The Federal Reserve (the Fed) was able to deliver its much-telegraphed pivot to an easing cycle at the September Federal Open Market Committee (FOMC) meeting after having left Fed Funds unchanged for almost 14 months. However, Fed Chairman Powell surprised many investors by lowering Fed Funds by 50 basis points (bps) in what he described as a “recalibration” accompanied by hawkish language.
Justification for the outsized rate cut included a disappointing July nonfarm payroll number released on August 2, 2024, accompanied by a rise in unemployment to 4.3% that breached the “Sahm Rule,” which is an early indicator of recession triggered when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more above its lowest level in the previous 12 months. Then on August 21, 2024, a Bureau of Labor Statistics (BLS) revision that lowered the number of jobs created over the 12 months ending in March of 2024 by 30% indicated further weakness in the labor market. At the same time, the consumer price index (CPI) declining to 2.5% YOY in August combined with Core PCE holding at 2.5% convinced the Fed that its inflation target of 2% was within sight. Also in early August, the Bank of Japan (BOJ) surprised the market by raising the overnight rate from 0.15% to 0.25%, triggering a sharp drop in JPY/USD (yen appreciation) that subsequently caused a rapid unwind of yen carry trades. An overnight lack of liquidity pushed VIX, the equity volatility index, to its highest level since the COVID-19 pandemic, while the Nikkei 225 index registered its worst loss since 1987, and U.S. indices dropped close to 5% in the overnight session preceding August 5, 2024. After reassurances from the BOJ to help support financial stability, markets quickly recovered and global indices ended up relatively unchanged for the week, although this risk of episode spooked the markets and may have influenced the Fed.
In terms of the success of the classic 60/40 equity/fixed income portfolio, both 2023 and 2024 (so far) have produced polar opposite results from 2022, when 60/40 portfolios posted one of their worst returns in history. Within equities, Q3 was a great quarter for stocks outside of Magnificent 7 as equal-weighted S&P 500 index posted 9.48% return versus 4.69% for the market value-weighted S&P 500 benchmark. Small caps represented by Russell 2000 index benefited from the Fed rate cut and rallied by 8.46% in Q3. Finally, the tech heavy Nasdaq 1000 managed only a 0.92% return for the quarter. Meanwhile, international stocks outperformed their U.S. counterparts on the heels of a massive stimulus package from China. The Hang Seng index with heavy exposure to Chinese companies went parabolic in Q3 with a 22.83% return.
In the fixed income markets, the yield curve rallied and steepened. The two-year Treasury note yield rallied by 111bps versus a 60bps rally for the 10-year, as the much-awaited bull steepener finally normalized the yield curve between twos and tens (+14bp as of 09/30) after what had been the longest inversion in U.S. history. U.S. Bond mutual funds and ETFs saw $129 billion of inflows in Q3 and $451 billion YTD in 2024, representing about 6% of funds’ AUM. With the money market rates set to decline alongside the Fed’s easing cycle, money has started to seek longer duration offered by fixed income funds. After widening during the equity market volatility of early August, credit spreads finished the quarter at tighter levels despite persistent recessionary fears and geopolitical upheaval in the Middle East. Bloomberg Investment Grade (IG) Corporate index spreads ended the quarter at 88bps, the lowest level since November 2021. Bloomberg Corporate High Yield (HY) index spreads ended the quarter at 295bps. Credit investors are discounting the probabilities of U.S. economy hitting a hard landing, with a “soft” or “no landing” being the prevalent view. This sanguine economic sentiment combined with a persistent yield grab continues to push down HY all-in yields to 7.29% despite 4.8% annualized default rate in Q2 (S&P Global Ratings). While projected to improve to 3.75% over the next 12 months, assuming a 50% default severity, all-in “loss-adjusted” yields for the HY index would be only 5.42%.
