The BBH Limited Duration Fund Class I ("the Fund") returned 0.27% in August, and the Bloomberg Barclays U.S. 1-3 Year Treasury Index returned -0.02%. Outperformance was due to the Fund’s positive performance in credit sectors, vs. an all Treasury benchmark during a month where short rates rose slightly.
The yield in the 1-3 year portion of the Treasury curve increased an average 2 basis points1 in August. Returns in excess of Treasuries (excess returns) for 3-5 year Investment Grade corporate bonds were 0.38% and 0-5 year High Yield corporate bonds were 0.99% vs. total returns of 0.27% and 0.96%, respectively. Total return for floating rate loans was 1.50%. Asset-backed securities and non-agency commercial mortgage-backed securities returned 0.25% and 0.36%, respectively.
Credit index spreads and risk-free rates were little changed in August. The re-openings of state economies were sluggish and uneven, and further federal government stimulus did not materialize. These factors were counterbalanced by better-than-expected economic reports and potentially expedited vaccine development timetables.
Sectors such as indoor malls, entertainment, travel and lodging, airlines and aviation, and consumer and business lending continue to face severe pandemic related challenges. As usual, our current purchases are being kept only to issuers with the durability to withstand a wide range of economic scenarios and which are well-positioned in this environment.
An ongoing economic slowdown coupled with a reduction in government support leave credit markets vulnerable to a slower, but more fundamentally-driven pullback going into the end of the year.
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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. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations.
Purchase and sale information provided should not be considered as a recommendation to purchase or sell a particular security and that there is no assurance, as of the date of publication, that the securities purchased remain in a fund's portfolio or that securities sold have not been repurchased.
Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.
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Brown Brothers Harriman & Co. ("BBH"), a New York limited partnership, was founded in 1818 and provides investment advice to registered mutual funds through a separately identifiable department (the "SID"). The SID is registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. BBH acts as the Fund Administrator and is located at 140 Broadway, New York, NY 10005.
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Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. The BBH Limited Duration Fund was rated against the following numbers of U.S.-domiciled Ultrashort Bond category funds over the following time periods: 168 funds in the last three years, 130 funds in the last five years, and 59 funds in the last ten years. With respect to these Ultrashort Bond category funds, the overall BBH Limited Duration Fund (Class I & Class N), received a Morningstar Rating of 5 stars and 5 stars, respectively. Class I three-, five- and ten-year periods received ratings of 5 stars, 5 stars and 5 stars, respectively. Class N three-, five- and ten-year periods received ratings of 5 stars, 5 stars and 5 stars, respectively.
Not FDIC Insured No Bank Guarantee May Lose Money
IM-08421-2020-09-11 BBH003039 Exp. Date 10/31/2020
 A unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.