Breckinridge Intermediate Municipal Strategy
A separately managed account focused on investment-grade municipal bonds in an effort to limit risk to principal while generating federal tax-exempt interest income.
Focus on high-quality bonds
We work to balance your desire to reduce the effect of interest rate changes with your income goals by investing in high quality bonds. The average credit quality of the bonds in your SMA will be at least AA at the time of purchase, with nothing rated below A–. High quality, or investment grade bonds, tend to be more reliable sources of interest income and are generally a lower risk of default than low-quality, or non-investment grade bonds. It's part of our effort to generate the income you're seeking without taking on unnecessary risk.
Predictable tax-exempt income
Depending on your tax bracket, the after-tax return on municipal bonds may be more beneficial than those offered by taxable bonds. A key benefit of municipal bonds, particularly for investors in high tax brackets, is their ability to offer federally tax-exempt interest income. Interest income from some municipal bonds may also be free from state income tax, depending on your state of residency.
Based on 2018 federal income tax rates. Tax equivalent yields do not reflect tax credits, exemptions, and itemized deduction phaseouts, or the impact of federal and/or state alternative minimum taxes. The two highest tax brackets of 38.8% and 40.8% include a Medicare surtax of 3.8% imposed by the Patient Protection and Affordable Care Act of 2010. Please consult your tax advisor for further details.
Tax-equivalent yield: The interest rate that must be received on a taxable security to provide the holder the same after-tax return as that earned on a tax-exempt security.
Note: The yields and calculated tax-equivalent yields in the chart do not reflect the potential effects of the federal alternative minimum tax or state/local taxes, either of which could have a significant impact on the values shown.
Balance income vs. risk
Municipal bonds historically have had a lower level of default risk relative to other types of bonds. By maintaining a portfolio of investment-grade municipal bonds, with a significant portion having a credit rating of AA– or higher, Breckinridge Intermediate Municipal Strategy is built to help limit risk to your investment and to seek a steady, reliable stream of income over the long term. The strategy has a philosophy centered on a research-based approach that balances the opportunity to generate income and capital appreciation with a focus on risk management.
To also help manage risk, the strategy targets an average duration3 similar to the duration of the Bloomberg Barclays Managed Money Short/Intermediate (1–10 years) Municipal Bond Index.5 A duration in this mid-range helps reduce the impact from interest rate changes in comparison to strategies that have longer duration.
The benefits of an experienced investment team
Breckinridge Capital Advisors, Inc. has an investment philosophy that seeks to carefully analyze and manage risk, while investing opportunistically in an effort to improve incremental returns. Breckinridge strives to add value through efficient trading, bottom-up credit research, and proactive portfolio management, while avoiding what it views as excessive speculation. These strategies are balanced with a commonsense approach based on the seasoned judgment of its investment team.
Breckinridge's proprietary technology and broad network of over 140 dealers allows the firm to trade municipal bonds efficiently by providing:
- The flexibility to find value in both the primary and secondary markets.
- The ability to take advantage of opportunities in both large and smaller lot sizes.
- The capacity to seek lower transaction costs relative to the broader market.