BBH Limited Duration Fund (“The Fund”) seeks to invest in a well-diversified portfolio of high quality fixed income instruments consistent with preservation of capital and prudent investment management. The Fund aims to preserve capital and to generate a positive absolute return, while attempting to avoid instances of negative total return over extended periods of time (typically, over rolling 6-month time periods). The Fund typically owns 75 to 200 Credits with most positions accounting for 0.5% to 1.5% of the Fund’s market value. Our highest conviction holdings may be up to 3.0% of the Fund’s value at purchase.
The Fund’s investments are primarily focused in notes and bonds issued by domestic and foreign corporations and financial institutions and U.S. Government, Government agency and Government guaranteed issuers. The Fund may also purchase Asset Backed Securities, Mortgage Backed Securities, and other Sovereign Debt when the Investment Adviser believes that the additional income from these securities justifies a higher risk of allocations to these asset classes. The Fund may invest in money market instruments, Repurchase Agreements and derivative instruments to meet its investment objective although not typically as a primary strategy.
Our unique valuation framework and comprehensive credit review criteria are combined to build portfolios of durable credits purchased when we believe they are at attractive yields. Credit valuations often become disconnected from their underlying fundamentals and are prone to unjustifiably high levels of volatility, an inefficiency that provides the opportunity to enhance fixed income returns through active management. Our disciplined, value-based investment process seeks to:
- Preserve capital through independent research
- Invest in credit only when a Margin of Safety exists
- Drive portfolio construction with value opportunities
- Take a long-term approach
- Foster a culture of transparency, process discipline, and open debate among professionals
Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.
The value of some asset-backed securities and mortgage-backed securities may be particularly sensitive to changes in prevailing interest rates. Although mortgage-backed securities are generally supported by some form of government or private insurance, there is no assurance that private guarantors or insurers will meet their obligations. 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.