Limited Duration Fixed Income

Low duration strategy emphasizing well-compensated credit opportunities

Strategy Objectives

Our objective is to deliver excellent returns relative to industry benchmarks through market cycles. The Limited Duration Fixed Income Strategy is designed for interest rate sensitive investors seeking broad exposure to the U.S. fixed income markets with a portfolio duration of less than two years.
 
Our active management approach seeks to build low duration, taxable bond portfolios bottom-up allowing valuation to drive our portfolio construction. We only invest in creditsClose
Credits

Obligations such as bonds, notes, loans, leases and other forms of indebtedness, except for Cash and Cash Equivalents, issued by obligors other than the U.S. Government and its agencies, totaled at the level of the ultimate obligor or guarantor of the Obligation.

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we believe to be durable, well-managed, appropriately structured, which can be comprehensively researched and understood.
  • Active Management: We believe in a bottom up, value-based approach to active management.

  • Durability: We only invest in securities we believe are built to withstand a variety of economic conditions.

  • High Conviction: We work to balance ample diversification while ensuring meaningful concentration in our highest conviction ideas.

  • Long-term Perspective: We underwrite our investments to perform through market cycles.

  • Discipline and Patience: We let valuation drive our investment process and will hold reserves when the opportunity set is limited.
     

  • $13.8 Billion

    Limited Duration Fixed Income AUM
    as of (12/31/2023)

  • 25 Years

    Average experience of our portfolio management team

  • 20

    Investment professionals contribute to the strategy
    as of (12/31/2023)

We seek excess return over time, not relative value across today’s opportunity set.



Investment Process

  • Our independent research serves as the foundation of our bottom-up investment process. We also apply a proprietary quantitative framework to assess each security’s long-term return potential. We will hold reserves when available opportunities do not meet our credit and valuation criteria.
  • Investment opportunities must meet four essential criteria: durability, transparency, excellent management, and appropriate structure.

Our valuation framework:

  • Allows uniform evaluation of the entire fixed income market.
  • Incorporates a margin of safetyClose
    Margin of Safety

    With respect to fixed income investments, a margin of safety exists when the additional yield offers, in BBH's view, compensation for the potential credit, liquidity and inherent price volatility of that type of security and it is therefore more likely to outperform an equivalent maturity credit risk-free instrument over a 3-5 year horizon.

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    considering volatility differences across sectors and ratings tiers.
  • Highlights new opportunities and assesses the ongoing attractiveness of existing holdings.
  • Provides valuable input on position-sizing and allocating our credit team’s resources.

Buy Discipline:

  • Systematic review and ranking of available credit universe.
  • Deep fundamental credit review of identified opportunities.
  • Durable positions sized commensurate with expected excess return.
     

Sell Discipline:

  • Trim positions as margin of safety recedes.
  • Sell positions when a margin of safety no longer exists.
  • Immediate sale if the analyst’s credit outlook changes. 

We view investment risk in absolute, rather than relative terms.  We believe the greatest risk to a fixed income portfolio is the permanent impairment of a portfolio holding. Our primary defense against impairment is the rigorous credit underwriting process we employ prior to each purchase and through its holding period.  We underwrite all credit holdings to maturity and only purchase performing credits we believe to be highly durable.  Every credit we purchase has been pre-stressed to withstand the most severe adversity that we anticipate for its industry or asset type.

We believe that investors should only accept credit risk for which they are amply compensated.  We have designed a valuation framework that quantifies the risk associated with credit to identify opportunities that are worthy of a deeper credit review and size their allocation in portfolios.  This process of risk management interacts with the investment process by narrowing the universe of securities to which we will apply our valuable analytic resources.

We ensure both a well-controlled trading platform and compliance with client guidelines through a comprehensive enterprise risk management framework that includes an automated front-end trading system, pre-trade guideline clearance by a dedicated risk management team, independent senior management compliance oversight, and formal weekly portfolio reviews.

What Makes Us Different?

  • We strive to identify strong absolute-value, not relative-value, opportunities.
  • We are entirely bottom-up with a team-based approach emphasizing security selection.
  • Our portfolio sector exposures take shape through a strict adherence to our valuation and credit criteria.
  • We avoid large macroeconomic and directional positions that add volatility, but not return.

