The Advisory — Our latest insights https://www.brownadvisory.com/us/the-advisory-rss en Outlook for 2019 | The Measure of All Things https://www.brownadvisory.com/intl/outlook-2019-measure-all-things <span class="field field--name-title field--type-string field--label-hidden">Outlook for 2019 | The Measure of All Things</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Tue, 02/12/2019 - 09:12</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Last year, our annual outlook publication, <em><a href="https://www.brownadvisory.com/us/outlook-2018-confronting-unknown">Confronting the Unknown</a></em>, focused on risk: how we define it, how we measure it, and what we saw as the major risks facing investors in 2018. The discussion, unfortunately, was timely given the market volatility we experienced last year. Two of the five risks we highlighted—the risks of rising interest rates and heightened global trade tensions—were top of mind for investors throughout the year. Later in the year, markets became anxious about other topics, such as a potential economic slowdown, a new level of dysfunction in Washington (including unusual executive challenges to the Fed's independence and an extended partial government shutdown), and escalating trade disputes between the U.S. and China. All of this weighed heavily on equity returns across the globe in 2018.</p> <p class="text-align-center"><a href="https://www.brownadvisory.com/sites/default/files/2019-02/Brown%20Advisory%20-%20The%20Measure%20of%20All%20Things%20-%20Outlook%20for%202019.pdf" target="_blank"><img src="https://www.brownadvisory.com/sites/default/files/download_PDF_btn.png" /></a></p> <p>Entering 2019, we face rising economic, political and market risks. But the drop in valuations experienced at year’s end, alongside higher bond yields, offer a foundation for better long-term return expectations across most asset classes. Given that backdrop, many of our client conversations during the back half of 2018 centered on how we might balance these opportunities and risks. Valuation is one of the key drivers of long-term future equity market returns, and as such, we thought an appropriate topic for this year’s publication would be a deeper dive into valuation—the figures we examine to gauge valuation, the manner in which we adjust portfolios to valuation shifts, and the state of market valuations today in our view. There is no silver-bullet metric for valuation analysis, and as we will demonstrate later in this report, the variety of metrics that we monitor—from price/sales ratios to enterprise value/EBITDA multiple—sometimes point in different directions. We believe that by gathering a wide spectrum of information, we can begin to cut through the market’s noise and make informed decisions that help us lean into value and away from more expensive areas.</p> <p>One example of this which we will explore in depth is examining the opportunity set between U.S. vs. non-U.S. equities along with the topic of geographic diversification. The prolonged period of strong U.S. performance has led many U.S.-based investors to consider severely reducing or even abandoning non-U.S. equity exposure. Consistent headlines about political turmoil (such as in the U.K., Italy and Turkey), economic challenges (such as in China, Argentina and Germany) and structural issues (such as in Japan and Italy) have fueled concerns about non-U.S. markets. But there are still long-term opportunities to invest in great companies in these countries. We wanted to offer a holistic look at how we think about the geographic mix of our equity investments.</p> <p class="text-align-center responsive"><img src="https://www.brownadvisory.com/sites/default/files/isgOutlook_fillerImage.jpg" /></p> <p>This is also a fitting moment to review the intersection of risk and valuation. 2018 marked the 10-year anniversary of the depths of the 2008–09 financial crisis, an event that tested the strength of the global financial system, the will of the global body politic, and the mettle of everyday citizens throughout the world. We are now also nearly 20 years separated from the collapse of the internet bubble in the late 1990s. During both of these events, asset prices became disconnected from reasonable estimates of intrinsic value. Investors who weathered these storms all bear scars, but we can all draw important lessons from those events about the risks of excess leverage in portfolios or on balance sheets, the importance of sticking to your investment discipline, and the need to maintain a diversified asset allocation with robust liquidity to withstand periods of market mayhem.