Strategy Performance (%)
The Easterly Structured Credit Value Strategy returned 4.88% net for the quarter ending September 30, 2024. The strategy underperformed its benchmark by 0.32%, as the Bloomberg U.S. Aggregate Bond Index returned 5.20% for the quarter. Q3 underperformance is attributed to lower duration of the strategy relative to Bloomberg Aggregate (2.6 yrs vs 6.2 yrs) as interest rates rallied between 60bps and 100bps. The strategy’s net yield advantage of over 300bps and spread tightening across all structured credit sectors mitigated much of the adverse duration effect in Q2.
| QTD | YTD | 1-Year | 3-Year | 5-Year | Since Inception* | |
|---|---|---|---|---|---|---|
| Structured Credit Value (gross) | 5.05 | 8.71 | 12.01 | 3.72 | 6.84 | 7.07 |
| Structured Credit Value (net) | 4.88 | 8.19 | 11.30 | 3.05 | 6.15 | 6.38 |
| Bloomberg Barclays Aggregate Bond | 5.20 | 4.45 | 11.57 | -1.39 | 0.33 | 1.80 |
*Inception Date: 9/1/2018
Performance shown is the Orange Investment Advisers (“the Firm”) Structured Credit composite in USD. Past performance is not indicative of future results. Gross performance results do not include advisory fees and other expenses an investor may incur, which when deducted will reduce returns. Changes in exchange rates may have adverse effects. Model net returns are supplemental to actual net returns and are calculated by reducing the monthly composite gross return by a model fee of 0.05417%, which equates to an annual model fee of 0.65%, the highest fee charged to any SMA client. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. Investment management fees are available upon request. The Firm claims compliance with the GIPS® standards; this information is supplemental to the GIPS® report included in this material. Returns greater than one year are annualized.
Sector Performance
Main contributors to the performance in Q3 were our allocations to RMBS (37%), which generated significant unrealized and realized returns, Corporate Structured Notes (12%) which generated sizeable unrealized gains due to 70bps SOFR curve bull steepening and CMBS (29.5%) that had significant carry and unrealized gains due to spread tightening of Conduit mezzanine and senior Single Asset Single Borrower (SASB) positions. The portfolio also benefited from an overweight to 3-year part of the curve versus the long end as the 3 Treasury yield rallied 40bps more than the 10-year.
| Sector | % Port | % Attribution |
|---|---|---|
| RMBS | 37.30% | 2.05% |
| CMBS | 29.50% | 1.01% |
| ABS | 7.40% | 0.29% |
| CLO/CDO | 4.60% | 0.11% |
| CORP | 12.20% | 1.20% |
| GOVT | 1.10% | 0.09% |
| Cash | 9.00% | 0.05% |
| Hedge | -1.00% | 0.25% |
| Expense | 0.00% | -0.16% |
| Total | 100.00% | 4.88% |
Source: Bloomberg and Orange Investment Advisors as of 9/30/2024.
Residential Mortgage Backed Securities (RMBS)
Non-Agency RMBS made up approximately 37% of the portfolio over Q3 and produced a total return of 5.49%, contributing 205bps to portfolio return for the quarter. RMBS fundamentals remain strong with home prices continuing their ascent, despite very low affordability. Supply limitations remain the primary factor behind low housing affordability. According to Goldman Sachs (GS) research, U.S. homeowner vacancy rate remains close to historical lows. While inventory of existing homes recovered from the January 2022 low of 1.35 million are expected to reach 1.5 million, it’s still far below the 40-year average of 2.3 million. Also, according to GS, the total household formation has outpaced the housing starts by 235,000 units since March 2020.
Agency MBS had a strong quarter in Q3 with nominal current coupon 30-year MBS spreads tightening by 20bps stop 128bps while Bloomberg MBS index OAS tightened by 6bps to 42bps as rate volatility declined. Non-Agency RMBS sectors also fared well with spreads tightening across most cohorts. Non-QM continues to dominate Non-Agency RMBS issuance with $33 billion issued through Q3, an amount higher than the collective of 2023. Lower interest rates should result in even higher issuance volumes going forward. Non-QM spreads were largely unchanged in Q3 with AAAs closing the quarter at 135bps, BBBs at 210bps and BBs at 330bp. In past rate rallies, Non-Agency spreads often widened at lower yields, but given the relative value of Non-Agencies relative to Corporates, spreads remained unchanged to slightly tighter. Discount coupons from 2020 and 2021 vintages outperformed new on-the-run 2023-2024 Non-QM across the credit stack as investors anticipated faster prepayment scenarios from the current rate rally.
