Brown Brothers Harriman (BBH) has been at the forefront of U.S. Treasury Inflation-Protected Security (TIPS) research, thought leadership, and active management since the inception of the U.S. TIPS market in 1997. Our U.S. TIPS strategy aims to provide investors with a hedge against future inflation by maintaining investments that are denominated primarily in U.S. TIPS. Our investment process is focused on the long term, employing a collection of time-tested strategies within the inflation-indexed markets, diversified to avoid dependence on any single tactical strategy. This “Pure Play” approach eschews credit and real-asset exposures along with the volatility unrelated to inflation that often accompanies them.
Our independent research, a blend of quantitative and qualitative analysis, serves as the foundation of our investment process. We exploit market inefficiencies in the U.S. TIPS and non-U.S. inflation-indexed markets using three primary strategy categories:
- Fundamental Strategies: Using proprietary quantitative models, our investment team seeks to identify real rate levels and curve slope that may be historically inconsistent with current economic fundamentals. This analysis, along with the judgment of our experienced investment team, will periodically drive modest duration or yield curve positions relative to the index.
- Non-Directional Strategies: Our research has identified several consistent and reoccurring inefficiencies within the U.S. TIPS market, and our investment team frequently positions our portfolio to capture the relative excess return available from them. These market inefficiencies are the result of auction cycles, seasonal patterns, performance index extensions, inflation accruals, and roll down.
- Opportunistic Strategies: These strategies entail out-of-index positions in the U.S. Treasury market and non-U.S. sovereign inflation-indexed markets.