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.

FALLING INTEREST RATES TRIGGER INVESTOR HUNGER FOR YIELD

Investors snapping up U.S. securities are seeking yield as much as safety.

The rush by investors had all the hallmarks of a bond market panic. When the U.K. voted on June 23 to leave the European Union, yields on the benchmark 10-year Treasury note plunged to a record low of 1.32%.

Yet fear that the EU will unravel was not the only impulse driving investors. Opportunism also fueled much of the buying—the yield on investment-grade corporate bonds fell more than the yield for Treasuries.

Investors today hunger for yield as interest rates worldwide sink toward or below zero. Their craving has belied longstanding predictions that the end to the 30-year bull market in fixedincome securities is imminent. In fact, investment-grade bonds rose 5.9% during the year ended July 31, according to the Barclays Aggregate Bond Index, outperforming other major asset classes including equities in both developed nations and emerging markets. Given that this trend is both unpredictable and unprecedented, we are maintaining our focus on buying bonds through a bottom-up analysis of each security rather than on a top-down forecast on the direction of interest rates.

Recent history suggests that interest rates should not be so low. The outlook for the U.S. economy is brighter today than in 2009, when 10-year Treasuries hovered around 3.2%. Unlike in 2011—2012, Greece is not on the verge of default and a handful of European countries do not require bailouts. Moreover, the Federal Reserve is not artificially pushing down interest rates by purchasing securities. The central bank bought $4.5 trillion in assets from 2008 until 2014 in an effort to spur borrowing and revive growth.

Since the end of the Fed’s so-called quantitative easing, however, weakening global demand has prompted a steady slide in interest rates, with some yields in Japan and continental Europe falling below zero. The start of bond purchase programs by the Bank of Japan, European Central Bank and Bank of England (BOE) has reinforced the decline.

The BOE in August, attempting to avert a post-Brexit recession, announced a cut to its main interest rate and plans to buy corporate and government bonds. BOE policymakers expect to reduce the rate again later this year. Capital flows since the Brexit vote have highlighted that the U.S. offers one of the only large, liquid bond markets with positive yields spanning a variety of maturities and credit qualities.

With the outlook for interest rates so cloudy, we have outperformed by concentrating on the characteristics of individual bonds. We look for corporate, municipal or securitized debt with mispriced risk—allowing us to gain when the price corrects. Here are some examples:

In March, we bought bonds issued by Campbell Soup, a 146-year-old company with solid cash flow but limited avenues for growth. Campbell bonds had declined excessively amid weakness in the corporate bond market. Investors had also overestimated its credit risk. We would have been satisfied to simply earn its 2.8% yield, but when the credit premium for Campbell bonds fell, along with general interest rates, we generated a solid gain.

So too was the case with Micron Technology, one of the three top producers of memory semiconductors used in servers, tablets and smartphones. We purchased Micron bonds in June 2016, confident that investors had overestimated its default risk because of expectations that excessive supply would keep down the price of semiconductors for an extended period. In our view, Micron holds enough liquidity and generates sufficient free cash flow to weather the cyclical slump. Once the oversupply dries up, we believe our Micron debt will perform especially well.

The mispricing of default risk can provide opportunity regardless of whether the company in question makes chicken noodle soup or the neural network for advanced electronics. Especially in times when predicting the direction for interest rates is particularly ill-advised, there is steady income and upside potential to be made in bonds with unappreciated potential.

 

 

 

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 and you may not get back the amount invested. 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.

This communication and any accompanying documents are confidential and privileged. They are intended for the sole use of the addressee. Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, indepth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.



⚑ Investment Outlook

This article appears in the September 2016 issue of The Advisory. Other articles in this issue include:

 

Investors Facing Rising Risks Need Solid Defense, Savvy Offense
Increasing political and economic risk during the past year has widened the range of possible positive and negative scenarios for financial markets. Consequently, investors need to build a solid defensive position while seizing opportunities that arise amid the instability.
By Taylor Graff, Head of Asset Allocation Research and Ed Chadwyck-Healey, Head of International Private Clients
⚑ Investment Outlook

Defense Industry Stocks Gain Amid Rising Global Tension
Geopolitical instability and the end to nearly a decade of budget austerity have improved the prospect for defense industry stocks.

By Adi Padva, Equity Research Analyst
⚑ Equities

Private Credit Outshines Many High-Valuation Stocks, Bonds
Private credit occupies a sweet spot on the investment landscape, offering earlier distributions than private equity and higher yields than most publicly traded securities.

By Meera Patel, CFA, Director of Private Equity Fund Research and Jane Korhonen, CFA, Portfolio Manager
⚑ Alternative Investments

Proposed Tax Law Changes Prompt Estate Planning Review
Multi-generational planning, while best executed in prudent steps over long periods, sometimes requires a review because of changes in regulation or financial markets. Such is the case today amid consideration of changes to U.S. tax law.

By Edward Dunn, Strategic Advisor and Morgan Folus, Strategic Advisory Analyst
⚑ Strategic Advisory

 

Share The Advisory

Mutual Funds Attestation

 

You are now leaving the Brown Advisory website and entering the Brown Advisory Mutual Funds site.

The content on this site is directed at investors in the U.S. By entering this site you are confirming that you are a U.S.-based investor to whom these Funds may legally be promoted.

If you are an international-based investor please click here.

By clicking "Exit" below I indicate that I have read the above terms and do not wish to continue into this section of the web site.

By clicking "I Agree" below I indicate that I have read and accept the terms above and wish to continue into this section of the web site.