3rd Quarter 2015 Review and Outlook

Taxable High Grade Strategies

Samsons High Grade strategies outperformed their benchmarks on a gross
basis for the first 9 months of the year. Interest rates fell for the quarter as
decelerating US economic indicators led investors to reduce their outlook for
both future growth and the probability that the Fed would tighten. As
uncertainty about the future rose, volatility increased across asset classes,
reminding investors of the importance of diversification. Our objective is to
provide investors with the diversification benefits of fixed income as an asset
class, in a risk managed fashion, with an emphasis on investing in high quality,
liquid bonds.
The market moving headlines this quarter were the weakness in Asia and the
Feds decision to keep its policy rate at zero. Chinese growth has disappointed
and the resulting fall in Chinese demand for commodities has led to a drop in
their prices, darkening the outlook for commodity export oriented countries.
Not only did Chinas growth decelerate to 7%, but the government became
sufficiently alarmed that Chinas central bank devalued its currency in order to
cheapen its exports. The Fed statement added global risks as one reason for
keeping rates unchanged. This too served to unsettle investors who feared the
Feds benign growth outlook was now likely wrong.
2nd

We mentioned in our
Quarter commentary that deflationary pressures
remained robust and geopolitical risks were rising. Accordingly, the factors
driving our outperformance during the third quarter included our decisions to
increase Treasuries, eliminate TIPS, and maintain an above benchmark
duration.
We began to reduce our TIPS position late in the 2nd quarter and eliminated
it early in the 3rd quarter. As the chart in Exhibit 3 below shows, TIPS breakevens collapsed towards 1% throughout the quarter.
Exhibit 3: TIPS Break-Evens

Exhibit 1: Performance
Summary as of 9/30/15
HGST

Gross
Net*

Ex BBB
Gross

BC Int. Agg
Ex. BBB/CMBS/ABS
Gross

1.02%

0.34%

1.03%
1.86%

1.16%

1.67%

1.08%

1.73%

1.22%
0.59%

Net*

1.02%

0.29%

1.23%

Net*

Corp 1-5

YTD
1.21%

0.41%

BC US Gov/Cred 1-3Y

HGCI

3Q15
0.47%

1.84%
1.72%

0.53%

1.53%

BC 1-5 Corp

0.58%

1.61%

BC Int. Treasury

1.24%

2.06%

U.S. Treasury 5 Year

1.74%

2.73%

U.S. Treasury 10 Year

2.92%

2.39%

BC U.S. TIPS

-1.15%

-0.80%

BC U.S. MBS

1.30%

1.61%

BC Int. Corp

0.71%

1.50%

BC Int. Corp BBB

0.22%

1.06%

BC Muni 5 Year

1.16%

1.76%

ML High Yield

-4.88%

-2.51%

S&P 500

-6.44%

-5.29%

*Please see important disclosures on p4.

Sources: Barclays (BC), Merrill Lynch (ML)

Exhibit 2: Market Indicators

(9/30/14 9/30/15)
MOVE Index
100
90
80
70

2.4%

60

S&P Index

10-Year TIPS

2200

1.9%

2100

1.4%

2000

5-Year TIPS

Source: Bloomberg

Sep-15

The rise in uncertainty and the fall in inflation expectations led us to conclude
that the Fed was not likely to tighten and, as a result, we began to increase our
exposure to nominal Treasuries that we viewed as oversold on excessive
expectations of Fed tightening. The Treasury implied forward curve as of June

650
575
500
425
350

Jul-15

Source: Bloomberg

S&P GSCI Index

May-15

Sep-15

Mar-15

Jun-15

Jan-15

Mar-15

Nov-14

Dec-14

1900

Sep-14

0.9%
Sep-14

30th in Exhibit 4 below shows the opportunity that existed at that time when
the front end of the Treasury yield curve was discounting a rate rise of about
74 basis points. We felt that this was incorrect, and that the market was
discounting an aggressive Fed tightening cycle that was not likely to unfold.
Although the market moved closer to our view by September 30th,
discounting a smaller rate rise, we still believe the front end of the Treasury
curve has overly discounted the prospects of Fed tightening.
Exhibit 4: Treasury Implied Forward Yield Curves
June 30, 2015
September 30, 2015

