Quarter 4 2023: Preferred Securities Update

Amidst the backdrop of rising interest rates, we wanted to provide an update on our preferred holdings. Last year, we moved into preferred stocks in reaction to the upward pressure on interest rates. While we will go into more details below, the fundamentals of our holdings have not changed since that shift.

 We remain confident in our current portfolio and are pleased to report that preferred stocks are now yielding nearly 7% before factoring in fees. Year-to-date, the average preferred stock has declined by 2.3%, excluding dividends received, which compares favorably to a 7% decline in the underlying stocks and a 5% decline in the PFF ETF. Below is a chart highlighting the inverse relationship between rates and the asset class.

Image Source: Bloomberg BVAL, 'PFF US Equity from October 3, 2022, to October 3, 2023,' accessed October 2, 2023.

We anticipate that the rise in interest rates will eventually taper off, likely in conjunction with a slowing economy later this year or early next year, based on our best estimate. Our portfolio includes preferred securities that have been heavily researched and selected by our team. For a current list of holdings, please contact us and we will be happy to provide that to you.

If you have any questions, please contact our team.

This update is being furnished by Brasada Capital Management, LP (“Brasada”) and may not be modified, reproduced or redistributed in whole or in part without the prior written consent of Brasada. This document does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services or to participate in any trading strategy.

 All figures are estimated and unaudited. In addition to management fees, the managed accounts will also bear its share of expenses and fees charged by underlying investments. The fees deducted herein represent the highest fee incurred by any managed account during the relevant period. Past performance is no guarantee of future results.

 References to indices or benchmarks are for informational and general comparative purposes only. There are significant differences between such indices and the investment program of the managed accounts. The managed accounts do not necessarily invest in all or any significant portion of the securities, industries or strategies represented by such indices and performance calculation may not be entirely comparable. Indices are unmanaged and have no fees or expenses. An investment cannot be made directly in an index and such index may reinvest dividends and income. References to indices do not suggest that the managed accounts will, or is likely to achieve returns, volatility or other results similar to such indices. Accordingly, comparing results shown to those of an index or benchmark are subject to inherent limitations and may be of limited use.

 Certain information contained herein constitutes forward looking statements and projections that are based on the current beliefs and assumptions of Brasada and on information currently available that Brasada believes to be reasonable. However, such statements necessarily involve risks, uncertainties and assumptions, and prospective investors may not put undue reliance on any of these statements. The information contained herein is believed to be reliable but no representation, warranty or undertaking, expressed or implied, is given to the accuracy or completeness of such information by Brasada.