Exhibit I: Fixed income index returns for various indexes as of March 31, 2026, displaying duration, total return, and excess return.
1Q Highlights
|
| Performance As of March 31, 2026 |
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|---|---|---|---|---|---|---|---|
|
Total Return |
Average Annual Total Returns |
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Composite/Benchmark |
3 Mo. |
YTD |
1 Yr. |
3 Yr. |
5 Yr. |
10 Yr. | Since Inception |
BBH Structured Fixed Income Composite (Gross of Fees) |
0.55% |
0.55% |
5.60% |
8.33% |
4.95% |
5.06% | 4.94% |
BBH Structured Fixed Income Composite (Net of Fees) |
0.46% |
0.46% |
5.24% |
7.95% |
4.59% |
4.69% | 4.57% |
BBH Structured Fixed Income Benchmark |
0.43% |
0.43% |
4.67% |
5.12% |
2.36% |
2.46% | 2.54% |
Past performance does not guarantee future results Composite Inception Date: 01/01/2016 Upon the close of business on 12/31/2025, BBH Credit Partners, LLC, a subsidiary of BBH, became the investment adviser to the strategy. Performance prior to the close of business is of accounts managed by BBH. Returns of less than one year are not annualized. BBH Structured Fixed Income Benchmark is a combination of two indices. The Bloomberg US ABS Index was used prior to 11/1/2023; 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. One cannot invest directly in an index. The composition of the indexes is materially different than the strategy’s holdings. Sources: Bloomberg and BBH & Co. |
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Market Environment
The Bloomberg U.S. Aggregate Index had a slightly negative return during first quarter 2026 as interest rates and credit spreads rose slightly. Interest rates rose across all tenors as oil prices surged with the onset of conflict in Iran, spurring inflationary concerns and weaker prospects for Federal Reserve (Fed) rate cuts in 2026. Index credit spreads widened marginally from historically low levels. High-yield bonds and loans had slightly negative returns of -0.5% and -0.4%, respectively, and underperformed investment grade bonds.
Several events drove headlines during the quarter. Three noteworthy events impacted markets: the potential for artificial intelligence (AI) to disrupt software companies, elevated redemptions and limits in business development companies (BDCs), and the onset of the conflict in Iran and its impact on oil shipments and prices. Each development brings concerns, particularly as AI disruption and BDC redemptions impact conditions in the direct lending industry and the rise in oil prices begins to impact consumer prices.
When it comes to the market impacts of these headlines, the bark seems worse than the bite. Broad measures of private credit fundamentals indicate that defaults are rising toward historically normal levels. The U.S. consumer appears resilient, with delinquency and charge-off rates on most types of consumer loans in-check. In the credit markets, software companies’ spreads widened in the loan market and BDC bonds’ spreads widened. However, at the broader sector levels, credit spreads widened only marginally to levels far lower than they have in past episodes of market anxiety. This may be explained partially by the magnitude of bond fund inflows that occurred as investors flocked to the safety of bonds given higher nominal interest rates.
Valuations
Spreads of nontraditional asset-backed securities (ABS) and collateralized loan obligation (CLO) debt widened towards historical averages, while spreads of single-asset single-borrower (SASB) commercial mortgage-backed securities (CMBS) were little changed during the quarter and near their historical averages. Opportunities emerged in several structured credit sectors, including SASB CMBS, data center ABS, subprime auto ABS, personal consumer loan ABS, and broadly syndicated loan (BSL) CLOs.
Performance
The portfolio performed in line with its benchmark during the quarter, with favorable selection results offsetting negative sector effects. Sector effects detracted from relative performance, driven by exposures withing holdings of ABS and corporate credit. Positive selection effects were driven primarily by ABS exposure, particularly within holdings of collateralized fund obligations, triple net lease ABS, personal consumer loan ABS, and data center ABS. Holdings of high-yield corporate bonds of finance companies and agency CMBS also contributed to results. Holdings of BDC debt, SASB CMBS, and recurring-revenue ABS detracted from performance.
Exhibit III: Attribution as of March 31, 2026, showing average portfolio weight and gross contribution displayed in basis points.
Transaction Summary
We continued to find durable credits1 offering attractive value even as valuations reflect a growing belief that the U.S. economy is slowing. The table below summarizes a few notable portfolio additions.