Sep-15

Sep-14

Mar-14

Sep-13

Mar-13

Exhibit 6: Crude Oil

100
90

0.63%

80

0.31%
1

Sep-15

2
3
Maturity (years)

Mar-15

0.0

0.90%

64bps

Jul-15

0.27%

0.5

58bps
57bps

Maturity (years)

Source: Bloomberg

Though we remain positive on the outlook for quality corporate bonds and
have maintained our overweight to the sector, we made modest adjustments
to our positions to help fund our increase in nominal Treasuries.

Spot price ($)

70
60
50
40

May-15

0.0

0.65%

0.95%

Source: Bloomberg

Mar-15

0.5

1.01%

1.0

1.20%

Jan-15

75bps

74bps

100

1.48%

1.5

Non-farm
Payroll (000)

150

Nov-14

1.0

75bps

200

Sep-12

1.38%
1.02%

250

Sep-14

1.75%

1.5

300

2.0

Yield (%)

Yield (%)

2.0

Exhibit 5: Jobs and Wage Growth

(6-Month Rolling Average)

Source: Bloomberg

Towards the end of the quarter, the markets outlook for inflation collapsed,
corporate spreads reached new wide levels, and a Fed tightening was pushed
out into the future. As a result, we felt more comfortable rebuilding our
corporate and TIPS holdings again, financing these purchases with municipal
bond sales. Municipals had performed well during the quarter, and our
expected return outlook for TIPS and corporates on a forward looking basis
was more favorable.
Our current portfolio structure is predicated on the US economy continuing
to grow at a slow pace. Payroll growth, commodity prices and manufacturing
data all proved disappointing in recent months. We are not bearish on jobs
creation, but merely note the deceleration that has occurred. Despite the
slowdown, monthly jobs growth is still plus 200k and job openings have
increased from 2.2 to 5.7 million from the depths of the recession to now.
Although falling commodity prices have been a short-term concern, they also
have a positive longer-term impact that supports our modest growth view. For
example, falling gas prices serves a tax cut for US consumers.
Lastly, the relative strength of the US economy and anticipated path of
monetary policy has caused a large appreciation in the US dollar. This has hurt
manufacturing and trade as US goods are less competitive. Amongst the
reasons the Fed is wary of tightening, we believe, is the further disinflationary
winds dollar strength generates, as well as the drag on the economy that
Samson Capital Advisors HG 3rd Quarter 2015 Review and Outlook

Exhibit 7: Consumer Confidence

110
100

It is important to note that the US is still a consumer led economy as over

70% of GDP comes from consumer spending. Looking forward, we note a
number of positive data points for consumers: steady job creation, positive
(if muted) retail sales, healthy sentiment, and lower energy prices.

90

We don't dismiss the possibility that overseas events will further impact the
US economy, however with a resilient consumer central banks could be
accommodative and coordinate efforts to increase banks financial soundness
making recession risks low.

50

80
70

Source: Bloomberg

We expect rates to stay low not because of recession risks, but as a result of
continued low inflation. In a world of weak demand brought about by
deleveraging and government austerity, we don't see a catalyst for inflation to
breach the Fed's 2% target any time soon. Excess slack remains in the labor
market and slower growth elsewhere means inflation pressures are minimal.
These factors, combined with other central banks diverging from the Fed,
mean the dollar could stay strong too.
Given our view, we are maintaining a modestly longer duration posture,
essentially curve neutral, with an overweight to spread sectors. For those
worried about a surge in rates, the chart in Exhibit 8 provides an international
context. US rates remain near their widest spreads to bunds in more than 15
years. If the 10-year Treasurys spread to bunds fell to its 15 year average, the
10 year Treasury would be trading under 1%. While that is not our forecast, it
is a reminder that our rates are among the highest in the world for a major
economy, and capital from overseas will likely drive our rates lower.
Exhibit 8: Sovereign Yield Curves as of September 30, 2015
3.0

