Breckinridge Intermediate Municipal Strategy
This separately managed account (SMA) offers professional management of individual investment-grade1 municipal bonds.
FAQs: Breckinridge Intermediate Municipal Separately Managed Account
How can this strategy help me meet my goals?
Investing in municipal bonds can be a great way for investors in high tax brackets to generate federally tax-free interest income.* Municipal bonds can also help insulate your portfolio against market volatility, and tend to have lower default risk than corporate bonds. Although this powerful combination makes municipal bonds appealing, many investors find it challenging to navigate the large and fragmented municipal market.
Our professionally managed account offers investors a diversified portfolio of high-quality bonds, selected to generate federally tax-exempt interest income, while seeking to limit risk to principal. Offering direct ownership of securities enables investors to have transparency into the bonds the manager has selected for their individual account.
Who manages my money?
The Breckinridge Intermediate Municipal Strategy combines the fixed-income capabilities of Breckinridge Capital Advisors, Inc. (Breckinridge), with the ongoing oversight of Fidelity Personal and Workplace Advisors LLC (FPWA). Breckinridge Capital Advisors is a fixed income manager specializing in the municipal bond market. Exclusive focus on bonds allows them to provide investors with deeper credit research, broader access to available bonds and potentially more efficient pricing and trading. Their careful analysis of the market enables them to build bond portfolios that include a range of issuers, regions, sectors and maturities to ensure diversification and help limit risk. Unlike other firms, Breckinridge does not hold any bond inventory, so investment decisions are not influenced by internal interests. They buy bonds solely for placement in client accounts.
What kind of investments can I expect in my account?
Your portfolio will contain a significant portion of bonds that have an S&P credit rating of AA or higher at time of purchase.
Municipal bonds are debt typically issued by cities, towns or state governments who use the money for public projects like building schools, highways, hospitals, etc. (When you buy a municipal bond from the issuer, you are lending money to a state or local government for a set time—with the promise of a return of your initial investment—plus ongoing tax-free interest payments.)
How are the bonds chosen for my 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.
Can I choose my own investments?
Breckinridge will select all securities for your account. They will make every effort to include any investment grade1 municipal bonds2 you currently own, provided they meet the selection criteria and overall portfolio construction.
Can I request that the manager only buy bonds issued within the state in which I pay taxes?
The national portfolio can hold bonds issued within any of the 50 states. You can choose a state-preference option if the state in which you are taxed is CA, MA, MD, NJ, NY, PA or VA. Choosing this option will bias your account towards bonds issued within your state. (With the state-preference option, state tax-exempt interest is emphasized over national diversification.)
Can I add funds to my account?
Yes, you can add funds to your account. Funds will remain in cash until there is enough to buy additional bonds.
Can I withdraw funds from my account?
Yes, there are several ways that you can access your funds, including automatic interest income withdrawals.
What is the account minimum?
The minimum funding amount is $350,000. Accounts can be funded with a check, bank wire, an exchange of assets from an existing Fidelity account, or a transfer of eligible assets from an account at another institution.
How much does it cost?
The annual advisory fee ranges from 0.35% to 0.40% based on account balance.4
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.
Lower yields - U.S. Treasury bonds typically pay less interest than other bonds in exchange for lower default or credit risk.
Interest rate risk - U.S. Treasury bonds and municipal bonds may be susceptible to fluctuations in interest rates, with the degree of volatility increasing with the amount of time until maturity. As rates rise, prices will typically decline.
Call risk - Some U.S. Treasury and municipal bonds carry call provisions that allow the bonds to be retired prior to stated maturity. This typically occurs when rates fall.
Inflation risk - With relatively low yields, income produced by U.S. Treasury and municipal bonds may be lower than the rate of inflation. This does not apply to Treasury Inflation-Protected Securities (TIPS), which are inflation protected.
Credit or default risk - Investors need to be aware that all bonds have the risk of default. Investors should monitor current events, as well as the ratio of national debt to gross domestic product, Treasury yields, credit ratings, and the weaknesses of the dollar for signs that default risk may be rising.
Additionally, municipal bonds can carry the following risk: The municipal market can be affected by adverse tax, legislative, or political changes, and the financial condition of the issuers of municipal securities. In comparison, U.S. Treasury bonds are backed by the full faith and credit of the U.S. government. Interest income generated by U.S. territories is generally exempt from federal and state income taxes. Interest income generated by U.S. Treasury bonds and certain securities issued by possessions, agencies, and instrumentalities is generally exempt from state income tax but is generally subject to federal income and alternative minimum taxes and may be subject to state alternative minimum taxes.
Please see the Program Fundamentals for more information about the material investment risks applicable to Fidelity® Strategic Discipline accounts.
FPWA has engaged Breckinridge Capital Advisors, Inc. to provide the day-to-day discretionary portfolio management of Breckinridge Intermediate Municipal Strategy accounts, including investment selection and trade execution, subject to FPWA's oversight. Breckinridge is an independent registered investment adviser and is not affiliated with any Fidelity Investments company.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917