Equities Fixed Income Hedge Funds Private Equity and Real Estate Sustainable Investing

Equities

We follow a philosophy that low-turnover, concentrated portfolios derived from sound bottom-up fundamental research provide an opportunity for attractive performance results over time. We have a culture and firm equity ownership structure that help us attract and retain professionals who share those beliefs, and we follow a repeatable investment process that helps us stay true to our philosophy.

We construct balanced portfolios for private clients, nonprofits and institutions depending on the needs of the client. We can be 100% open architecture, using third-party managers only, or we can put together a mix of internal and external strategies, whatever is in the client's best interest.

Fixed Income

We follow a philosophy that fixed income strategies built from a foundation of stability coupled with fundamental credit research can seek to generate alpha and control risk. We have a culture and firm equity ownership structure that attract and retain professionals who share those beliefs, and we follow a repeatable investment process that helps us stay true to our philosophy.

We construct balanced portfolios for private clients, nonprofits and institutions depending on the needs of the client. We can be 100% open architecture, using third-party managers only, or we can put together a mix of internal and external strategies, whatever is in the client's best interest. Meet the Investment Solutions Group.

Hedge Funds

Hedge Funds

The Investment Solutions Group is an investment-management team within Brown Advisory that specializes in asset allocation, manager selection, hedge funds and other alternative investment strategies. Dedicated to open-architecture solutions, our team has established a strong track record of identifying high-quality, third-party investment managers across the hedge fund, long-only and private equity universes. We leverage this expertise to help clients assemble portfolios that we believe best fit their needs and goals, offering clients a range of solutions from complete portfolio management to fulfillment of specific hedge-fund and alternative-asset mandates.

Founded in June 2002, the Investment Solutions Group now manages in excess of $3.4 billion for clients (data as of January 31, 2017) in a combination of managed accounts, advisory relationships and fund-of-fund offerings.

Private Equity and Real Estate

Private Equity and Real Estate

Brown Advisory has incorporated private equity and real estate investments in client portfolios since our founding. Today, we can provide that exposure in three distinct ways.

Feeder Funds and Multimanager Funds
We introduce clients to investment opportunities in early- and late-stage venture capital and buyout funds, as well as select real estate funds. We also construct these feeder funds into multimanager funds through our Private Equity Partners (PEP) and Real Estate Partners (REP) vehicles to make private equity investing as easy as possible for our clients.

Customized Private Equity Portfolios
For most clients, private equity is one component of a balanced portfolio that we manage. Other clients, however, come to us specifically for custom-built private equity and real estate portfolios.

For more information on private equity please click here or contact Jacob Hodes at 410-537-5315 or jhodes@brownadvisory.com.

Sustainable Investing

Sustainable Investing Strategies

  • Multi-Manager Strategies
  • For clients seeking an open-architecture solution, we have access to several of the premier sustainable managers in the industry - all vetted by internal research.
  • Private Equity
  • Our private equity team is focused on evaluating the growing universe of private impact investments to identify standout opportunities that target various issues of particular concern to our clients. To date, we have placed assets in investments targeting a variety of impact themes such as community impact, microfinance, education technology, sustainable real estate, water initiatives and others.*
  • *Many alternative investments by regulation may only be sold to Accredited Investors (institutions with at least $5 million in assets) or Qualified Purchasers (institutions with at least $25 million in investments).

Customized Portfolios

This diverse assortment of solutions will meet many clients’ sustainability objectives; however, we understand the continued evolution of this space and seek to be able to react quickly to client needs.

For clients with unique missions, value-aligned investing programs, or who simply wish to ensure that they do not own certain controversial companies or have access to certain industries, we offer the following customized options:

Additional Screening: To the extent we have reliable data and can build rules into our compliance systems, we can add specific screens to a separate account to restrict companies (e.g. oil and gas providers) or industries (e.g. tobacco or weaponry).

Customized and Thematic Portfolios: Within a separate account, we can work together to solve for a sustainability need. From a universe of securities researched from both the bottom-up and for their ESG profile, we can assemble a custom portfolio of securities designed to meet many specific sustainable goals or outcomes.

IS ESG SMART ENOUGH?

Recently, Brown Advisory’s Karina Funk spoke at the Investing for Impact event in Boston, produced jointly by the SRI Conference and BASIC (Boston-Area Sustainable Investing Consortium). This series of regional events seeks to educate and inspire investment professionals on various topics related to sustainable investment, and also to build momentum for the annual SRI Conference, one of the oldest and largest sustainable investment conferences in the U.S. (This year’s conference will be held in San Diego, November 1-3.)