Yield (%)

2.5
2.0

United States

1.5

Germany

1.0

Japan

0.5
0.0

10

15

20

30

Maturity (years)
Source: Merrill Lynch

Jonathan Lewis
Managing Principal
Chief Investment Officer

Brian Meaney, CFA

Portfolio Manager

Samson Capital Advisors HG 3rd Quarter 2015 Review and Outlook

Sep-15

Mar-15

Sep-14

Mar-14

Sep-13

Sep-12

60

Mar-13

occurs when its tougher to sell our goods abroad. Importantly, a Fed on hold
takes away support for the dollar and will likely contribute to a modest
decline, which should prove supportive to growth longer-term.

Past performance is not indicative of future results. Performance reflects the reinvestment of income and other earnings. Any
benchmarks or indices shown are for illustrative purposes only, are unmanaged, assume reinvestment of income, and have limitations
when used for comparison or other purposes because they may have volatility, credit or other material characteristics (such as number
and types of securities) that are different from HGCI, HGST, and IG. Certain information is based on third-party sources and, although
believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. This information is
confidential, is intended only for intended recipients and their authorized agents and may not be distributed to any other person without
our prior written consent.
No representation or assurance is made that Samson Strategies will or are likely to achieve their objectives, or will make a profit or will
not sustain losses. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections
of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and
involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our
control. Future results could differ materially and no assurance is given that these statements are now or will prove to be accurate or
complete in any way. Samson does not provide tax, accounting or regulatory advice. ANY TAX STATEMENT CONTAINED HEREIN IS NOT
INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING TAX PENALTIES.
High Grade Core Intermediate Composite
Schedule of Investment Performance for the Period 12/31/0412/31/14
Primary Benchmark: Barclays Capital Intermediate Aggregate
Total Firm
Composite Assets

Annual Performance Results

Composite
Gross
Net

Composite
Barclays Capital 3 Year Std Deviation
Int. Aggregate Composite BC Int Agg Dispersion
4.12%
1.98%
1.96%
0.26%

Year End
2014

Assets
(mill)
7,457

USD
(mill)
189

# of
Accounts
22

3.82%

3.56%

2013

7,076

208

27

-0.92%

-1.16%

-1.02%

2.03%

2.01%

0.15%

2012

7,318

223

29

2.96%

2.70%

3.56%

1.84%

1.87%

0.26%

2011

7,440

220

27

6.55%

6.28%

5.97%

2.32%

2.29%

0.41%

2010

7,122

149

17

4.95%

4.69%

6.15%

3.38%

3.36%

0.14%

2009

6,516

125

15

5.97%

5.70%

6.46%

3.40%

3.33%

0.13%

2008

4,525

94

3.66%

3.41%

4.86%

3.22%

3.20%

0.15%

2007

3,653

33

Five or Fewer

8.10%

7.83%

7.02%

2.25%

2.31%

N.A.

2006

3,105

45

Five or Fewer

4.33%

4.07%

4.58%

N.A.

N.A.

N.A.

2005

2,588

52

1.95%

1.69%

2.01%

N.A.

N.A.

N.A.

High Grade Short Term Composite

Schedule of Investment Performance for the Period 5/31/1112/31/14
Primary Benchmark: Barclays Capital 1-3 Year Government/Credit Index
Total Firm

Composite Assets

Annual Performance Results

3 Year Standard Deviation
Composite
Benchmark

Assets
(mill)
7,457

USD
(mill)
50

# of
Accounts
Five or fewer

Composite
Gross
Net
1.21%

0.96%

Barclays 1-3 Year

Govt/Credit Index
0.77%

0.65%

0.49%

Composite
Dispersion
N.A.