Prime 2.0 and Agency-eligible Investor issuance has totaled $22 billion through Q3, almost three times the amount in the first three quarters of 2023, as execution in Non-Agency securitization continues to be more efficient than Agency execution. Prime 2.0 spreads relative to Agency TBAs (UMBS) tightened in Q3 with on-the-run 5.5 Senior Passthroughs trading 1 point back of TBAs, Mezzanine Passthroughs trading 1.5 points back of Agency TBAs and LCF (last cashflow) off 5.5% Prime Jumbo collateral tightening 20bps to a spread of 145bps. The Reperforming and Non-Performing Loan (RPL/NPL) market also had robust new issuance of $16.6 billion through Q3, per JP Morgan (JPM) research. RPL front-pay spreads tightened by 20-25bps in Q3 with the front pay tranche from the newest deal issued by Chase pricing at 135bps spread, 25bps tighter than the same tranche from their previous deal, which was issued at 160bps spread.
The Government-Sponsored Enterprise Credit Risk Transfer (GSE CRT) market has seen $7.6 billion of net new issue in 2024, which is somewhat suppressed by programmatic tenders from Fannie Mae and Freddie Mac that have seen over 95% of investor participation. The latest CAS 2024-R06 deal priced in late September 2024 with BBB-rated M2s at a 160 discount margin (dm) and BB-rated B1s at 205bps. On-the-run CRT spreads continue to grind tighter due to both the technicals of limited supply mentioned above and improving credit fundamentals driven by a robust residential housing market. Additionally, regular rating agency upgrades of non-IG CRT to investment grade due to their continuous de-levering helps increase their liquidity and valuation. The closed-end second lien/HELOC market exploded in 2024 with $10.5 billion of issuance through Q3, double the issuance amount of the full year in 2023. Given the high build-up in home equity, with the average mortgage holder having $315,000 of equity, and a very low ability to refinance of outstanding first lien mortgages at current high rates, an increasing number of borrowers are resorting to second lien mortgages and HELOCs for equity extraction. Spreads on closed-end second lien paper are closely tracking Non-QM spreads with on-the-run senior AAA tranches clearing at spreads of 150bps and BBB subordinate bonds at 235bps.
Q3 saw strong investor demand for less liquid esoteric RMBS sectors such as Private-label Reverse RMBS. Spreads on HECM buy-out deals tightened by 30bps to 200bps on senior and subordinate tranches as investors chased incremental yields. Ocwen’s most recent HECM buy-out deal priced at aggressive levels compared to their previous deals with AAA front-pay at 140bps spread, and BBBs at 460bps with spreads tightening on the follow. Legacy RMBS also saw stronger investor interest with several all-or-none bid-lists trading to large money managers at aggressive levels. Investment-grade subprime or Prime/Alt-A floaters ended the quarter in the high hundreds dm while non-IG Subprime Floaters have been trading at dm’s of 250bps.
Commercial Mortgage Backed Securities (CMBS)
CMBS accounted for about 29.5% of portfolio capital over Q3. The CMBS position posted a return of 3.41% in the Q2, contributing 101bps to overall portfolio total return. The CMBS market continued its year-long trend in Q3 of gradually deteriorating fundamentals for certain property types combined with incrementally tighter spreads. The beleaguered Office segment saw additional price declines according to Real Capital Analytics Commercial Property Price Indices (RCA CPPI) with August levels down 54% from the Q1 2022 peak. September saw another uptick in conduit delinquencies with 30+ delinquencies rising to 5.7%. Office delinquencies are now at 8.4% while Lodging is not too far behind at 6.2%. According to Morgan Stanley research, 78% of office loans scheduled to mature in the month of September 2024 remain outstanding while retail loans that failed to mature on schedule in September stood at 43%. The Q3 interest rate decline has yet to make a big impact on the refinancibility of many large office loans. However, there have been some green shoots in Q3 as CMBS investors were encouraged by the pay-off two of their properties.