</p> <p>We don’t see the same levels of excess in either market valuations or excessive debt levels that we saw in 1999 or 2008, but global economic growth appears to be slowing, and we do see rising risks of a recession in the U.S. Our base scenario for 2019 includes a deceleration of U.S. growth, but not a recession. Nevertheless, we are concerned about the pressures of rising interest rates and the potential blowback from global trade strife. On the other hand, the recent market sell-off has taken valuations in equity markets to somewhat more attractive levels. In our conversations with external managers, and with Brown Advisory’s own equity and fixed income research teams, we are hearing more excitement about bottom-up investment opportunities than we have in the past few years. In non-U.S. markets, the opportunities look even more attractive from a pure valuation perspective, and one area of particular focus in this publication will be how valuation and other factors inform our views and decisions about investments in Europe, emerging Asia and other areas of the world.</p> <p>We are moderately cautious in our portfolio positioning at the start of 2019, with reduced equity exposure vs. our long-term targets and an emphasis on liquidity in our client portfolios. In times of elevated volatility, we seek to remain disciplined, control the natural human impulse to retreat from losses, and avoid any overreactions to near-term price movements. We have been preparing client portfolios for these conditions for more than two years and believe we are in a good position to approach today’s challenges from a position of strength and patience.</p> <p>But this stance is a baseline that changes for every client, depending on that client’s situation. The title for this year’s report comes from a quote from the Greek philosopher Protagoras, often paraphrased as “Man is the measure of all things”—a statement about relativism (i.e., two people can experience the same set of conditions differently, and both experiences are equally valid representations of reality) that cuts to the heart of our work. The objective realities of today’s market may lead to very different advice and diverging paths for our clients, informed by their time frame, circumstances and temperament. Our aim is to help them reconcile the objective and subjective factors that each play a key role in their long-term plans.</p> <p>As always, we hope this paper leads to valuable conversations with our clients and helps us make better decisions together as a result. We look forward to hearing your thoughts and comments. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <p> </p> <p> </p> <p> </p> <p> </p> <p>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.</p> <p style="line-height: 1.5em; font-size: 0.7em;">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.</p> <p style="line-height: 1.5em; font-size: 0.7em;"><sup>1</sup>Private and alternative investments (including hedge funds and private equity, credit and real estate funds) available for qualified purchasers and/or accredited investors only.</p> <p style="line-height: 1.5em; font-size: 0.7em;">The following indexes were used throughout this report to represent returns and characteristics of various asset classes and regions:</p> <p style="line-height: 1.5em; font-size: 0.7em;">U.S. Equities: The S&amp;P 500® Index represents the large-cap segment of the U.S. equity markets and consists of approximately 500 leading companies in leading industries of the U.S. economy. Criteria evaluated include: market capitalization, financial viability, liquidity, public float, sector representation, and corporate structure. An index constituent must also be considered a U.S. company. Standard &amp; Poor’s, S&amp;P, and S&amp;P 500 are registered trademarks of Standard &amp; Poor’s Financial Services LLC (“S&amp;P”), a subsidiary of S&amp;P Global Inc. The Russell 3000® Index is a market-capitalization weighted equity index that provides exposure to entire U.S. stock market. It tracks the performance of the 3,000 largest U.S.-traded stocks, which collectively represent about 98% of all U.S. incorporated equity securities. The Index is completely reconstituted annually. The Russell 3000® Index and Russell® are trademarks/ service marks of the London Stock Exchange Group of companies.</p> <p style="line-height: 1.5em; font-size: 0.7em;">Emerging-market equities: The MSCI Emerging Markets® Index captures large and mid-cap representation across 23 Emerging Markets countries. With 834 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Emerging Markets Net Total Return (Local) Index tracks the performance of the MSCI Emerging Markets Index in local-currency terms. The MSCI Emerging Markets EMEA Index captures large and mid-cap representation across 10 emerging markets countries in Europe, the Middle East and Africa. With 145 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. European equities: The MSCI Europe Index is designed to represent the performance of large- and mid-cap equities across 15 developed markets. As of December 2017 it had more than 400 constituents and covered approximately 85% of the free float-adjusted market capitalization across European developed-market equity. Japan equities: The MSCI Japan® Index is designed