The BBH Intermediate Municipal Bond Fund seeks to protect investors’ capital and generate attractive risk adjusted returns by combining thorough, independent research and a unique valuation discipline to identify undervalued municipal securities.
The Fund targets between 75-125 Credits in major sub-sectors of the U.S. municipal bond market, including general obligation bonds, revenue bonds, and pre-refunded securities. The Fund invests in a long-term, tax aware manner and applies a bottom-up, fundamental investment approach to municipal credit analysis.
The essence of our fixed income process is to own a limited number of durable credits purchased at attractive yields. At BBH, our fixed income investment philosophy draws upon our investment culture as a firm and is grounded in a few key insights. First, credit valuations across fixed income sectors historically offer compensation well in excess of default-driven losses. Second, credit spreads are more volatile than the underlying fundamentals justify providing a fertile environment for active management. Third, we believe a patient, long-term approach is necessary to deliver peer leading total returns.
Our investment team seeks to deliver attractive long-term results by rigorously applying the following investment principles:
- We aim to preserve capital through thorough underwriting: We are committed to fundamental research and have made it the foundation of our investment process. We commit capital only to durable, transparent, well-managed, and appropriately structured investments.
- We are value investors: We believe that credit valuations are often disconnected from their underlying fundamentals. We take advantage of this basic and lasting inefficiency by purchasing individual securities that satisfy both our credit and valuation criteria.
- We let value opportunities drive portfolio construction: Our individual credit and sector weightings are built “bottom-up” from the depth and availability of attractively-priced opportunities, not “top-down” from benchmarks, ratings, or macro-thematic views. When attractive valuations are not available we maintain cash, pre-refunded bonds, or other liquid reserves.
- We take a long-term approach: Our valuation assessment of a bond may not coincide with market views prior to maturity. Therefore, we invest with a long-term approach, employing discipline and patience.
- We foster a culture of transparency, process discipline, and open debate: We believe these principles, supported by a peer review process, check-lists, and clear evaluation criteria, lead to greater objectivity and better decisions.
- We invest with a Margin of Safety: We require a margin of safety when purchasing credits. A margin of safety provides an additional discount to allow for the cyclicality of credit markets.
Investors in the Fund should be able to withstand short-term fluctuations in the fixed income markets in return for potentially higher returns over the long term. The value of portfolios changes every day and can be affected by changes in interest rates, general market conditions and other political, social and economic developments.
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.
Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax.
The Fund also invests in derivative instruments, investments whose values depend on the performance of the underlying security, assets, interest rate, index or currency and entail potentially higher volatility and risk of loss compared to traditional stock or bond investments.
As the Fund's exposure in any one municipal revenue sector backed by revenues from similar types of projects increases, the Fund will also become more sensitive to adverse economic, business or political developments relevant to these projects.
Asset allocation decisions, particularly large redemptions, made by an investment adviser whose discretionary clients make up a large percentage of the Fund's shareholders may adversely impact remaining Fund shareholders.