Summertime usually feels a bit quiet in NYC. It’s easier to get a seat on the train, the lines at the deli counter are shorter, and sometimes the pigeons outnumber the people. However, since the pandemic, this quiet summertime feeling has stuck year-round in some cities across the U.S., creating a range of potential implications for municipal credit, particularly for the debt of cities and their mass transit systems. This area of the market rarely calls attention to itself, but the relentless press forecasting of the death of downtowns is catching the eyes of many investors. Sales taxes also represent a major funding component for mass transit systems. Despite declining ridership trends across the country, mass transit credit has remained resilient. Strong economic growth has bolstered sales tax revenues, helping to offset ridership declines.
Learn more about the debt of cities and their mass transit systems and how they fit into BBH’s larger product offering in our latest Strategy Insights.
Issuers with credit ratings of AA or better are considered to be of high credit quality, with little risk of issuer failure. Issuers with credit ratings of BBB or better are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption.
Opinions, forecasts, and discussions about investment strategies represent the author's views as of the date of this commentary and are subject to change without notice. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations.
Diversification does not eliminate the risk of experiencing investment losses.
RISKS
Investors in the Fund should be able to withstand short-term fluctuations in the fixed income markets in return for potentially higher returns over the long term. The value of portfolios changes every day and can be affected by changes in interest rates, general market conditions, and other political, social, and economic developments. Bond prices may be sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, maturity, call, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Income from municipal bonds may be subject to state and local taxes and, at times, the alternative minimum tax. The Fund 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 Fund’s exposure in any one municipal revenue sector backed by revenues from similar types of projects increases, the Fund will also become more sensitive to adverse economic, business, or political developments relevant to these projects. Asset allocation decisions, particularly large redemptions, made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders may adversely impact remaining Fund shareholders. There can be no assurance the fund will achieve its investment objectives.
For more complete information, visit www.bbhfunds.com for a current Fund prospectus. You should consider the fund's investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the fund's prospectus, which you should read carefully before investing.
Shares of the Fund are distributed by ALPS Distributors, Inc. and is located at 1290 Broadway, Suite 1000, Denver, CO 80203.
Brown Brothers Harriman & Co. ("BBH"), a New York limited partnership, was founded in 1818 and provides investment advice to registered mutual funds through a separately identifiable department (the "SID"). The SID is registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940.
Not FDIC Insured No Bank Guarantee May Lose Money
IM-13296-2023-08-17 BBH003788 Exp. Date 08/31/2025