to measure the performance of the large and mid-cap segments of the Japanese market. With 319 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Japan. EAFE equities: The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets in Europe, Australasia and the Far East, excluding the U.S. and Canada. With more than 900 constituents as of December 2017, the MSCI EAFE Index covered approximately 85% of the free float-adjusted market capitalization in each country. The MSCI EAFE Net Total Return (Local) Index tracks the performance of the MSCI EAFE Index in local-currency terms. Asia ex-Japan equities: The MSCI Asia ex Japan Index captures large and mid-cap representation across 2 of 3 developed market countries (excluding Japan) and 9 emerging markets countries in Asia. With 953 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Latin American equities: The MSCI Emerging Markets (EM) Latin America Index captures large and mid-cap representation across 5 emerging markets countries in Latin America. With 108 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Non-U.S. equities: The MSCI World Ex-U.S. Index represents the performance of large and mid-cap securities across 22 of 23 developed-market countries, excluding the U.S. With more than 1,000 constituents as of December 2018, the Index coves approximately 85% of the free float-adjusted market capitalization in each country. The MSCI World Ex-U.S. Index represents the performance of large and mid-cap securities across 22 of 23 developed-market countries (excluding the U.S.) and 24 emerging-market countries. With more than 2,100 constituents as of December 2018, the Index coves approximately 85% of the global equity opportunity set outside of the U.S. Unless otherwise noted, all non-U.S. equity return data is cited in USD terms.</p> <p style="line-height: 1.5em; font-size: 0.7em;">All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.</p> <p style="line-height: 1.5em; font-size: 0.7em;">Investment-grade bonds: The Bloomberg Barclays Aggregate Bond Index is an unmanaged, market-value weighted index composed of taxable U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate, asset-backed and mortgage-backed securities between one and 10 years. High-yield bonds: Bloomberg Barclays U.S. Corporate High Yield Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&amp;P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.</p> <p style="line-height: 1.5em; font-size: 0.7em;">BLOOMBERG, is a trademark and service mark of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries.</p> <p style="line-height: 1.5em; font-size: 0.7em;">Terms and definitions: Definitions for various valuation ratios (Price/Earnings, CAPE, EV/EBITDA, Price/Sales, Price/Book Value, and Price/Cash Flow) are provided in a table on page 10 of the full publication. Earnings Growth refers to the growth rate of a company’s net profit. Yield to maturity is the total return anticipated on a bond if held until it matures. Yield to worst is the lowest total return anticipated on a bond with callable, puttable or other features (i.e., the "worst" outcome between yield to maturity, yield to call, yield to put, etc.).</p> </div> Tue, 12 Feb 2019 14:12:18 +0000 ajackson 27446 at https://www.brownadvisory.com Strategic Advisory – a thinking partnership https://www.brownadvisory.com/intl/strategic-advisory-thinking-partnership <span class="field field--name-title field--type-string field--label-hidden">Strategic Advisory – a thinking partnership</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 01/17/2019 - 09:02</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h4>Making sense of complexity</h4> <p>For many of our clients, the greatest challenges they face do not fit neatly into boxes. The inter-play of personal taxes – sometimes in more than one country – their business interests and investments, philanthropic intentions, and the education and succession of the next generation creates complexity and contradictions that can seem at times impossible to untangle.</p> <p>Brown Advisory's 30 strategic advisors bring together experience across many fields, including law, taxation, investment, business and family dynamics to act as a sounding board and thinking partner for clients wrestling with these challenges.</p> <p>Our role as a strategic advisory team is flexible, being governed by the individual circumstances and needs of each client. Typically, we work with our clients and their advisors to understand, clarify and articulate their holistic situation and goals so that prioritisation, planning and protection around all types of “life” events can be efficiently diagnosed and implemented.</p> <h4>Strategic Advice: from the client’s perspective</h4> <p>Whilst the United Kingdom remains a very popular place in which to live, the political, tax and economic landscapes have, like many other places in the world, become increasingly complicated. It is against this background that we work with clients across a wide range of topics.