The top 10 list for the five-year period ended Sept. 30 was slightly more diversified, comprising four high-yield strategies, three multisector strategies, one muni national long bond strategy, one corporate bond strategy and one bank loan strategy.
For the five-year period, the median return was 1.53%
In second place after 16th Amendment's Vicksburg strategy was Newport Investment Advisors' investment flexible bond strategy, returning a gross annualized 8.22%.
Kenneth Holeski, president, founder, and co-CIO, and Justin Holeski, senior vice president and co-CIO, at Newport Investment Advisors, said in a joint email statement that 2022 "represented one of the worst bond markets in 30 years. Once again, tactical and reactive allocation had us predominately invested in cash and equivalents with a very short strategic trade made in midyear to high-yield municipal bonds."
They added that in 2023 they included the largest number of categories and holdings in company history.
"Early in the year, we exited large positions in high-yield municipals and floating-rate securities. Since then, positions have evolved into mortgage-backed securities, investment-grade corporates, short-term investment grade and high-yield municipals once again."
They added: "Obviously, we are sector-indifferent, with an emphasis on capital preservation."
The third-best five-year performer was the Herzfeld Fixed Income Composite, which returned an annualized gross 7.36%.
"We have been bearish (on) duration since January of 2022 and recently turned bullish," said Ryan Paylor, portfolio manager at Thomas J. Herzfeld Advisors.
"Holdings in floating rate, private credit, and fixed income (closed-end funds) undergoing activism were performance-drivers over the last year. We have trimmed floating rate and private credit holdings while adding term preferred shares and higher credit quality bonds."
The Milwaukee Institutional Asset Management focused fixed-income value strategy ranked fourth over the five-year period with an annualized gross return of 6.47%.
This strategy holds a concentrated portfolio of 10-12 positions and uses a bottom-up fundamental investment approach to identify improving credit situations, said J.P. Geygan, chief operating officer and senior vice president at Global Value Investment Corp., the parent company of MIAM.
"We are long-term value investors and expect price appreciation of our investments as underlying business fundamentals improve and as the notes near maturity," Geygan said.
The strategy has the flexibility to invest in securities with varying duration and credit quality, he said. As such, the strategy may invest in securities that are overlooked or undervalued by the market typically for temporary or unsupported reasons. Consequently, Geygan noted the portfolio can own both investment-grade securities as well as non-investment-grade securities that are expected to eventually move up to investment-grade status. MIAM's focus on unrecognized quality has allowed the portfolio to maintain very low turnover as a result of infrequent trading, he said.
In fifth place behind MIAM was Brandywine's global high-yield strategy, returning a gross annualized 6.25%.
"As a full-cycle manager, we want to outperform the most in down markets and then, if we capture our fair share of the strongest markets, we believe we will rise to the top over a complete market cycle," said John McClain, portfolio manager. "That is what happened in the five years through September 2023, with down markets in the fourth quarter of 2018, the first part of 2020, and the first half of 2022."
Mesirow's high-yield strategy delivered a 5.49% annualized gross return over the past five years, making it the seventh-best performer on the five-year list.
Robert Sydow, chief investment officer and portfolio manager, said the high-yield team looks for companies that appear risky to other investors — and therefore yield significantly more than the index — for reasons that are not really fundamental to their businesses.
"We often discover such opportunities with small to midsize companies, in small industries which are relatively unfollowed and unknown, and with first time issuers, complex companies, entrepreneur-owned companies, and lower-rated securities," he added. "These are where we find overcompensated credit risks. If we can find about 100 of these companies and know them exceptionally well, we believe we can capture the excess coupon income and still sustain much lower-than-average defaults."