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.

COMMANDING HEIGHTS: AMAZON, MICROSOFT EXPAND PROFITS IN THE CLOUD

Amazon and Microsoft have gained a competitive advantage selling corporate customers computing power through the Internet by offering a “full stack” of computing much like the first giants of the industry last century.

Amazon and Microsoft have expanded their market share and strengthened their dominance of cloud computing in much the same way that mainframe manufacturers came to rule their sector 50 years ago.

The two companies in the most recent quarter boosted earnings and increased profits from the sale of computing power and data storage via the Internet by stepping up sales of sophisticated software, data analytics and services. Their gains—part of a trend that has accelerated in recent years—come at the expense of IBM, Oracle, HP Enterprise and other rivals that are struggling to shift to the cloud after decades of tailoring services to customers’ in-house data centers.

The expansion by Amazon and Microsoft up the “technology stack” into all stages of enterprise cloud computing resembles the vertical integration that mainframe computer makers achieved in the 1960s. Back then, companies such as IBM, Burroughs and Honeywell controlled the entire computing supply chain—manufacturing mainframe hardware components, writing operating systems and application software, and providing services. Their “end-to-end solutions” locked in customers, prompting the purchase of entire product lines.

Today, Amazon and Microsoft are using the cloud to stake out the competitive advantages from vertical integration. Like their mainframe predecessors, they are fueling profitability by locking in customers to an expanding product line. The companies’ recent quarterly results show how they aim to lead the ascent into new, more profitable areas in the cloud such as big data analytics and artificial intelligence (AI).

“Once enterprise customers choose one of our cloud services, they continue to adopt more services,’’ Microsoft CEO Satya Nadella said in an Oct. 20 call with analysts. More than 60% of Fortune 500 companies use at least three of Microsoft’s cloud products, a 20-percentage-point increase in just 12 months, Nadella said.

"The companies aim to lead the ascent into new, more profitable areas in the cloud such as big data analytics and artificial intelligence."

Amazon and Microsoft are hardly alone in riding a boom in on-demand, Internet-based computing. Another cloud pioneer, salesforce.com, built an infrastructure housing software that enables companies to track all their contacts with customers— from sales, to marketing, to support. Amazon and Microsoft are each building on their core strengths, with Amazon deploying its expertise in managing large-scale data centers as a top online retailer. Microsoft, which for years has sold software and servers to companies for use on site, is building its own data centers to offer customers those same capabilities in the cloud.

Demand is rising for Amazon Web Services (AWS) and Azure—Microsoft’s cloud business—as companies seize on the savings, efficiency and flexibility from cloud computing. Companies can immediately ramp up or reduce computing power based on their needs while shutting down costly in-house data centers. Also, they can be confident of using the newest version of software. AWS says it can slash a company’s information technology expense during a three-year period by 60%. Global spending on cloud computing will more than double to $141 billion by 2019, according to International Data Corp. (IDC).1

The advance into the cloud by AWS and Azure has been especially challenging to HP Enterprise, Dell EMC, NetApp and other makers of servers and storage that companies install in house. Hardware and on-site workloads become obsolete when a company replaces its own data centers with cloud services from AWS or Azure. That shift will probably persist— spending on public cloud infrastructure, including servers and storage, will grow at a compound annual rate of 15% during the next five years, while non-cloud information technology spending will annually fall 1.8%, according to IDC.2

Up the Stack

Amazon and Microsoft are locking in customers to an expanding product line in cloud computing, staking out the competitive advantages from vertical integration. The companies aim to lead the ascent into new, more profitable fields of on-demand Internet computing, including big data analytics and artificial intelligence.

 

 

Microsoft’s recent quarterly results reflect how the shift from on-site data centers is accelerating. While sales of its PC software shrunk, revenue from the cloud business surged, with gross profit margins jumping to 49% from 42% during the second quarter. The higher profitability stems from Microsoft’s success in building on the foundation of its servers and storage to sell more sophisticated and profitable cloud-based services.

Microsoft aims to further expand its premium services on the cloud by deploying AI and riding the explosive growth in the “Internet of Things,” in which businesses and consumers connect objects ranging from heating systems to jet engines for real-time monitoring and measuring. “AI will be infused into everything we do,” Nadella said. By 2020, the number of connected things will increase to 21 billion from 4.9 billion in 2015, according to Gartner.3 The oceans of data will need processing, storage and analysis.

Like Azure, AWS soared during the most recent quarter and remains one of Amazon’s biggest sources of profit. The operating profit margin for AWS rose to 31.6% from 25% in the third quarter of 2015 in part because of its rapid pace of innovation, according to Amazon spokesman Darin Manney. AWS this year has already added more functions and services in the cloud than in 2015, when it deployed more than 700 new features, Manney said in an Oct. 27 call with analysts.

Although cloud computing is still in an early stage of hypergrowth, we believe AWS and Azure should heed the decline of mainframe manufacturers, whose lock-in of customers weakened when advances such as client-server computing spurred innovation, cut costs and increased flexibility. While leading growth into the cloud in the years ahead, AWS and Azure would do well to keep in mind how the makers of “big iron” frittered away the advantages from vertical integration with their inflexible, oligopolistic approach to customers.

 

 

1. IDC, Worldwide Semiannual Public Cloud Services Spending Guide, January 2016.
2. IDC Press Release, Expected Recovery in Hyperscale Service Provider Spending Will Lead to Another Year of Strong Growth for Cloud IT Infrastructure, October 5, 2016.
3. Gartner, Gartner Says 6.4 Billion Connected “Things” Will Be in Use in 2016, Up 30 Percent From 2015. November 10, 2015. www.gartner.com/newsroom/id/3165317

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 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.



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