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.

IN TOO DEEP? THE RISKS FROM SUB-ZERO RATES

Six central banks try to spur growth by introducing negative rates despite potential hazards from the unprecedented policy.

Central bankers in Europe and Japan are embarking on the monetary policy equivalent of the first-ever dive by a submarine. While pushing interest rates below zero for the first time, they are unsure whether their plunge into uncharted depths will bring progress or adversity.

The Bank of Japan, European Central Bank (ECB) and four of Europe’s other central banks are charging a fee, rather than paying interest, on money held in their reserves. They want banks to shift money away from central banks and into longer-term assets, thereby reducing rates on a broad range of securities including mortgage bonds and corporate debt. In theory, the move could spur borrowing and stimulate economic growth.

But there is a risk of backfire. If rates are cut too far, businesses and citizens may hoard physical cash to avoid losses from negative interest rates, disrupting the banking system and hobbling growth. Especially at risk are banks, insurers and other companies whose profits shrink when long-term interest rates fall more than short-term rates. Lower profits could prompt banks to curtail lending.

If rates are cut too far, businesses and citizens may hoard physical cash, hobbling economic growth.

The unclear impact from negative interest rates underscores the importance for investors of holding adequate liquidity—including cash—to meet day-to-day operating expenses, buffer against market volatility and have ready capital for any future investment opportunities. Over time, subzero rates will probably boost demand for U.K gilts, U.S. Treasuries and other bonds with positive yields that are issued by governments with comparatively steady inflation and economic growth.

So far, negative rates do not show clear signs of spurring growth or speeding inflation. The International Monetary Fund (IMF)forecast in April that the eurozone and Japan will grow this year by 1.5% and 0.5%, respectively, or 0.2 percentage points and 0.5 percentage points less than its forecasts in January.

The ECB’s introduction of a negative rate in June 2014 has had no obvious impact on banks’ excess reserve accumulation. Nevertheless, the IMF supports such a policy “given the significant risks we see to the outlook for growth and inflation,” José Viñals, director of the IMF’s monetary and capital markets department, said in a blog in April. While saying the policy has provided some stimulus, Viñals conceded that rates too low may trigger cash hoarding, with the possible “tipping point” ranging from -0.75% to -2%.

Even without an outbreak of hoarding, negative rates may hurt retirees and other savers who will need to set aside more money to generate the same amount of income. Indeed, a slump in retail sales in Europe suggests that negative rates are crimping spending. Moreover, investors reaching for yield may take on more risk with less-liquid assets, fueling the emergence of asset price bubbles. For example, negative rates could prompt excessive real estate investment by pushing mortgage rates to record lows.

Negative interest rates may persist for some time as policymakers try to cure severe economic ills in Europe and Japan. The U.K. vote to exit the European Union may slow regional economic growth and intensify pressure for additional monetary easing. Bank of England Governor Mark Carney indicated after the June 23 referendum that fiscal as well as central bank stimulus is needed. In response, investors will probably turn to income-producing assets, like real estate and high-yield debt, along with high-quality U.K. and U.S. bonds. They should exercise caution when reaching for yield—valuations of some high-dividend, low-growth stocks already look excessive in our view.

We cannot predict with certainty the ultimate impact of negative rates on the economy or financial markets. But identifying assets with an attractive balance of downside risk and upside potential should yield good long-term results, regardless of how long central bankers hold rates underwater.

 

 

 

This article was updated on July 14, 2016 to reflect the U.K. vote to exit the European Union.

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, indepthanalysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.



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

 

Moral Courage Amid Disruption
Brown Advisory colleagues recently gathered with clients to explore how disruption in technology and other fields calls for bold, even-handed decision-making and what we call moral courage.

By Brien White, Head of Washington Office, Portfolio Manager

Profits, Not Vapor: Titans Emerge in Cloud Computing
Three companies have brought down to earth the long-elusive goal of selling corporate customers computing power through the Internet.

By Maneesh Bajaj, CFA, Portfolio Manager and Emmy Mathews, CFA, Equity Research Analyst

Market Chill: Holding Fast To Fundmentals
Volatility in equity markets has persisted as investors run from risk and search for yield. In times like these, we stay true to a bottom-up, value orientation.

By Sid Ahl, CFA, Chief Investment Officer of ISG and Stephanie McCormick, Portfolio Manager

Dire Call: Helping When It Is Most Needed
After years of serving clients, we have found that the depth of our relationships is especially valuable when helping them adapt to the most difficult news.

By John Poulton, Strategic Advisor and Doug Borg, Strategic Advisory Analyst

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