Credit curve flattening continued in Q3 in CMBS Conduit market. On-the-run AAA LCF tranches saw 10bps of spread tightening to 95bps while on-the-run BBB- tranches ended Q3 80bps tighter at 450bps. With A-rated Conduits at around 250bps, we expect the spread differential between As and BBBs to compress. Investors bid up recent well-underwritten deals that were originated at higher rates, as well as 2019-2021 vintage Conduit subordinate tranches from deals with low office exposure as investors assigned lower probabilities to extension scenarios due to declining interest rates. Similar hunger for yield in the post-Fed-rate-cut regime was observed in seasoned Conduit mezzanine tranches (2013 -2016) that saw 2-4% price appreciation as they are priced to a more sanguine scenario. It must be noted that many of these seasoned Conduit mezzanine tranches were trading to distressed scenarios and a latent emergence of several distressed CMBS/CRE funds has served as a major catalyst to push prices on these bonds higher. Still, a lack of favorable maturity resolutions and a sharp decline in most recent appraisals kept many seasoned Conduit mezzanine bonds trading at double digit nominal yields to maturity (not adjusted for maturity extensions). Finally, dealers have recently shown a willingness to position CMBS, adding a decent amount of investment grade Conduit and SASB paper to their inventory in Q3, further adding to demand.
Private label CMBS issuance reached $75.5 billion through the end of Q3, a massive 142% increase over 2023 issuance. Most of this new issuance has been concentrated in SASB market with $45.9 billion issued. Despite this inflow of new supply, SASB spreads were largely unchanged in Q3. New issue Multifamily and Hotel AAA priced at 150-160 dm, SASB AAA Retail deals cleared at 170 dm, while ell underwritten office deals sold in the high hundreds with general SASB spreads approaching those in Q1 2022. At the other end of the spectrum, seasoned SASB deals backed by Office collateral suffered significant appraisal reductions due to a drop in occupancy levels, lower debt yields and DSCRs, causing them to see lower prices relative to May peaks. There is an element of investor fatigue and disenchantment with distressed SASB deals as 6 to 7 AAA SASB are set to follow in the footsteps of 1740 Broadway (BBWAY 2015-1740) in suffering principal writedowns at the AAA level. The most vulnerable Office SASB deals are those backed by leasehold properties where the borrower is facing an escalating ground rent schedule (e.g. BBCMS 2019-BWAY).
The Commercial Real Estate Collateralized Loan Obligations (CRE CLO) market saw an uptick in demand in September as it became the last CMBS sector to tighten with multifamily CRE CLOs clearing at 160 dm despite deteriorating fundamentals and negative headlines around some sponsors. Small Balance Commercial (SBC) spreads tightened in Q3 as collateral performance remains strong and investors’ demand for incremental yield continues to drive spreads tighter. The latest Velocity deal (VCC 2024-5) saw AAA front-pay tighter by 15bps to 180bps while BBBs were tighter by 30bps to 310bps.
Asset Backed Securities (ABS)
During Q3, ABS accounted for just over 7% of portfolio capital. The ABS holdings returned 3.90%, contributing 29bps to portfolio total return. ABS issuance reached $262 billion at the end of Q3, surpassing the full year 2023 issuance. 2024 issuance is already a record for ABS with one quarter still to come. Auto ABS issuance as expected is leading charge with $139 billion (Prime, Subprime, Lease, and Floorplan according to JPM) but esoteric ABS issuance has been a pleasant surprise for ABS investors with $54 billion issued through Q3. The top four categories in Esoteric ABS are Franchise, Device Payments, Data Centers, and Aircraft. ABS issuers clearly have responded to seemingly insatiable investor demand for short duration paper. As mentioned above, net inflows into fixed income, including structured credit-focused ETFs, have been very strong. As a result, according to JPM asset managers have accounted for 69% of net demand for ABS in 2024 with insurance companies a distant second at 12%.