2013

7,076

21

Five or fewer

0.57%

0.32%

0.64%

N.A.

N.A.

N.A.

2012

7,318

27

Five or fewer

1.53%

1.27%

1.26%

N.A.

N.A.

N.A.

2011*

7,440

18

Five or fewer

1.02%

0.88%

0.55%

N.A.

N.A.

N.A.

Year End
2014

*5/31/11-12/31/11
Corporate Replication Strategy 1-5 Year
Schedule of Investment Performance for the Period 8/31/1412/31/14
Primary Benchmark: Barclays 1-5 Year Corporate Index
Year
End
2014*

Total Firm

Composite Assets

Assets
(mill)
7,457

USD
Number of
(mill)
Accounts
126 Five or fewer

Annual Performance Results

Composite
Gross
Net
0.08%

-0.01%

3 Year Std Dev

Barclays 1-5 Yr
Corporate Index Composite BC 1-5 yr Corp
-0.03%
N.A.
N.A.

Comp.
Dispersion
N.A.

*8/31/14-12/31/14
Net returns are net of annual fees and expenses of 0.25%, relevant for accounts with $10 million in assets. Investors in certain classes
may pay a higher fee, which would have the effect of reducing net returns.
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year or lack of
a full year of performance. 3 Year Standard Deviation data is not available because 36 months of returns does not exist for the time
period indicated.