Characteristics
At the end of the quarter, the portfolio’s duration was just under 2 years and continued to approximate that of its benchmark. The portfolio’s yield and average spread (option-adjusted spread, or OAS) remained elevated vs. its benchmark of traditional ABS. OAS increased over the quarter to 369 from 245 as opportunities emerged and spreads widened. The portfolio’s weighting to high-yield and non-rated instruments remained at 16%. The portfolio’s weight to ABS decreased by 3% while its weight to corporate debt increased by 3%.
Exhibit V: Characteristics as of March 31, 2026, including credit rating and sector allocation.
Concluding Remarks
A core tenet underlying our investment process is that credit valuations tend to be far more volatile than underlying fundamentals. Determining what signal is being sent by evaluating index spreads is of less interest to a bottom-up credit manager like BBH. Instead, we are evaluating opportunities that are emerging and determining whether to shake with fear or embrace these concerns as a reason to invest in situations where valuations have become disconnected from otherwise strong fundamentals.
1Obligations 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. Durable means the ability to withstand a wide variety of economic conditions.
Definitions
Bloomberg US ABS Index is the asset backed securities component of the Bloomberg US Aggregate Bond Index. The index includes pass-through, bullet, and controlled amortization structures. The ABS Index includes only the senior class of each ABS issue and the ERISA-eligible B and C tranche. The Bloomberg U.S. ABS ex. Stranded Cost Utility Index excludes certain stranded cost utility bonds included in the Bloomberg US ABS Index.
An index is not available for direct investment.
“Bloomberg®” and the Bloomberg indexes are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the indexes (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 Strategy. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the Strategy.
Risks
Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Mortgage-backed and asset-backed securities have prepayment and extension risks.
SASB lacks 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.
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.
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.
The Structured Fixed Income Strategy Representative Account is managed with the same investment objectives and employs substantially the same investment philosophy and processes as the strategy.
The securities discussed do not represent all of the securities purchased, sold or recommended for advisory clients and you should not assume that investments in the securities were or will be profitable.
Opinions, forecasts, and discussions about investment strategies represent the author’s views as of the date of this commentary and are subject to change without notice.
Issuers with credit ratings of AA or better are considered to be of high credit quality, with little risk of issuer failure. Issuers with credit ratings of BBB or better are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption. The Not Rated category applies to Non-Government related securities that could be rated but have no rating from Standard and Poor’s or Moody’s. Not Rated securities may have ratings from other nationally recognized statistical recognized statistical rating organizations.
Brown Brothers Harriman Investment Management (“IM”), a division of Brown Brothers Harriman & Co (“BBH”), claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
To receive additional information regarding IM, including a GIPS Composite Report for the strategy, contact John Ackler at 212 493-8247 or via email at john.ackler@bbh.com.
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 results reflect 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. Results will vary among client accounts. Performance calculated in U.S. dollars.
The objective of our Structured Fixed Income Strategy is to deliver excellent returns in excess of industry benchmarks through market cycles. The Composite is comprised of all fully discretionary, fee-paying structured fixed income accounts over $10 million. Investments are focused on asset-backed securities, commercial mortgage-backed securities, collateralized loan obligations, and corporate debt securities that are primarily investment grade. Non-investment grade securities may be held. Investments are focused on U.S. dollar denominated securities, but non-U.S. dollar securities may be held. The accounts are managed to a duration +/- 2 years of the Bloomberg ABS ex-Stranded Cost Utility Index. Effective December 1, 2022, the composite definition was slightly altered to establish a band around the duration of the Bloomberg ABS ex-Stranded Cost Utility Index.
Duration is a measure of the portfolio’s return sensitivity to changes in interest rates.
Standard deviation measures the historical volatility of a returns. The higher the standard deviation, the greater the volatility. The Sharpe ratio is the average return earned in excess of the risk-free rate (the Fed Funds rate).
Traditional ABS include prime auto backed loans, credit cards and student loans (FFELP). Non-traditional ABS include ABS backed by other collateral types.
Brown Brothers Harriman & Co. (“BBH”) may be used to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries. This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners. © Brown Brothers Harriman & Co. 2026. All rights reserved.
Not FDIC Insured No Bank Guarantee May Lose Money
IM-18420-2026-04-24 Exp. Date 07/31/2026
