10-year treasury yields declined a modest 5 basis points during March which allowed DVDN’s active portfolio management to deliver monthly returns that more than offset the January & February return drawdowns* largely resulting from the 37-basis-point increase in yields. Market expectations for FY24 Federal Reserve rate cuts seem to be settling in at 2 or 3 with July being the market’s odds-on favorite for the first rate cut. That said, markets are also pricing a 0 or 1 rate cut as non-zero probability outcome.
During March, DVDN portfolio managers (a) increased total companies in the portfolio to 17 from 14; (b) continued decreasing exposure to residential REITs as median valuations rallied to 90%+ of book value*; (c) increased exposure to commercial REITs by overweighting multifamily exposure and taking opportunistic positions in attractively priced office exposure; and (d) maintained its allocation to BDCs that should continue delivering attractive returns in a “higher-for-longer” rate environment.
For further details, please see our March 2024 Newsletter here.
