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Equities Fixed Income External Managers 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.

Brown Advisory Equity Strategies

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.

Brown Advisory Fixed Income Strategies

External Managers

Investment Solutions Group

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.

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.

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.

Investment Insights and Thoughts from Brown Advisory
Equities Earnings Guidance: Really Helpful, or a Red Herring?
Eric Gordon, CFA
June 12, 2018

Last week, Jamie Dimon and Warren Buffett dropped an interesting nugget in a joint interview on CNBC, calling for an end to quarterly earnings guidance that, in their view, brings an “unhealthy focus” on short-term profits vs. long-term business success.

Dimon and Buffett are both legends in the investment business with well-earned reputations, and they raise an important philosophical discussion. But facts are facts: Over the past three-year and five-year periods, companies that offer guidance have generally performed better than those that don’t.

It is true that in some cases, quarterly guidance is at best unhelpful and at worst misleading. Many companies may have an excellent view of the near future, thanks to subscription-based contracts, predictable conversion of a large backlog, or the ability to lock in supply costs or end-market prices. But other companies may have far less visibility into the next quarter or year. It’s also true that some companies play a “beat and raise” game with their guidance, managing expectations deftly in an effort to generate positive investor sentiment. As always, buyers should indeed beware of the reliability and motivations of their data sources.

When we looked at the data, we found that companies in the S&P 500® Index that offer guidance are in the minority. Only about 20% provide quarterly earnings guidance, and even fewer (15%) provide quarterly revenue guidance. And these companies have definitively outperformed the rest. And as seen in the chart, the numbers are clear: The median three-year annualized return for companies offering earnings guidance was 14%, vs. 7% for those that don’t. Over five years, the difference is even more striking—15% vs. 9%. And the companies offering revenue guidance offered shareholders a whopping 18% annualized return over both three- and five-year periods. (All return figures are as of June 8, 2018.)

S&P 500® Index Companies Offering Guidance Generated Better Returns Than Those That Didn't

Source: Factset®. As of June 8, 2018.

Three-year and five-year periods don’t let us judge a company over multiple business cycles, but they are a big enough window for a company to establish a track record of business performance. Companies can launch new products, develop and execute strategies, and tackle new markets within these timeframes. In other words, five years extends beyond what we would call a short-term period.

These facts would seem to suggest that investors should pounce on all companies that provide guidance. But as an investment strategy, that would be equally as dangerous as deciding to avoid all companies that provide guidance. The truth, as always, is somewhere in the middle. There are many potential reasons why companies offering guidance have performed well. These companies often have confidence in their business strategies and good visibility into the future, and thus they are more comfortable projecting their results. Of course, we can’t ignore the fact that many of these companies are in growth sectors like technology and health care, and those segments of the market have generally performed well in the last few years.

Most importantly, we think that the decision to invest or not invest—and we are confident that Mr. Dimon and Mr. Buffett would agree—should be based on a fundamental evaluation of each company’s business strategy, and NOT on whether they have chosen to share guidance about that strategy with the market. 

The views expressed are those of 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 or asset classes mentioned. It should not be assumed that investments in such securities or asset classes 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.The Standard & Poor's 500® Index is a market capitalization weighted index of the 500 largest U.S. publicly traded companies by market value. The S&P 500 is a market value or market capitalization weighted index and one of the most common benchmarks for the broader U.S. equity markets. Other common U.S. stock market benchmarks include the Dow Jones Industrial Average (DJIA) or Dow 30 and the Russell 2000 Index, which represents the small-cap index.
Standard & Poor’s, S&P, and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of S&P Global Inc.
Copyright 2018 FactSet Research Systems Inc.