Newgate Capital Management’s Total Return Income Portfolio gained 5.3%
in 2013, well ahead of the 2% loss for the Barclays US Aggregate Bond
Index and rose an annualized 17.3% versus 4.4% for the Index for
trailing five years. Top-down active asset allocation decisions have
been the driving force behind the Portfolio’s success. Newgate’s CIO,
Avy Hirshman, believes that unconstrained, active asset allocation is a
prudent approach to fixed income investments during these uncertain
times. “Given the current macroeconomic backdrop, Treasuries, Agencies,
and investment grade corporate bonds will face headwinds,” says
Hirshman. “Stronger US and global growth, the Fed’s ongoing tapering of
bond purchases and the early signs of inflation will continue to push
yields higher in 2014.” Capital losses in standard fixed income
portfolios could be very high, particularly in terms of duration risk,
resulting in a high probability of negative returns.
The Portfolio’s dynamic approach enables it to adapt to rapidly changing
market conditions and to proactively manage risks, including duration
risk. Over the past year, “It was more important where you weren’t
invested than where you were,” says Hirshman. “And going forward, we see
much of the same.” Newgate’s unconstrained Total Return Income Portfolio
ended 2013 with 19% in cash and zero allocated to interest rate
sensitive, Treasuries, Agencies or investment grade corporate bonds.
Newgate’s largest current allocations are to the senior floating rate
loan market through discounted closed-end funds such as the Invesco
Senior Income Trust (NYSE: VVR), Nuveen Floating Rate Income Fund (NYSE:
JFR), Eaton Vance Senior Income Trust (NYSE: EVF) and the Nuveen Senior
Income Fund (NYSE: NSL) and through large liquid ETFs such as Power
Shares Senior Loan Portfolio (NYSE: BKLN).
“The key advantage of the Total Return Income Portfolio is its
unconstrained investment approach,” says Newgate Founder, Dr. Sonia
Rosenbaum. Rather than managing the Portfolio against a single
traditional fixed income benchmark, capital is tactically allocated to
the most attractive sectors worldwide, including Treasuries, Agencies,
investment grade corporate bonds, high yield, convertible bonds,
preferred shares, bank loans, mortgages, international bonds and
emerging market debt. In today’s volatile market, asset selection is
critical, and the Portfolio’s mandate provides investors with an
actively managed approach to capitalize on current opportunities. “When
we launched this Portfolio back in 1988,” says Rosenbaum, “there were
few ways to lower overall duration except for going to cash. Today, we
have many, including floating rate loans, convertible bonds and short
term credits.”
About Newgate: Newgate Capital Management LLC is an independent
investment advisor based in Greenwich, Connecticut that offers an
unconstrained, fixed income portfolio. Market commentary and performance
are available at the company’s website: www.newgatecapital.com.
Disclosure: Past performance is no guarantee of future results.
Performance may vary across accounts. Returns are calculated using a
time-weighted market value assuming reinvestment of dividends.
Performance is reported net of management fees, commissions, and other
direct expenses, but before custody charges, withholding taxes, and
other indirect expenses. Performance shown is compared to the Barclays
Capital US Aggregate Bond Index, a broad-based securities index that is
unmanaged and not subject to fees and expenses. Investments cannot be
made directly in a broad-based securities index. Any securities, sectors
and markets listed are included for illustrative purposes at the time of
publication and may not be held by accounts currently managed by
Newgate. The securities identified do not represent all of the
securities held in client accounts. It should not be assumed that any
investments identified were or will be profitable.
Copyright Business Wire 2014