ABS spreads have retraced small widening that occurred in early August and have ended Q3 at multi-year tights. AAA Prime Auto ABS has traded in a narrow range all year, ending Q3 at 55bps. Subprime Auto ABS spreads tightened with AAAs at 65bps and BBBs at 165bps at the end of the quarter. Subprime Auto ABS credit performance has stabilized with annualized losses on Fitch Subprime Auto ABS index declining to 8% in August after reaching 9.5% in Q4 2023. With used car prices declining by 5.3% according to Manheim Used Car Value index, the recovery rate on subprime auto loans has declined to 35% in Q3, well below the post-GFC average. However, with delinquencies stabilizing after a spike at the end of 2023 and unemployment rates still low, the credit performance of subprime auto ABS deals remains robust. Unsecured consumer space remained well bid with AAA seniors spreads tightening to 100bps while BBBs have been trading in 220-240bps range. MPL (market placed lending)/Unsecured credit has marginally improved after both delinquencies and defaults reached record highs in the beginning of 2024. 30+ delinquencies declined by 1% to 5.28% in August while conditional default rates (CDR) dropped to 14.94% from 17% earlier in the year.
Corporate Structured Notes (CSN)
The CSN position made up about 12% of the portfolio in Q3, posting a total return of 9.81%, contributing 120bps to the portfolio. CMS Spread Floaters with coupons linked to the difference between 30 and 2-year SOFR rates had a trifecta of positive news in Q3. First and foremost, the SOFR curve steepened by 70bps from 2s to 30s and brought the inversion between 2s and 30s down to 14bps. Hence, the longest yield curve inversion is about to end with coupon payments resuming when the spread between 30 and two-year CMS turns positive. Also supporting prices were the secondary effects of lower interest rates and tighter corporate spreads. These positive developments caused a rush of demand into CSN. The best performers for the quarter were the high multiplier CMS floaters. 10x multiplier, 2030 through 2037 maturity, Citi, Morgan Stanley, and UBS CMS spread floaters saw 10-12% price appreciation in Q3. Lower multiple 4x and 5x Morgan Stanley 2034 maturity bonds saw 7-8% price appreciation with prices moving to high 60s amidst limited supply.
Other Sectors
Collateralized Loan Obligations/Collateralized Debt Obligations (CLO/CDO) accounted for just under 5% of portfolio capital during Q3, posting a total return of 2.40% which contributed 11bps to the overall portfolio. Treasury bonds made up 1.1% of portfolio capital, returning 8.39%, contributing 9bps of portfolio return. Hedges, including Treasury futures for duration and HY CDX to reduce portfolio spread duration, contributed 25bps of total return for the quarter. Cash accounted for around 9% of portfolio assets in Q2 and contributed 5bps of return. Strategy expenses reduced portfolio gross return by 16bps.
Portfolio Outlook
We expect the long end of the curve to be rangebound over the next three to four quarters. We believe exploding federal debt will counterbalance a potential weakening in the economy. With federal deficits currently 5-6% of GDP and no political will to cut spending by either party, there is no end in sight to debt growth. In fact, at current rates, interest on the debt now exceeds defense spending. It is always a possibility that the Fed will attempt to inflate its way out of this debt by lowering short-term interest rates and engaging in quasi-QE as they have done in the past. These inflationary measures will cause long-term rates to push higher, while the current easing cycle will cause the yield curve to continue to steepen. Our thesis of higher long-term rates is supported by the actual performance of the 10-year Treasury note over the past two calendar years. Despite widespread bullishness since the end of 2022, when the 10-year Treasury yield closed the year at 3.88%, it has spent 64% of the time since 2022 at higher yields, averaging 4.05% over that period. In terms of credit spreads, we expect the Structured Credit Value Strategy to fare well relative to Corporates based on where their spreads are currently in relation to their respective ranges over the past 10 years. Specifically, Non-Agency RMBS, CMBS, and ABS spreads are currently above the 50th percentile (i.e. wide) while the spreads of both IG and HY Corporates are in the bottom decile (i.e. tight). While spreads of Structured Credit Value Strategy sectors have tightened in 2024, they still look attractive relative to the 2018-2019 pre-pandemic period.
