Breckinridge® Limited Duration Municipal StrategyA separately managed account investing in high-quality investment-grade municipal bonds, which seeks to deliver interest income exempt from federal income taxes while limiting risk. This actively managed strategy looks to maintain an average target duration of 2 to 3 years. |
Investment objective: Seeks to limit risk to principal while generating federally tax-exempt interest income.
Types of investments: Primarily high-quality investment-grade1 municipal bonds at time of purchase
Investment minimum: $250,0002
Eligible Registration Types: Taxable only
Gross annual advisory fee: 0.35% – 0.40%3 (varies based on total assets invested)
A research-driven approach to federally tax-exempt interest income focused on higher-grade municipal bonds and risk management.
- Designed to help pursue federally tax-exempt interest income
Built for investors seeking a professionally managed limited-term duration municipal bond portfolio with a high overall credit profile—targeting an average credit rating of AA and investing only in bonds rated A- or higher at the time of purchase—while aiming to deliver federally tax-exempt interest income, including income exempt from the alternative minimum tax (AMT). The Strategy also maintains a disciplined focus on diversification and risk awareness.
- Dedicated expertise across the investment-grade municipal market
Portfolios are managed by Breckinridge Capital Advisors, a firm with deep specialization in investment-grade municipal bonds. Breckinridge applies a rigorous, research-intensive process designed to uncover opportunities and help manage risk in a complex and evolving marketplace.
- Tax-sensitive management supported by direct bond ownership
Direct ownership enables the portfolio team to apply targeted tax-smart4 strategies—such as tax-loss harvesting when appropriate—to help enhance after-tax efficiency.
- Flexibility to act on market insights, not just endure them
Active management provides the ability to hold bonds through maturity or sell them earlier when conditions warrant—helping the team navigate rate environments, manage duration, and respond to changing opportunities as markets evolve.
- Balanced approach to income generation and potential price appreciation
Through disciplined research and a steady focus on credit quality, the strategy seeks opportunities that can support meaningful federally tax-exempt income while also identifying bonds with potential for price appreciation—all within a robust risk-management framework.
About the strategy
High-quality limited-term municipal bonds
Focus on high-quality bonds
- Target average rating: Primarily AA or higher
- Minimum credit quality: Bonds rated A- or better at purchase5
- Average target duration: 2 to 3 years
- Maturities: Bonds generally maturing within 7 years
- Number of holdings: Typically, 15—50 individual bonds‡
- AMT considerations: Interest is generally not subject to AMT.
‡ Number of portfolio holdings dependent on overall portfolio size.
Expected range of credit quality of the bonds in your SMA
Investment-grade municipal bonds typically offer relatively low default rates†
10-year average cumulative default rates (1970-2023)
| Moody's rating category7 | Municipal bonds | Global corporate bonds | |
|---|---|---|---|
| Investment
Grade |
Aaa | 0.00% | 0.36% |
| Aa | 0.02% | 0.77% | |
| A | 0.10% | 2.03% | |
| Baa | 1.09% | 3.61% | |
| Non-Investment
Grade |
Ba | 3.49% | 15.25% |
| B | 17.07% | 34.31% | |
| Caa-C | 25.59% | 51.44% |
†Source: Moody’s Investor Service “US Municipal Bond Defaults and Recoveries, 1970-2023, October 24,2024
Broad diversification across the municipal market
The strategy invests in a diversified mix of municipal bonds issued by U.S. states, cities, counties, and public and nonprofit organizations. This broad opportunity set allows the portfolio to access a wide range of credit profiles, projects, and local economies. By incorporating multiple sectors and varying maturities, the strategy seeks to reduce reliance on any single issuer type or region.
Flexibility to invest nationally or prioritize potential state tax benefits
National portfolio option
The national portfolio can hold bonds issued within any of the 50 states or U.S. territories, offering broad diversification and income potential.
State-preference option
Breckinridge’s municipal approach to state preference uses thoughtfully designed allocation ranges. These ranges indicate the level of emphasis—or the typical proportion of the portfolio—that may be invested in each state, based on investor demand, market conditions, and bond availability. States are grouped into three general tiers based on their typical level of in-state exposure within the strategy:
Higher-emphasis states*
These states may represent a larger portion of the portfolio due to deeper municipal markets and strong demand for in-state tax-exempt income.
- California: 70 – 100%
- New York: 70 – 100%
- Massachusetts: 40 – 75%
Moderate-emphasis states*
These states generally fall into the middle exposure range, offering meaningful but more moderate allocation targets that help support diversification.
- New Jersey: 35 – 65%
- Pennsylvania: 35 – 60%
- Connecticut: 30 – 55%
- Virginia: 30 – 50%
- Maryland: 20 – 50%
Lower-emphasis states*
States with smaller, more variable, or less frequently traded municipal markets typically receive a lower level of in-state exposure within the strategy.
- Minnesota: 20 – 45%
- North Carolina: 20 – 45%
- Ohio: 20 – 45%
- Georgia: 20 – 40%
- Colorado: 15 – 35%
- South Carolina: 15 – 35%
*Actual in-state allocations will vary over time based on market conditions, bond availability, and broader economic factors, and cannot be guaranteed. When appropriate, the investment team may include or increase exposure to national municipal bonds to support prudent portfolio construction and diversification. Allocation ranges are subject to change without notice at the discretion of Breckinridge Capital Advisers.
