Bloomberg U.S. Intermediate Credit|
|Yield to Worst||6.56%||5.87%|
|Yield to Maturity||6.56%||5.87%|
|Effective Duration||3.62 years||3.94 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 outperformed the Bloomberg U.S. Credit Intermediate Index by 27 basis points. The Fund’s outperformance was driven by security selection in the corporate investment grade sector.
|Top Performers||Bottom Performers|
|Western Digital Corp.||Davita Inc.|
|U.S. Treasuries||Dick’s Sporting Goods Inc.|
|Microchip Inc.||Tempur Sealy International Inc.|