Karina is Brown Advisory’s Head of Sustainable Investing and co-portfolio manager of the firm’s Large-Cap Sustainable Growth equity strategy. Along with Tom Kuh from MSCI and Conor Platt from Etho Capital, Karina spoke on a panel entitled “Smart Beta: Is ESG Smart Enough?” Investors are keenly interested in the promise of smart beta strategies, which seek to deliver an enhanced risk/return profile by building portfolios with exposures to various quantitative factors (such as size, momentum, yield and so on). The panel dove into the topic of ESG as a potential smart beta factor.

Separating Alpha and Beta

One of the key points that Karina made during the discussion is that ESG data can be used to create both beta and alpha in portfolios, and investors should have a clear sense of what they want before deciding on how to apply this information to their investment decisions. To state things simplistically, if an investor has conviction that they want to bet on a particular style or quantifiable theme (like growth versus value), factor-based portfolios are a great way to do this. If investors want performance that results from individual stock selection, independent from the market, they should seek alpha exposure.

Is ESG a Smart Beta Factor?

The search for an ESG beta factor is up against a material challenge: A factor needs to be objectively quantifiable to be universally applicable in portfolios. As an example, consider the non-ESG “quality” factor used within the MSCI-BARRA model. The term “quality” may be a subjective concept, but those who use the MSCI-BARRA model have settled on an objective, quantitative definition: “quality” is measured using return on equity, debt-to-equity and earnings variability data. Karina drew a contrast between that definition of quality, and the more subjective, qualitative information that she finds valuable when assessing a company’s management quality. All active managers believe that management quality is important, even if few of them would assign a score to it; similarly, ESG information may be material to an investment decision, but not quantifiable in a way that would be necessary to use it as a beta factor

Karina also pointed out that even in instances where the data is sufficient, ESG beta exposure may not be useful if investors are more interested in good business models than in factor exposures. A company’s factor sensitivity does not tell us if that company enjoys high barriers to entry, if its business model is getting stronger, or if it is truly a company you want to own for the long term. In fact, she suggested that a singular emphasis on the value of ESG as a beta factor does a disservice on the value that ESG data can play in fundamental research and in driving alpha. Successful companies need a strong understanding of the risks they face—political shocks, macroeconomic shocks, natural resource constraints, sensitivity of their operations to climate risk, and many other issues—to ensure their long-term survival, and they can also adopt sustainable thinking in their business strategies to find new ways to grow faster, drive customer loyalty, and deliver more long-term value to shareholders. But each company’s circumstances, and the strategies that company adopts in response to those circumstances, are relatively distinct; there is no universal beta factor that will help investors consistently find those winning business models.

Our firm’s approach to investing is more focused on alpha than on beta—we emphasize fundamental research to drive our selection of individual stocks or bonds for inclusion in our portfolios. As such, we can speak to the use of ESG information as a source of alpha, and we have found success over time by using an ESG lens as an additional way of understanding a company’s business model and evaluating its return prospects independently from the market. ESG data may very well be a viable foundation for smart beta strategies. The skill of managers such as fellow panelist Conor Platt of Etho Capital goes far beyond a simplistic application of quantitative metrics to construct thoughtful and successful factor-based portfolios. We are simply speaking from our experience in using both quantitative and qualitative ESG data in a different way.

Karina Funk and David Powell—the co-managers of the Large-Cap Sustainable Growth strategy—address this topic further in an upcoming article, “ESG and the Stock Picker’s Dilemma,” in the Journal of Environmental Investing. Please click here for more information about how we are leveraging sustainable investment principles across our firm.

 

 

The views expressed are those of the author and Brown Advisory as of the date referenced and are subject to change at any time based on market or other conditions. These views should not be construed as investment research. These views are not intended to be and should not be relied upon as investment advice and are not intended to be a forecast of future events or a guarantee of future results. Past performance is not a guarantee of future performance and you may not get back the amount invested. The information provided in this material is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell, or hold any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. To the extent specific securities are mentioned, they have been selected by the author on an objective basis to illustrate views expressed in the commentary and do not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed by us as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is intended solely for our clients and prospective clients, is for informational purposes only, and is not individually tailored for or directed to any particular client or prospective client.



⚑ Sustainable Investing

To learn more about Brown Advisory's Sustainable Investing solutions, please click here.

 

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