How to Invest

Our Limited Duration Fixed Income Strategy can be accessed through a variety of investment vehicles.  To learn more please contact a member of our institutional relationship management team.

Visit the BBH Funds website and the BBH Luxembourg Funds website for more information about our public fund offerings.

 

John Ackler

Managing Director
New York City, NY | USA

As a Fixed Income Product Specialist, John Ackler is responsible for overseeing many of the firm’s US institutional fixed income client and consultant relationships. John also participates in…  Learn More

Our Team

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Performance and Portfolio Characteristics

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Composite Performance as of 12/31/2023

BBH Limited Duration Fixed Income Composite

Total Returns Average Annual Total Returns
Composite/Benchmark
3 Mo.
YTD
1 Yr.
3 Yr.
5 Yr.
10 Yr.

Since Inception

(04/01/1990)

BBH Limited Duration Fixed Income Composite
(Gross of Fees)
2.81% 7.91% 7.91% 2.82% 3.28% 2.40% 4.50%
BBH Limited Duration Fixed Income Composite
(Net of Fees)
2.75% 7.64% 7.64% 2.57% 3.03% 2.18% 4.28%
ICE BofA 1-3 Year US Treasury Index
2.49% 4.20% 4.20% -0.05% 1.28% 1.04% 3.67%

Past performance does not guarantee future results.

The ICE BofA Merrill Lynch 1-3 U.S. Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of at least one year and less than three years. The index is not available for direct investment.

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Portfolio Characteristics as of 12/31/2023

BBH Limited Duration Fixed Income

Benchmark
Effective Duration (years)
1.77
0.85
Yield to Maturity
4.37%
6.69%

Portfolio holdings and characteristics are subject to change.

Portfolio Characteristics are of the Representative Account. The Representative Account is managed with the same investment objectives and employs substantially the same investment philosophy and processes as the strategy.

Gross of fee performance results for this composite do not reflect the deduction of investment advisory fees. Actual returns will be reduced by such fees. Net of fees performance reflects the deduction of the maximum investment advisory fees.  Returns include all dividends and interest, other income, realized and unrealized gain, are net of all brokerage commissions, execution costs, and without provision for federal or state income taxes. Performance is calculated in U.S. dollars. 

Effective duration is a measure of the portfolio’s return sensitivity to changes in interest rates.

Yield to Maturity is the rate of return the portfolio would achieve if all purchased bonds and derivatives were held to maturity, assuming all coupon and principal payments are received as scheduled and reinvested at the same yield to maturity. This figure is subject to change and is not meant to represent the yield earned by any particular security. Yield to Maturity is before fee and expenses.

This communication is for informational purposes only and does not constitute an offer or a solicitation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor’s circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice.  Any views and opinions are subject to change at any time.
Strategies are shown without regard to whether they are offered as separately managed account mandates or through pooled vehicles.  Any discussion of or reference to any given strategy herein should not be taken as a recommendation or solicitation of any pooled vehicle which has an investment objective featuring or similar to such strategy.

This material does not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized or unlawful to do so.

Risk Considerations

There is no assurance that a portfolio will achieve its investment objective or that the strategy will work under all market conditions.  The value of the portfolio can be affected by changes in interest rates, general market conditions and other political, social and economic developments.  Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.
Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, maturity, call and inflation risk; investments may be worth more or less than the original cost when redeemed.  Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.

Asset-Backed Securities ("ABS") are subject to risks due to defaults by the borrowers; failure of the issuer or servicer to perform; the variability in cash flows due to amortization or acceleration features; changes in interest rates which may influence the prepayments of the underlying securities; misrepresentation of asset quality, value or inadequate controls over disbursements and receipts; and the ABS being structured in ways that give certain investors less credit risk protection than others.

The strategy also invests in derivative instruments, investments whose values depend on the performance of the underlying security, assets, interest rate, index or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments.

Foreign investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards.

Illiquid investments subject the investor to the risk that she may not be able to sell the investments when desired or at favorable prices.

NOT FDIC INSURED ● NO BANK GUARANTEE ● MAY LOSE VALUE

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