Samson Capital Advisors HG 3rd Quarter 2015 Review and Outlook

1) Definition of Firm: Samson Capital Advisors LLC (the Firm), founded in June 2004, is an SEC registered investment adviser as of May
2004. Samson provides investment management services.
2) Compliance Statement: Samson claims compliance with the Global Investment Performance Standards (GIPS) and has prepared and
presented this report in compliance with the GIPS standards. Samson has been independently verified for the period June 1, 2004
through December 31, 2008 by Ashland Partners & Company LLP and from January 1, 2009 through December 31, 2014 by The
Spaulding Group.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firmwide basis and (2) the firms policies and procedures are designed to calculate and present performance in compliance with the GIPS
standards. Verification does not ensure the accuracy of any specific composite presentation.
The High Grade Core Intermediate composite has been examined for the periods December 31, 2004 through December 31, 2008. The
verification and examination reports are available upon request.
3) Policies: Additional information regarding the Firms policies and procedures for calculating performance, valuing portfolios, and
preparing compliant presentations is available upon request.
4) Composite Descriptions: The High Grade Core Intermediate (HGCI) Composite was created September 30, 2005.
The Composite
consists of all fully discretionary, fee paying separately managed accounts in the High Grade Core Intermediate style. The High Grade
Core Intermediate strategy is a relative return focused mandate appropriate for investors with an indefinite investment horizon, seeking
to maximize return with a lower degree of principal volatility than typical aggregate market strategies. The minimum account size for this
composite is $2.5 million.
The High Grade Short Term (HGST) Composite was created January 31, 2012.
The Composite consists of all fully discretionary, fee
paying separately managed accounts in the High Grade Short Term style. The strategy is a relative return focused mandate appropriate
for investors with an 1-3 year investment horizon, seeking to maximize return with a lower degree of principal volatility than typical
aggregate market strategies. The minimum account size for this composite is $2.5 million.
The Corporate Replication Composite was created August 31, 2014.
The Composite consists of all fully discretionary, fee paying
separately managed accounts in the Corporate Replication 1-5 year style. The strategy is appropriate for investors with a 1-5 year
investment horizon, seeking to provide a similar return and risk profile to that of selected corporate benchmarks with fewer securities.
The minimum account size for this composite is $2.5 million
5) Benchmark: For comparison purposes, the HGCI composite is measured against the Barclays Capital Intermediate Aggregate Index.
The Barclays Capital U.S. Intermediate Aggregate Index is an unmanaged index that represents the U.S. domestic investment-grade bond
market. It is comprised of the Barclays Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed
Securities Index, including securities that are of investment-grade quality or better, have at least one year to maturity, and have an
outstanding par value of at least $100 million.
For comparison purposes, the HGST composite is measured against the Barclays Capital 1-3 Year Government/Credit Index.
The Barclays Capital U.S. 1-3 Year Government/Credit Index is an unmanaged index that represents the U.S. domestic investment-grade
government and corporate bond market. It is comprised of the Barclays Capital Government and Credit Indices, including securities that
are of investment-grade quality or better, have between one and three years to maturity, and have an outstanding par value of at least
$250 million.
For comparison purposes, the Corporate Replication composite is measured against the Barclays 1-5 Year Corporate Index. The Barclays
Capital 1-5 year U.S. Corporate Index is an unmanaged index that represents the U.S. domestic investment-grade corporate bond
market. It is comprised of the Barclays Capital Corporate Indices, including securities that are of investment-grade quality or better, have
between one and five years to maturity. Please note that indices do not take into account any fees and expenses of investing in the
individual securities that they track, and that individuals cannot invest directly in any index. Data about the performance of these indices
are prepared or obtained by NBM and include reinvestment of all dividends and capital gain distributions.
6) Reporting Currency: Composite returns are expressed in U.S. dollars.
7) Fees: Gross-of-fees returns are presented before management fees, but net of all trading expenses, and withholding taxes. Actual
returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. Net-offee performance is show net of model management fees, all trading expenses and withholding taxes. Model fees are being deducted on a
monthly basis. Actual investment advisory fees incurred by clients may vary.
8) Significant Flows: The composite policy requires the temporary removal of any portfolio incurring a client initiated significant cash
inflow or outflow of at least 15% of portfolio assets. The temporary removal of such an account occurs at the beginning of the month in
which the significant cash flow occurs and the account re-enters the composite at the beginning of the month, after full investment.
9) Internal Dispersion: The measure of dispersion used in this presentation is the asset-weighted standard deviation of annual gross-offees returns of those portfolios that were included in the composite for the entire year. This calculation measures the fluctuation of the
rates of return of portfolios with the Composite in relation to the average return. Dispersion is not shown for composites with 5 or fewer
portfolios for a full year.
10) List of the Firms Composites: In addition to the Composite, the Firm provides investment management services utilizing different
strategies. A complete list of composite descriptions is available upon request.
11) Additional Disclosures: As of 7/1/09 portfolios are revalued for cash flows of 10% or more. Prior to 7/1/09 portfolios were not
revalued for large cash flows.
Benchmarks are shown for illustrative purposes only, may not be available for direct investment, are unmanaged, assume reinvestment of
income, and have limitations when used for comparison or other purposes because they may have volatility, credit, or other material
characteristics (such as number and types of securities) that are different from the Strategy. Information is as of the date hereof unless
otherwise indicated. Certain information is based on data provided by third-party sources and, although believed to be reliable, it has not
been independently verified and its accuracy or completeness cannot be guaranteed. This information is confidential, is intended only for
intended recipients and their authorized agents and may not be distributed to any other person without the Managers prior written
consent. Notwithstanding and foregoing, the recipient and their authorized agents may disclose to any and all persons, without limitation
of any kind, the structure and tax aspects of the transactions described herein and all materials of any kind that are provided by Samson
to the recipient related to such structure and tax aspects.
Past performance is no guarantee of future results and may differ in future time periods.
Beginning January 1, 2008, the HGCI composite definition was expanded to include accounts with mandates that allow for investment in
securities which do not fall within the High Grade Core Intermediate style. For example, the mandate may allow for allocations to
alternative sectors, or an extension in duration outside the acceptable boundaries of the High Grade Core Intermediate style. At their
time of inclusion, these portfolios had no allocation to these securities. Should these portfolios become invested in these securities, they
will be removed from the composite.

Samson Capital Advisors HG 3rd Quarter 2015 Review and Outlook