INVESTMENT PHILOSOPHY
The Brown Advisory Global Leaders Strategy portfolio managers seek to own a concentrated portfolio of 30-40 leading global companies in any sector or country that we believe are capable of compounding excess economic returns over time. We follow a fundamental, bottom-up, research intensive investment selection process.
At the heart of our approach is the belief that high-quality companies that deliver superior outcomes for their customers, have strong leadership positions and high return on invested capital (ROIC) can generate outstanding shareholder returns for investors. We look to purchase these companies at discounts to intrinsic value for our clients.
A 2-Step Investment Process:
We employ two distinct processes when investing: investment selection and capital allocation. Most investment managers focus on the investment side, or the “treasure hunt,” but we have seen that spending equal time on determining how much capital to put behind each investment can be a significant contributor to performance over time.
As long-term investors we want to own businesses that compound their attractive economics long into the future. We find such businesses in companies that do something special for their customers and those which are dominant players in their industries, with the potential to generate high and sustainable returns on invested capital.
Our capital allocation process in turn is repeatable and built to help us to put the most capital behind our highest conviction positions. To be most effective in doing so we also use a behavioral coach to help us address human biases in decision making.A Capital Preservation Mindset:
As investors, we firmly believe in the importance of self-improvement. This is demonstrated within our capital allocation process through our work with a team of behavioral coaches who provide reflection and insights into our investment process. This helps us to unearth any systematic behavioral biases we may be exhibiting.
We have spent a considerable amount of time thinking about how human behavior can damage our clients’ capital and how we can create a repeatable process to increase investment skills by minimizing the negative impact of behavioral biases.
The goal of integrating behavioral analysis is to systematically improve skills by avoiding bias pitfalls and explicitly avoiding losers.Sustainable Investment Research:
We believe that sustainability is inseparable from business opportunities and risks. We therefore integrate the views of our in-house sustainable investment research analysts into our investment process, with the intention of improving performance and mitigating risk.
Sustainable investment analysis, like everything else in investing, is subjective and we believe there is no substitute for doing your own work.
Within our research of potential sustainable opportunities, we look for companies with Sustainable Business Advantage drivers (“SBA” drivers) that help drive material free cash flow generation for customers and meaningful differentiation vs. peers.
Specifically, we look for SBA drivers that can potentially improve a company’s performance over time by (1) growing revenues faster than peers, (2) reducing cost and hence improving margin structure, and (3) enhancing franchise value (such as brand strength or customer loyalty).
AUDIO UPDATES
The Portfolio Managers discuss the portfolio’s performance and positioning for the fourth quarter 2024, as well as their outlook for the strategy.
Disclosures can be found here
2024 - Quarter 3
2024 - Quarter 2
2024 - Quarter 1
INVESTMENT LETTERS
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