GIPS® Report
Orange Investment Advisors Structured Credit Value Strategy Composite
Composite Inception Date: September 1, 2018
| Composite Performance | Annualized 3-Year Standard Deviation | Total Assets (millions) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Year End | Gross | Actual Net | Model Net | Benchmark | Composite | Benchmark | Internal Dispersion | Firm | Composite | Number of Accounts |
| 2023 | 7.48% | 5.91% | 6.79% | 5.53% | 2.73% | 7.24% | N/A | 541.83 | 316.24 | 1 |
| 2022 | -4.86% | -6.27% | -5.48% | -13.01% | 5.88% | 5.85% | N/A | 526.5 | 327.79 | 1 |
| 2021 | 6.35% | 4.79% | 5.66% | -1.54% | 5.37% | 3.40% | N/A | 422.61 | 294.19 | 1 |
| 2020 | 15.74% | 14.05% | 15.00% | 7.51% | N/A | N/A | N/A | 274.65 | 193.05 | 1 |
| 2019 | 8.92% | 7.31% | 8.21% | 8.72% | N/A | N/A | N/A | 39.74 | 39.74 | 1 |
| 2018 | 1.96% | 1.46% | 1.74% | 0.98% | N/A | N/A | N/A | 35.76 | 35.76 | 1 |
Firm Definition
Orange Investment Advisors, LLC is an independent registered investment advisor that provides primarily fixed income investment management services to institutional investors. The firm was founded in August 2018 and has claimed compliance with the GIPS standards since the firm’s inception.
Firm Verification Statement
Orange Investment Advisors claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Orange Investment Advisors’ performance has been independently verified from the firm’s inception, which includes the period from August 1, 2018 through December 31, 2021. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firmwide basis. Verification does not provide assurance on the accuracy of any specific performance report.
Composite Description
The Structured Credit Value Strategy Composite includes all fee paying SMAs and Funds that invest in Structured Credit based on Orange’s Active Value Security Selection approach which is a bottom-up, value-based investment strategy. The strategy seeks to provide a high level of income and total return with low sensitivity to interest rates and credit spreads by taking advantage of opportunities in the inefficient and non-indexed structured credit market. Derivatives, including options, futures, and swaps, and short positions may be used, primarily for hedging or managing certain risks, including interest or credit spread risk. The account minimum for the composite is $1 million. The Structured Credit Value Strategy Composite invests in some index securities but primarily focuses on non-index securities, particularly structured credit securities, which offer exposure to underlying debt instruments. These securities can be investment grade, below investment grade, or non-rated and include asset-backed and mortgage-backed securities, and collateralized loan and debt obligations. The inclusion of both investment-grade and below investment-grade securities as well as index and non-index securities offers a broader set of candidates to the Strategy than the benchmark.
Benchmark Description
The benchmark for the composite the Barclays Bloomberg U.S. Aggregate Bond Total Return Index. Index returns reflect the reinvestment of income, but do not include any expenses, such as transaction costs and management fees. The benchmark measures the investment grade, US dollar-denominated, fixed-rate taxable bond market and includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Performance Calculation
Valuations are computed and performance is reported in US dollars.
Returns include the reinvestment of income and are presented gross and net of fees. Gross returns are net of transaction costs. Gross-of-fee returns for pooled funds are calculated by dividing the applicable total annual fund expense ratio by 12 and adding back that monthly prorated expense to each monthly net return to derive a monthly return gross of investment management and fund fees but net of transaction costs and interest and dividend expense. Actual net returns are net of actual transaction costs, management fees, as well as other fund operating fees and expenses. Model net returns are supplemental to actual net returns and are calculated by reducing the monthly composite gross return by a model fee of 0.05417%, which equates to an annual model fee of 0.65%, the highest fee charged to any SMA client. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. The firm’s fees are available upon request and also may be found in the firm’s Form ADV Brochure. The standard annual fee schedule is: 0.65% on the first $100 million, 0.55% on the next $150 million, and 0.45% on all assets above $250 million under management. Where mutual fund returns are included in a composite, the returns of the primary institutional share class are used. In the case of the Easterly Income Opportunities Fund, the returns and of the I Share class are used in the percomposite.
