During the second quarter, the iM Dolan McEniry Corporate Bond Fund had a loss of 4.74% versus the Bloomberg U.S. Intermediate Credit benchmark decline of 3.63%.
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 4/30/2023. In the absence of such waivers, total return would be reduced.
During the second quarter, volatility and negative returns were seen in many equity and fixed income markets. After months of angst over inflation, corporate earnings, and geopolitical concerns, the market sold off further in June over fears higher interest rates could weigh on growth and economic activity.
As expected, the Federal Reserve increased the Federal Funds rate to 1.75% from 1.00% in June. Despite the uncertainty, credit quality remains strong, and yields are substantially higher than they were at the start of the year. Dolan McEniry will continue to monitor markets for any opportunities that may arise.
During the quarter, the treasury remained flat as the 10-year U.S. Treasury yield increased from 2.34% to 3.02%, the 5-year yield increased from 2.46% to 3.04% and the 2-year yield increased from 2.34% to 2.96%.
Per Bloomberg data, spreads of corporate investment grade bonds widened 39 basis points during the quarter to an average option adjusted spread (“OAS”) of +155 basis points. The OAS of the Bloomberg Corporate High Yield Index widened 244 basis points to +569 basis points at quarter end.
On a relative basis, the iM Dolan McEniry Corporate Bond Fund underperformed the Bloomberg U.S. Credit Intermediate Index by 111 basis points. The fund’s underperformance was driven by its relative underperformance in corporate investment grade and overexposure to high yield as opposed to government related securities. 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 June 30th, the iM Dolan McEniry Corporate Bond Fund had a +116 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.
|06/30/22 Stats||iM Dolan McEniry Corporate Bond Fund||Bloomberg U.S. Intermediate Credit|
|Yield to Worst||5.47%||4.31%|
|Yield to Maturity||5.48%||4.31%|
|Effective Duration||3.86 Years||4.21 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 iM Dolan McEniry Corporate Bond Fund underperformed the Bloomberg U.S. Credit Intermediate Index by 111 basis points. The fund’s underperformance was driven by its relative underperformance in corporate investment grade and overexposure to high yield as opposed to government related securities.
|Top Performers||Bottom Performers|
|Fortune Brands Home & Security Inc.||Qurate Retail Inc.|
|Conagra Brands Inc.||Qorvo Inc.|
|British American Tobacco plc||Transdigm Inc.|