Why diversification beyond your home state can be beneficial
Selecting a state preference does not always limit the portfolio to only one state. In certain cases, including bonds from other states can still play an important role in supporting diversification and overall portfolio construction:
- Increased income potential
Some out-of-state bonds may offer higher yields, even after state taxes have been factored in. - Greater diversification
Investing in bonds from multiple states can help reduce risk, especially if your home state encounters financial challenges. - Additional investment options
Access to a wider universe of municipal bonds increases the availability of investment opportunities, enhancing the portfolio manager's ability to pursue favorable yields and credit quality.
Learn more: Understanding the Potential Benefits of Out-of-State Municipal Bonds (PDF)
Municipal bond expertise, delivered through separately managed accounts
Strategic Advisers LLC (Strategic Advisers), has engaged Breckinridge Capital Advisors, a registered investment adviser, to provide the day-to-day discretionary portfolio management of Breckinridge Limited Duration Municipal Strategy accounts, including investment selection and trade execution, subject to Strategic Advisers' oversight.
About Breckinridge Capital Advisors
Breckinridge Capital Advisors is a Boston-based, independently owned asset manager working to provide the highest caliber of investment management. They serve high-net-worth individuals and large institutions through a network of financial advisors, consultants, and family offices.
What sets them apart
Their investment approach is defined by:
- Disciplined portfolio management
- Rigorous fundamental credit analysis
- Customization at scale through separate accounts
- A proprietary technology platform that enhances efficiency and insight
Investment Philosophy
They aim to strike the right balance between managing risk and seeking returns. Through indepth, bottom-up research, efficient trading, and the seasoned judgment of their portfolio managers, they work to enhance risk-adjusted returns for clients.
1993 |
Year foundedExperienced asset manager with offices in Boston and San Diego. |
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$54+ BILLION* |
Assets under managementCustomized separately managed accounts. |
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80+ EMPLOYEES |
Professionals30 of which are portfolio managers, traders, analysts, and co-Chief Investment Officers (CIOs). Source: Breckinridge Capital Advisers, *AUM as of 12/31/25. Employee figures as of 07/01/2025. |
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By maintaining a portfolio of investment-grade municipal bonds, with a significant portion having a credit rating of AA or higher, Breckinridge Limited Duration 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 duration similar to the duration of Bloomberg Managed Money Short Term Index.8 This index is a 1–5 year municipal bond index which typically has an average duration of 2-3 years. In general, portfolios with shorter durations are less sensitive to changes in interest rates than portfolios with longer durations.
Tax-smart investing as part of active management
Active management and direct ownership of individual municipal bonds provide the portfolio team with flexibility to make tax-smart management decisions throughout the year. When appropriate, the team may identify and realize losses—an approach known as tax-loss harvesting—to help support after-tax efficiency.
How tax-loss harvesting works
If a bond in the portfolio declines in value, it can be sold at a loss. If a bond is sold at a loss, those losses may be used to offset realized gains elsewhere in a client’s portfolio. This can help reduce, defer, or in some cases eliminate certain taxable gains, depending on the investor’s individual tax situation. By keeping more of a client’s money invested, this strategy seeks to support long-term after-tax
A year-round approach—not just at year-end
Tax-loss harvesting for this strategy is performed by Breckinridge Capital Advisors as part of their ongoing active management process. The Breckinridge investment team monitors markets and individual bonds throughout the year to identify tax-smart opportunities when appropriate, always within the context of the strategy’s investment objectives.
Important considerations
Tax-loss harvesting opportunities in municipal bond portfolios may be more limited than in equity strategies, as municipal bonds tend to be less volatile than equities with less potential for loss realization. Because of this, results can vary, and tax-loss harvesting may not always be available or beneficial. Investors should consult a tax professional regarding their specific situation.
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.
- A disciplined tax-loss harvesting process, when appropriate, to help enhance after-tax efficiency while maintaining the strategy's objectives.
How will Breckinridge select bonds for your account
Breckinridge will select all securities for your account.
Their research team assesses risk for each proposed bond, using national credit ratings and their own proprietary analysis. This proprietary analysis includes investment quality, price, default, and call and liquidity risk. The team focuses on selecting top-rated securities in an effort to limit risk to your original investment, and with the goal of holding them to maturity to generate a predictable income stream.
Each account may consist of a variety of issuers, geographies, sectors, maturities, etc., to help ensure it is not concentrated in one area. Your account will align with your personal tax situation, your comfort with risk and your cash flow needs.
Diversification does not ensure a profit or guarantee against loss.
Does Breckinridge hold bonds to maturity?
While the primary intent is to hold bonds to maturity, positions may be sold earlier when market conditions warrant or when compelling opportunities arise. One common reason is to help maintain the portfolio’s target duration. As bonds approach maturity, their duration naturally shortens, which can change how the portfolio behaves. By selectively replacing shorter-maturity bonds with longer-maturity bonds, Breckinridge helps keep the portfolio aligned with its stated duration objective.
The portfolio is generally managed with low turnover in mind; however, trades may occur to support income generation and risk management objectives.
In certain market environments, Breckinridge may also realize losses for tax purposes when appropriate. This practice—known as tax-loss harvesting—involves selling a bond at a loss to help offset taxable gains elsewhere in the portfolio, with the goal of improving after-tax efficiency. If realized losses exceed gains in a given tax year, up to $3,000 may be used to offset ordinary income. Any remaining losses can generally be carried forward to future tax years, subject to IRS rules.