Investment Management Fee Schedule
The standard annual fee schedule is: 0.65% on the first $100 million, 0.55% on the next $150 million, and 0.45% on all assets above $250 million under management.
Composite Dispersion
Internal dispersion is calculated using the equal-weighted standard deviation of annual gross returns of those portfolios that were included in the composite for the entire year. It is not presented (“N/A”) when there are five or fewer portfolios in the composite for the entire year.
Standard Deviation
The three-year annualized standard deviation measures the variability of the composite gross returns and the benchmark returns over the preceding 36-month period.
Trademark
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
Important Disclosures
This information has been prepared solely for the use of the intended recipients; it may not be reproduced or disseminated, in whole or in part, without the prior written consent of Easterly Asset Management LP.
Easterly Asset Management LP (“Easterly”) is the holding company of Easterly Investment Partners LLC, an SEC registered investment adviser. Easterly serves as the growth platform for the firm’s asset management business. In 2021, Easterly formed Maritime Logistics Equity Partners (MLEP) to take advantage of opportunities and dislocations in the international shipping markets. In November 2023, Easterly announced a strategic partnership with Lateral Investment Management where Easterly will provide access to its technology, fundraising, and operations expertise, and will invest alongside the firm in certain deals. In March 2024, Easterly announced a strategic partnership with Harrison Street, a leading investment management firm exclusively focused on alternative real assets. In April 2024, Easterly announced an agreement to acquire the ROC Municipals municipal bond team from Principal Street Partners. More information about each registered investment adviser, including its investment strategies and objectives, can be found in the firms’ Form ADV which is available on the www.sec.gov website. Registration does not imply a certain level of skill or training.
No funds or investment services described herein are offered or will be sold in any jurisdiction in which such an offer or sale would be unlawful under the laws of such jurisdiction. No such fund or service is offered or will be sold in any jurisdiction in which registration, licensing, qualification, filing or notification would be required unless such registration, license, qualification, filing, or notification has been affected.
The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. Any decision to engage the Firm should be based upon a review of the terms of the prospectus, offering documents or investment management agreement, as applicable, and the specific investment objectives, policies and guidelines that apply under the terms of such agreement. There is no guarantee investment objectives will be met. The investment process may change over time. The characteristics set forth are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. Client portfolios are managed according to mutually agreed upon investment guidelines. No investment strategy or risk management techniques can guarantee returns or eliminate risk in any market environment. All information in this communication has been obtained from sources believed to be reliable but cannot be guaranteed. Investment products are not FDIC insured and may lose value.
Investments are subject to market risk, including the loss of principal. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate. The information contained herein does not consider any investor’s investment objectives, particular needs, or financial situation and the investment strategies described may not be suitable for all investors. Individual investment decisions should be discussed with a personal financial advisor.
Any opinions, projections and estimates constitute the judgment of the portfolio managers as of the date of this material, may not align with the Firm’s opinion or trading strategies, and may differ from other research analysts’ opinions and investment outlook. The information herein is subject to change without notice and may be superseded by subsequent market events or for other reasons. EAM assumes no obligation to update the information herein.
References to securities, transactions or holdings should not be considered a recommendation to purchase or sell a particular security and there is no assurance that, as of the date of publication, the securities remain in the portfolio. Additionally, it is noted that the securities or transactions referenced do not represent all of the securities purchased, sold or recommended during the period referenced and there is no guarantee as to the future profitability of the securities identified and discussed herein. As a reminder, investment return and principal value will fluctuate.
The indices cited are, generally, widely accepted benchmarks for investment performance within their relevant regions, sectors or asset classes, and represent non managed investment portfolio. It is not possible to invest directly in an index.
This communication may contain forward-looking statements, which reflect the views of EAM and/or its affiliates. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements or other predications or assumptions are subject to various risks, uncertainties, and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. EAM does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.
Past performance is not indicative of future results.
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