Structured Fixed Income

Diversified portfolio focused on the expanding opportunity set in securitized investments

Strategy Objectives

Our Structured Fixed Income Strategy is designed to deliver peer-leading returns through market cycles for investors seeking the attractive risk/return characteristics of the structured securities market.

We build structured fixed income portfolios bottom-up, allowing valuation and security selection to drive our portfolio construction. Portfolios include durable, well-managed, appropriately structured credits that can be thoroughly researched, stress-tested and well 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.
     

*15th percentile of 109 strategies over 1 year and 13th percentile of 95 strategies over 5 years in the US Securitized Fixed Income Category based on gross return for the period ending 12/31/2023.

We know of no other strategies that invest as broadly across the structured fixed income universe as BBH.



Investment Process

Our structured fixed income strategy invests in asset-backed securities, commercial mortgage-backed securities, agency mortgage-backed securities, secured corporate debt, and select collateralized loan obligations. We apply a disciplined investment selection process to portfolio construction focused on durable issuers with the following critical attributes:

  • Time-Tested Collateral: Secured by durable lending products.
  • Established Lending Track Record: Originated by profitable, established industry leaders with seasoned management teams.
  • Skin-in-the-Game: Originator maintains a substantial “first loss” stake in the capital structure of our investments.
  • Ample Credit Enhancement: Our proprietary stress testing requires structural protections that withstand severe economic conditions.
  • Full Transparency: We maintain full access to financial reporting and to the senior-most management.

Our valuation framework:

  • Allows uniform evaluation and ranking of the entire structured fixed income market.
  • Incorporates 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.

    See More Definitions
    considerations which vary across sectors and rating tiers.
  • Countercyclical by design, it signals new opportunities when valuations are attractive, and reduced exposures when valuations are approaching full value.
  • 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.
  • We seek opportunities across the entire spectrum of structured fixed income sectors with a particular focus in non-traditional ABS.

How to Invest

Our Structured 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.
 

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

Our Latest Insights

Performance and Portfolio Characteristics

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Composite Performance as of 12/31/2023

BBH Structured Fixed Income Composite

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

Since Inception

(01/01/2016)

BBH Structured Fixed Income Composite
(Gross of Fees)
3.60% 9.99% 9.99% 3.12% 3.73% -- 4.17%
BBH Structured Fixed Income Composite
(Net of Fees)
3.51% 9.61% 9.61% 2.76% 3.37% -- 3.81%
BBH Structured Fixed Income Benchmark
2.89% 5.31% 5.31% 0.05% 1.82% -- 1.81%

Past performance does not guarantee future results.

The BBH Structured Fixed Income Benchmark is a combination of two indices. The Bloomberg US ABS Index was used prior to 11/1/2022; the Bloomberg U.S. ABS ex. Stranded Cost Utility Index is used subsequently. Due to recent changes in the composition of the Bloomberg US ABS Index, the new Bloomberg U.S. ABS ex. Stranded Cost Utility Index more closely reflects the effective duration of the strategy.

The Bloomberg US ABS Index is the ABS component of the Bloomberg US Aggregate Index and is comprised of credit and charge card receivables, auto loan receivables, and utility receivables with at least:  an average life of one year, $500 million deal size and $25 million tranche size and an investment grade rating (Baa3/BBB- or higher) by at least two NRSROs.  The index is not available for direct investment.

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Portfolio Characteristics as of 12/31/2023

BBH Structured Fixed Income

Benchmark
Effective Duration (Years)
1.80
1.93
Yield to Maturity
8.55%
4.97%

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.

eVestment rankings are based on gross of fee performance of the Composite and reflect reinvestment of earnings. The deduction of an advisory fee reduces an investor's return. Return may not be representative of any one client's experience. Past performance does not guarantee future results. eVestment rankings are as of 1/22/2021.

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.

“Bloomberg®” and the Bloomberg US ABS Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Brothers Harriman & Co (BBH). Bloomberg is not affiliated with BBH, and Bloomberg does not approve, endorse, review, or recommend the BBH Structured Fixed Income Strategy. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the strategy.

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. Mortgage-backed securities have prepayment, extension, and interest rate risks.

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.

Single Asset-Single Borrower securities (“SASBs”) lack the diversification of a transaction backed by multiple loans since performance is concentrated in one commercial property. SASBs may be less liquid in the secondary market than loans backed by multiple commercial properties.

Below investment grade bonds, commonly known as junk bonds, are subject to a high level of credit and market risks.

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

NOT FDIC INSURED ● NO BANK GUARANTEE ● MAY LOSE VALUE

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You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

 
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