Investor Letter - December 2021

Sometimes the best Offense is Defense!

At this time of the year, I would like to thank all of you who have entrusted me to achieve above-market returns for your fixed-income portion of your portfolio utilizing a blend of eleven investment “sleeves”.

I am proud to write that TRC achieved positive 4% - 8% annualized returns in its lower-risk portfolio, despite the backdrop of rising interest rates and re-emerging inflation. By comparison, year-to-date returns for traditional bond indices - 10-year Treasury (down 4.1%), I-shares Bond AGG (down 2.6%), national Municipal Bond Index - MUB (down 1.2%), and Corporate High Yield Index - HYG (down 1.5%) have all experienced negative returns.

The two major risks for bond and fixed income investing generally include default (non-payment) and the backdrop of rising interest rates. The general rise in interest rates is largely the reason for the negative fixed income benchmark returns.

TRC attempts to manage fixed income risks by creating a bar bell of very low default-risk fixed-income sleeves like Municipals and High Grade Senior Corporate Loans blended with higher-yielding “riskier” sleeves like high dividend/free cashflow equities, high yield bonds, REITs, BDCs, and the like.

For those who were willing to take more risk that incorporates TRC’s special situation portfolio, TRC produced a total return of 35% which compares favorably to the Nasdaq 100 (QQQ up 25.1%) and the S&P 500 (SPY up 20.91%) during the comparable period.

This 35% total return had the benefit of many NAV discounts for the 11 closed-end fund sleeves when initially entered plus generally lower valuations which may not be the case going forward. Moreover, these returns were gross returns (before fees), had most of the closed-end funds reinvesting monthly dividends, required active management and rotation amongst the eleven sleeves with occasional concentration up to 50% in any one sleeve (like the high dividend/deep value equity sleeve, probably the riskiest) with this concentration offset by diversification within that concentrated sleeve. There is no guarantee that similar returns could be generated going forward with or without some of the benefits described above.

As we have discussed with our clients during the year and as illustrated in the attached slide deck, TRC’s goal is to achieve risk-adjusted annual returns largely through income distribution in the 4% - 8% range using eleven income strategies listed below, Closed-End Funds (CEFs) and some ETFs to access them.

• Business Development Companies (BDCs)

• High Yield Corporate and Mortgage Bonds

• Convertible Bonds

• International Sovereign Debt

• Corporate Senior Secured Loans

• Municipal Bonds

• Covered Call Writing Strategies

• Preferred Stocks

• Emerging Market Debt

• Real Estate Investment Trusts (REITs)

• High Dividend Deep Value Equities

Sometimes the best offense is defense!