Brown Brothers Harriman & Co. launched a fund designed to avoid risk, protecting investors' capital by focusing on high-grade intermediate maturities.
The new Intermediate Municipal Bond Fund (BBINX) launched on April 1 is a $50 million mutual fund that concentrates on long-term investments which BBH will select through a "bottom-up" approach.
"Before we purchase any security, the security needs to satisfy our credit and underwriting valuation criteria," Gregory Steier, manager of the fund and head of tax-exempt fixed income at BBH, said in an interview. "We approach building portfolios on a bond by bond basis, one by one."
The securities' valuations are not tied to benchmarks, rating, or macro-thematic views, according to the fund's description on BBH's website.
"The fund will be predominantly investment-grade," Steier said. "When we think about credit we want to own durable entities and we want to own credits that are solvent under a wide range of future economic outcomes."
The portfolio management team expects to have from 75 to 125 securities in the fund, according to BBH's press release. Steier said the fund plans to invest in sectors of the municipal market that BBH believes are undervalued.
"One example is auction rate securities," Steier said. "We are looking at the high quality issuers available that have bonds with a floating rate of interest available at discounts that should perform well in a rising interest rate scenario."
BBH will use independent research to find and determine what to purchase in these undervalued areas of the municipal market. The seven-member management team contains three analysts who will evaluate municipal credits. BBH will rely more on these assessments than the valuations of the major rating agencies.
Other than Steier and the analysts, three traders are on the team.
Steier said BBH launched the fund because it "wanted to extend its product offerings to private banks, family offices, and other investors for whom municipal bonds represent core holdings and wish to access muni bonds through mutual fund vehicles."
The minimum initial purchase is $5,000, according to the fund's prospectus.
One of the previous funds was the BBH Tax Free Short/Intermediate Fixed Income Fund, which was created to enable BBH private bank clients to access BBH's money management skills in the municipal space. Its name later changed to 59 Wall Street Tax Free Short/Intermediate Fixed Income Fund.
This is the third municipal fund BBH has launched. One of the previous funds was the BBH Tax Free Short/Intermediate Fixed Income Fund, that's name later changed to 59 Wall Street Tax Free Short/Intermediate Fixed Income Fund that was created to enable BBH private bank clients to access BBH's money management skills in the municipal space. The fund closed in 2007.
"A business decision was made that it was no longer needed," the spokesman said in an email.
The other fund was the BBH Tax-Exempt Money Fund that closed in 2009 as a result of a low interest rate environment, the spokesman said in an email.
