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 [email protected].

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.

SUSTAINABILITY—STARTING POINTS

Even investors with strongly held convictions sometimes avoid raising with their advisors the idea of syncing their investment portfolios with their ideals. Yet by focusing on sustainability, a family or institution can achieve clarity of purpose and commit to a long-term plan—two requirements of successful investing.

Many investors have deeply held beliefs and values that shape their life choices, including where they invest. The numbers tell it all: a more than sevenfold increase in investments aligned to environmental, social or governance factors from 2010 until 2014, according to US SIF Foundation.

Still, nearly three out of four investors wait for their advisors to raise the topic of sustainability in relation to their portfolios, according to a 2013 survey by Calvert Investments. Meanwhile, four out of five financial advisors wait for investors to begin the conversation, Calvert says.

That can be a mistake. We have found that clients who go through the process of clarifying their values and reflecting them in their portfolios have a better chance of successfully sticking with their investment programs for the long term. To help you figure out your family’s or institution’s approach to sustainability, we have identified five starting points in creating your distinct plan:

  1. Identify which values to begin with. Many institutions and families share broad values such as environmental stewardship, good governance or social justice. The specific causes they focus on, though, can vary dramatically. One family we advise wants to support local businesses with a regionally focused portfolio. Another family wants to support women by only selecting female portfolio managers, while a foundation we advise avoids investing in companies related to fossil fuels. Identifying a clear goal or priority helps a family or institution narrow its focus from a wide range of views, learn the basic steps in values-based investing and begin to move forward.
  2. Use sustainability to bridge generations instead of divide them. Clarifying an approach to sustainability can give institutions and families an opportunity to unify older and younger generations around shared interests and values. One client we advise skipped a generation when selecting a successor for his family foundation, choosing his granddaughter as executive director to bring fresh leadership to the organization. Working alongside her grandfather over many years, the executive director gradually took on more responsibility, first for grant making and then for the investment portfolio. During board discussions, she raised the importance of aligning the foundation’s portfolio with its values. The foundation is taking incremental steps, first choosing a sustainability large-cap equity manager while reviewing sustainable investing opportunities in fixed income. The family believes that the sustainability approach has helped bring the next generation into the investment and decision-making processes.
  3. Document your sustainability objectives in your investment policy statement. An investment policy statement (IPS) is a document that articulates how a family’s or organization’s money is to be managed. Having worked on myriad IPSs, we understand that the thought that goes into creating or modifying the statement is as important as the document itself. Asking stakeholders about their priorities can spark meaningful openness of views and clarity about what’s most important to members of an institution or family. IPSs are dynamic and evolve, so revisiting a statement to incorporate values can help maintain consensus— that is exactly what the executive director mentioned above is doing with her family foundation’s IPS. Keep in mind that such revisions do not necessarily entail an all-in decision to fully align investments with values. Instead, a change to an IPS can start with a written commitment to at least discuss a values-based approach with all stakeholders.
  4. Take “baby steps” before a “giant leap.” Making values a cornerstone of an investment portfolio is complex, and getting there can often entail higher turnover and higher taxes. Good first steps can include easy changes to the portfolio that are uncontroversial. This could include aligning bond holdings with values, or adding a core sustainability equity strategy. Initial steps such as these can minimize disruption and help an institution or family grow comfortable with valuesbased investing. A calibrated approach geared to increasing the confidence of an institution or family is essential to promoting a satisfying outcome. One client we work with started three years ago by investing in a sustainability-focused mutual fund and gradually has grown more comfortable with the strategy’s risk and returns. Now we are working with her to build a comprehensive sustainability plan for her entire portfolio.
  5. Clarify the sometimes blurred line between philanthropy and sustainable investing. An institution or family can often most effectively make a grant through an investment structure rather than through an outright donation. This can be done through several options, including program-related investments, which are loans or equity investments supporting a charitable activity, or B-corporations, which are for-profit entities aimed at benefiting society or furthering environmental goals. For example, we recently helped a family foundation structure a program-related investment loan to a nonprofit to bridge a cash flow gap for the organization. The family received market-based interest rates while leveraging its capital to support its grantmaking mission. The single transaction simultaneously met the needs of both groups.

    Another tool is social impact bonds, which enable investors to lend money to an organization and receive back their capital with interest if the program meets its impact goals. This is not an investment made for capital growth per se. Rather, it is an innovative structure with incentives that further an organization’s mission and impact. So differentiating between philanthropy and investing is essential. A family or institution that structures grants as investments should not consider such initiatives part of its investment portfolio.

Making values a cornerstone to investing offers an opportunity to bring a family or institution together. It helps clarify objectives and builds support behind a long-term portfolio plan, two essentials for successful investing.

 

Please download The Advisory to read other articles in this issue including:

Demystifying Sustainable Investing
By Mike Hankin, President and CEO

For many investors, the topic of sustainable investing is a jungle of jargon and vague terms. When you cut through the confusion, though, you find that sustainable investing strategies have matured and improved, and now form the core of an increasing number of investors’ portfolios.

When considering whether to incorporate their values into their portfolios, investors often find themselves at a loss as they try to sort through a dizzying array of SRI, ESG and other acronym-laden choices available to them. Mike Hankin, Brown Advisory President and CEO, describes the firm’s commitment to cutting through the noise to get at what matters most to clients: performance, advice and service.

An Expanding Toolkit
By Erika Pagel, Portfolio Manager; James Stierhoff, Associate Analyst

The boom in sustainable strategies has made it far easier than even five years ago to construct a sustainable portfolio across asset classes—from stocks to fixed income to compelling private equity alternatives.

Beyond the Usual Suspects
By Karina Funk, Co-Portfolio Manager Large-Cap Sustainable Growth Strategy; David Powell, Co-Portfolio Manager Large-Cap Sustainable Growth Strategy

CEOs across the board try to give their firms a boost by increasing revenue and cutting costs. Our focus is on finding stocks across sectors with underlying environmental business advantages. That can lead us to holdings that might surprise you.

The views expressed are those of the authors and Brown Advisory as of the date referenced and are subject to change at any time based on market or other conditions. These views 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. In addition, these views may not be relied upon as investment advice. The information provided in this material should not be considered a recommendation to buy or sell 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 or other 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 and is for informational purposes only. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.


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