Municipal Fixed Income

Uncovering value from the bottom up

Strategy Objectives

Peer-leading results, preservation of capital.

Our Municipal Fixed Income Strategy seeks to deliver excellent after-tax risk-adjusted returns in excess of industry benchmarks through market cycles. We invest bottom-up and seek to own a limited number of durable credits that offer attractive yields.

The municipal market is dominated by household investors, leading to concentrated demand and pricing inefficiencies. We focus our research on sectors and security types that fall outside the comfort zones of these investors, which allows us the potential to enhance our portfolios’ yield without adding additional risk. Our patient, value-oriented investment culture prioritizes capital preservation and seeks to foster consistent performance experiences throughout cycles. Our team is deeply focused and strongly aligned with our clients and has decades of experience in the municipal market.

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.
  • Top Quartile

    5 year eVestment ranking1

  • $7.3 Billion

    Municipal Fixed Income AUM
    (as of 06/30/2024)

  • 12 Years

    Average municipal bond experience of BBH team

  • >60 Years

    Managing municipal bond portfolios

1 11th percentile of 126 strategies over one year, 7th percentile of 119 strategies over five years, and 21st percentile of 96 strategies over 10 years in the eVestment U.S. Municipal Fixed Income – Intermediate Duration Category based on gross returns for the period ending 06/30/2024. Rankings are based on gross of fee performance of the Composite and reflect reinvestment of earnings. Past performance does not guarantee future results. BBH paid eVestment to be included in the rankings. The date of the eVestment rankings was 7/24/2024.

With over 1 million individual securities, the vast diversity of the municipal market lends itself well to our selective, bottom-up approach.



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 Municipal 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.
 

Visit the BBH Funds website and the BBH Luxembourg Funds website for more information about our public fund offerings.

 

Gregory Steier

Principal
New York City, NY | USA

As the Co-head of Fixed Income, Greg Steier is the lead portfolio manager for municipal bonds and has day-to-day oversight responsibility for the TIPS investment team and Quantitative Research.…  Learn More

Our Team

Our Latest Insights

Performance and Portfolio Characteristics

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Composite Performance as of 09/30/2024

BBH Municipal Fixed Income Composite

Total Returns Average Annual Total Returns
Composite/Benchmark
3 Mo.
YTD
1 Yr.
3 Yr.
5 Yr.
10 Yr.

Since Inception

(05/01/2002)

BBH Municipal Fixed Income Composite
(Gross of Fees)
2.73% 3.54% 10.09% 1.45% 2.16% 2.76% 3.71%
BBH Municipal Fixed Income Composite
(Net of Fees)
2.67% 3.35% 9.82% 1.20% 1.91% 2.50% 3.45%
Bloomberg Municipal Index 1-10 Yr Blend (1-12)
2.67% 1.87% 7.44% 0.53% 1.39% 1.97% 3.23%

Past performance does not guarantee future results.

The Bloomberg 1-10 Year Municipal Blend Index is a market value-weighted index which covers the short and intermediate components of the Bloomberg Municipal Bond Index --an unmanaged, market value-weighted index which covers the U.S. investment-grade tax-exempt bond market. The index is not available for direct investment.

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Portfolio Characteristics as of 09/30/2024

BBH Municipal Fixed Income

Benchmark
Effective Duration (years)
3.90
3.90
Yield to Worst
3.66%
3.25%

Portfolio holdings and characteristics are subject to change.

Portfolio Characteristics are of the Representative Account. The Representative Account is managed with the same investment objectives and employs substantially the same investment philosophy and processes as the strategy.

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.

eVestment rankings are based on gross of fee performance of the Composite and reflect reinvestment of earnings. The deduction of an advisory fee reduces an investor's return. Return may not be representative of any one client's experience. Past performance does not guarantee future results. 

A less favorable ESG profile may not preclude the Adviser from investing in a company, as the consideration of ESG factors is not more influential than the consideration of other investment criteria. Considering ESG factors as part of investment decisions may result in the Adviser forgoing otherwise attractive opportunities, which may result in lower performance when compared to advisers that do not consider ESG factors.

The BBH Municipal Fixed Income Strategy was previously called the BBH Intermediate Municipal Strategy.

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

Yield to Worst is the lowest yield an investor can expect when investing in a callable bond.

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.

“Bloomberg®” and the Bloomberg 1-10 Year Municipal Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (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 BBH Municipal Fixed Income Strategy. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the strategy.

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.

Income from municipal bonds may be subject to state and local taxes and at times the alternative minimum tax.

The strategy 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 strategy’s exposure in any one municipal revenue sector backed by revenues from similar types of projects increases, the strategy will become more sensitive to adverse economic, business or political developments relevant to these projects.

Investment Advisory Products and Services:

NOT FDIC INSURED   NO BANK GUARANTEE    MAY LOSE VALUE

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You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

 
1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see bbhluxembourgfunds.com



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