Our Alternative Credit strategy focuses on building a diversified portfolio of select credit investments. We seek to generate equity-level returns through full market cycles with a lower return volatility, similar to fixed income markets.
We leverage a differentiated, time-tested investment strategy tailored to our investment strengths, extensive relationships, and experience. We focus primarily on junior positions in structured credit and opportunistic investments in higher-yielding corporate credit.
Benefits of our Alternative Credit strategy
Our longstanding competitive advantages in higher-value segments of the structured credit markets power our Alternative Credit strategy.
- Leading Investment Manager: Among the largest investors in securitized assets, with decades of experience
- Proven Track Record: Top-quartile structured and corporate credit performer1
- Unique Opportunity Set: Attractive, less-trafficked, durable credit segments
- Existing Relationships and Network: Longstanding senior management relationships with more than 300 private issuers
- Depth of Team: Portfolio management team with a demonstrated track record of value-driven, dynamic allocation across specialized asset types
Given our breadth of coverage, experience, and relationships, we believe no other investor knows the value and risks in these credit segments better than BBH.”
Investment profile and strategy
Our Alternative Credit strategy invests dynamically across four core investment types complemented by opportunistic credit investments, resulting in a well-diversified portfolio across more than a dozen asset types.
- Core Investment Types
- Investment Process
- Asset Classes
- Private credit (BDC equity)
- Commercial loan (CLO)
- Multi-family lending (CMBS)
- Private loans and leases (ABS)
- Opportunistic credit
1. Broadest Credit Sourcing: Our sourcing prowess is key to successfully investing in the opportunity set. Our established, broad relationship network across sectors enables exclusive access to investments.
2. Credit Criteria: Through our due diligence process, we require that all credit investments meet four key criteria – durability, management, appropriate structure, and transparency – and withstand stringent stress testing.
3. Valuation Criteria: Our proprietary valuation model pursues adequate compensation and a margin of safety in a long-term context, focusing analyst attention on the highest-value ideas.
4. Portfolio Construction: We size positions, monitor duration, and assess betas and volatilities. Our independent risk team monitors diversification, risk metrics, and guideline compliance.
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1 Past performance does not guarantee future results.
This communication is for informational purposes only. 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. Individuals should consult their personal tax, accounting and legal advisers regarding any potential investment or strategy. Any views and opinions are subject to change at any time.
This material does not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized to do so.
Alternative Credit Strategy Risks
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. Because the equity CLO tranche’s success depends on the success of the loan tranches - it’s last in line to receive cash flows and first to realize loan losses - its investors take the most risk of any CLO investors. There is no assurance the investment objective will be achieved. The value of an investment may be adversely affected during times of market stress and volatility.
Investment Advisory Products and Services:
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
