Intermediate Duration Fixed Income

Applying a value-based discipline to security selection and portfolio construction 

Strategy Objectives: Peer-leading results, preservation of capital

The Intermediate Duration Fixed Income Strategy is designed to deliver excellent returns through market cycles for investors seeking broad exposure and intermediate duration to the U.S. fixed income markets. We take an active management approach, seeking to build low-duration taxable bond portfolios from the bottom up and allowing valuation to drive our portfolio construction. We only invest in credits we believe to be durable, well-managed, appropriately structured, and comprehensively researched and understood.

We are guided by a set of core principles that we consistently and rigorously apply across all fixed income strategies: 

  • Active Management: We believe in a bottom up, value-based approach to active management.
  • Durability: We only invest in securities we believe are built to withstand a variety of economic conditions.
  • High Conviction: We believe selection drives our results, and our investment process is a balancing act between conviction and a prudent level of diversification.
  • Long-term Perspective: We underwrite our investments to perform through market cycles.
  • Discipline and Patience: We let valuation drive our investment process and will hold reserves when the opportunity set is limited.
  • $2.8 Billion

    Intermediate Duration Fixed Income AUM
    (as of 06/30/2024)

  • 25 Years

    Average experience of our portfolio management team

  • 20

    Investment professionals contribute to the strategy
    (as of 06/30/2024)

Replacing fear with facts leads to strong performance.



Investment Process

Independent research, both quantitative and fundamental, serves as the foundation of our bottom-up investment process. First, we employ a proprietary quantitative framework to assess each security’s excess return potential. For those securities that meet this quantitative valuation hurdle, we apply our fundamental credit criteria: durability, transparency, excellent management, and appropriate structure.

Our valuation framework:

  • Allows uniform evaluation of the entire fixed income market.
  • Incorporates a margin of safetyX
    Margin of Safety

    With respect to fixed income investments, a margin of safety exists when the additional yield offers, in BBH's view, compensation for the potential credit, liquidity and inherent price volatility of that type of security and it is therefore more likely to outperform an equivalent maturity credit risk-free instrument over a 3-5 year horizon.

    See More Definitions
    considering volatility differences across sectors and ratings tiers.
  • Highlights new opportunities and assesses the ongoing attractiveness of existing holdings.
  • Provides valuable input on position-sizing and allocating our credit team’s resources.

Buy Discipline:

  • Systematic review and ranking of available credit universe
  • Deep fundamental credit review of identified opportunities
  • Durable positions sized commensurate with expected excess return

Sell Discipline:

  • Trim positions as margin of safety recedes
  • Sell positions when a margin of safety no longer exists
  • Immediate sale if the analyst’s credit outlook changes

We view investment risk in absolute, rather than relative, terms. We believe the greatest risk to a fixed income portfolio is the permanent impairment of a portfolio holding. Our credit underwriting process is a primary defense against impairment.

  • We employ this disciplined process through the lifecycle of an investment.
  • We underwrite all credit investments to maturity and only purchase performing credits we believe to be highly durable.
  • Every credit we purchase has been pre-stressed to withstand the most severe adversity that we anticipate for its industry or asset type.

We believe that investors should only accept risk for which they are appropriately compensated. Our valuation framework helps quantify investment risks to identify opportunities that are worthy of deeper research. Our fundamental credit criteria, along with continuous discipline around position size and economic sector concentration help to mitigate portfolio risk.

We ensure both a well-controlled trading platform and compliance with client guidelines through a comprehensive enterprise risk management framework including:

  • Pre-trade guideline clearance by a dedicated risk management team
  • Independent senior management compliance oversight
  • Formal weekly portfolio reviews

What Makes Us Different? Bottom-up, value-conscious investment process

  • We strive to identify strong absolute-value, not relative-value, opportunities.
  • We are entirely bottom-up with a team-based approach emphasizing security selection.
  • Our portfolio sector exposures take shape through a strict adherence to our valuation and credit criteria.
  • We avoid large macroeconomic and directional positions that add volatility, but not return.

How to Invest

Our Intermediate Fixed Income Strategy can be accessed through a variety of investment vehicles. To learn more please contact a member of our institutional relationship management team.
 

John Ackler

Managing Director
New York City, NY | USA

As a Fixed Income Product Specialist, John Ackler is responsible for overseeing many of the firm’s US institutional fixed income client and consultant relationships. John also participates in…  Learn More

Our Team

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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 reflects 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. Performance is calculated in U.S. dollars. 

Effective duration is a measure of the portfolio’s return sensitivity to changes in interest rates.

Yield to Maturity is the rate of return the portfolio would achieve if all purchased bonds and derivatives were held to maturity, assuming all coupon and principal payments are received as scheduled and reinvested at the same yield to maturity. This figure is subject to change and is not meant to represent the yield earned by any particular security. Yield to Maturity is before fee and expenses.

This communication is for informational purposes only and does not constitute an offer or a solicitation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor’s circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice.  Any views and opinions are subject to change at any time.
Strategies are shown without regard to whether they are offered as separately managed account mandates or through pooled vehicles.  Any discussion of or reference to any given strategy herein should not be taken as a recommendation or solicitation of any pooled vehicle which has an investment objective featuring or similar to such strategy.

This material does not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized or unlawful to do so.

Risks

There is no assurance that a portfolio will achieve its investment objective or that the strategy will work under all market conditions.  The value of the portfolio can be affected by changes in interest rates, general market conditions and other political, social and economic developments.  Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

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.  Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.

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.

Investment Advisory Products and Services:

NOT FDIC INSURED   NO BANK GUARANTEE    MAY LOSE VALUE

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