LOM Stable Income Fund Manager’s Report Q1 2018

The LOM Stable Income fund underperformed its benchmark in the first quarter of 2018, returning a negative 4.15% for the period, while the benchmark declined by 2.55%. While this was a challenging quarter, the Fund returns continue to exceed the benchmark index returns over the 3- and 5-year holding periods, returning 1.43% and 2.61% annualized returns, respectively. The Fund return also includes a monthly dividend of 0.03 per unit, which translates to a current yield of 3.37% as of 03/31/2018.

First quarter performance was weighed down by a ruling against master limited partnerships that prevents them from recovering an income tax allowance in the cost of service rates, a broad sell off in the equity markets, fears over rising interest rates and hurricane-related losses in the reinsurance sector. The fund was helped by tactical positioning in corporate preferred issues and stock selection within the healthcare, consumer cyclical and staples sectors.

The Fund’s current asset allocation is now approximately 47% equity and 53% fixed income as we have been slightly increasing our equity exposure on market dips. The fixed income portion of the portfolio is primarily represented by preferred issues, or so-called baby bonds. These securities generally possess long final maturities. However, many of them are trading to near term call dates which effectively reduces the interest rate risk for the portfolio.

On the equity side, we continue to invest in stocks which have historically been generous with their dividends and have the cash flow to continue paying. Our largest sector weightings include energy, financials, and information technology. Despite the recent pullback, the technology sector ended the month in positive territory, returning 4.86%.

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The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.