</p> <p><strong><em>Non-UK domiciled UK residents</em></strong><br /> Many of our clients live in the UK as citizens of other countries, including the United States. We help these clients navigate and understand the intricate tax and reporting rules that may follow from being resident (or contemplating becoming resident) in the UK.</p> <p><strong><em>UK domiciled UK residents</em></strong><br /> Our UK resident and domiciled clients are no more immune to this increasingly complex legal and tax landscape. Nevertheless, asset protection and the timely relinquishing of control of assets to the next generation are often front of mind for many of our clients. We recognize that efforts to achieve asset protection and form succession plans need to take into account many factors, including familial dynamics, the value and characteristics of assets, tax cost and cash-flow.</p> <p>Whatever the citizenship, residency and tax profile of our clients, it is their goals and objectives, in each case, that drive the formation of the solutions and methods that are ultimately deployed.</p> <p><strong><em>Case Study – Mr. and Mrs. X</em></strong><br /> Mr. and Mrs. X are citizens of the United States who have been living in the UK for several years. They had accumulated significant wealth in the U.S. from their investment and employment activities before they moved to the UK, and continue to do so today.</p> <p>When we first met Mr. and Mrs. X, we learned that their greatest uncertainty was how to manage their UK expenditure without incurring unnecessary tax costs. This concern had been brought to a head because they were contemplating a significant property purchase in the UK and were unsure which of their savings and investments would be the optimal source of funding.</p> <p>After an initial information gathering phase with Mr. and Mrs. X and their tax advisors, we proposed a revised account framework to ring-fence those monies which might be inefficient to bring to the UK and to make future identification of available assets easier.</p> <p>Having helped to clarify which parts of their estate might be most efficient for funding the property investment, for meeting annual expenditure in the UK, and for long-term growth, we constructed investment plans for each.</p> <h4>Strategic Advice: from the perspective of the client’s other advisors</h4> <p>We think that our clients get the best results when their investment, accounting and legal advisors are all working in sync with each other. As strategic advisors, we often play a coordinating role, communicating with our clients’ other advisors to ensure there is a common understanding and direction across the board. It is on this premise that we have built many fruitful partnerships with lawyers, accountants and other professionals to effectively serve our mutual clients.</p> <p>We are fortunate to be able to meet with clients on a regular and consistent basis which allows us to spot potential issues that may be appearing on the horizon and ensure the right members of the clients’ broader advisory team are brought in and/or introduced as early as possible.</p> <p>We are proactive in trying to provide a communication channel between our clients’ various advisors, so everyone can work from the same playbook, preempt potential issues long before they become last-minute concerns, and generally provide a more seamless experience and consistent result for the client.</p> <h4>Strategic Advice: our history</h4> <p>Our strategic advisory philosophy has been an essential component of Brown Advisory's approach since our firm’s founding over 25 years ago. Our first clients were complex families who valued our ability to help them devise investment plans that were closely intertwined with their business, succession and estate planning needs.</p> <p>Today, our firm serves many families and institutions around the world and we carry our strategic advisory philosophy into all of our relationships. Whilst investment return is an important part of our clients’ holistic strategy, we know that supporting non-investment goals is also a priority. We view a client’s long-term plan as a tapestry that depicts different events and goals (past, present and future); strategic advice is the thread that weaves it all together.</p> <p>As strategic advisors, we are privileged to work so closely with our clients and their teams and we are fortunate that our ability to be objective and empathetic with clients is reinforced by the structure and culture of our firm. We are free from the potential conflicts which can arise where firms are involved in lending, underwriting, commission-based transactions or other activities. In addition, we charge no fee to our clients for our strategic advice.</p> <h4>How can we help?</h4> <p>In the future, we will publish articles and host events in London that capture some of the planning solutions we bring to bear for our clients. In the meantime, we are happy to be a resource to anyone who has questions about our approach or the role that a Strategic Advisor may be able to play for them. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <p> </p> <p> </p> <p> </p> <p> </p> <p>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.</p> <p style="line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 17 Jan 2019 14:02:34 +0000 ajackson 27046 at https://www.brownadvisory.com 2018 Impact Report: Large-Cap Sustainable Growth Strategy https://www.brownadvisory.com/intl/2018-impact-report-large-cap-sustainable-growth-strategy <span class="field field--name-title field--type-string field--label-hidden">2018 Impact Report: Large-Cap Sustainable Growth Strategy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 12/19/2018 - 11:16</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><h4>A Letter of Introduction From The Portfolio Managers</h4> <p> </p> <p>Brown Advisory is deeply committed to sustainable investing, with the goal of helping our clients generate attractive investment returns, align their investments with their values and make a positive impact on society with their capital.</p> <p>Our clients are interested in learning more about the impact component of their sustainable investing strategies. To address this growing interest, we are pleased to issue our first, formal annual Impact Report for the Brown Advisory Large-Cap Sustainable Growth Strategy.</p> <p>The report includes a review of how we invest using innovative ESG and sustainability research, a discussion of the positive environmental and social outcomes being created by our portfolio companies, and a look at how we engage with portfolio companies and with the broader sustainable investing community.</p> <p>We want to express our gratitude to our research team of Emily Dwyer, Amy Hauter, Katherine Kroll and intern Lisa Fillingame, who work tirelessly to ensure that our investment decisions are informed by solid ESG data and clear viewpoints about how that data may affect a company’s prospects. Emily and Katherine were instrumental in the preparation of this report. We also wish to thank our firm’s Sustainable Investing Advisory Board; we greatly value the outside perspectives of Dan Esty, Kate Gordon, Marty Kaplan and Mamie Parker, and their insight and guidance is essential to our work. </p> <p>Finally, we are extremely grateful to CEO Mike Hankin, the senior leadership at our firm, our broader investment and strategic advisory teams, and in one way or another, every single one of our colleagues for their wholehearted support of sustainable investing principles and their eagerness to help build and advance our sustainable investing effort.</p> <p>On their behalf, we are proud to present this Impact Report to our clients. We hope you find it informative, and we welcome a continuing conversation with you about the work we are doing.</p> <p>Sincerely,</p> <p> </p> <div style="float: left; width: 35%;"> <p><strong>Karin Funk, CFA</strong><br /> Portfolio Manager and<br /> Head of Sustainable Investing </p> </div> <div style="float: left; width: 35%;"> <p><strong>David Powell, CFA</strong><br /> Portfolio Manager<br />  </p> </div> <p> </p> <p> </p> <p> </p> <p> </p> <p><span style="font-size:9px;">*Brown Advisory entities included are: Brown Advisory LLC, Brown Investment Advisory &amp; Trust Company, Brown Advisory Ltd. and Brown Advisory Trust Company of Delaware, LLC.</span></p> <p> </p> </div> Wed, 19 Dec 2018 16:16:04 +0000 ajackson 26381 at https://www.brownadvisory.com Finding Alpha in Challenged Global Markets https://www.brownadvisory.com/intl/finding-alpha-challenged-global-markets <span class="field field--name-title field--type-string field--label-hidden">Finding Alpha in Challenged Global Markets</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 12/12/2018 - 09:26</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p style="color:#005593; font-size:18px; font-family:georgia,serif;"><em>Global investors need to have an open mind. At any given time, many countries and markets around the world may appear to be rife with risks and problems, and yet in many cases, these countries may also offer sources of return that may not be evident at first glance. The best global managers are the ones that probe below the surface and find those sources of return. An excellent case study for this idea is Japan, a country that many investors wrote off long ago—but one that managers have successfully mined for return opportunities during the country’s extended economic struggles.</em></p> <p>In 1989, as the Berlin Wall began to fall, another 20th century institution, namely the Japanese market, started to collapse.</p> <p>On December 29, 1989, the Japanese equity market peaked at a level of 2,881. Many readers may not recall the market’s euphoria for all things Japanese. Unbridled optimism ushered in an economic bubble of historic proportions. The fever pitch reached such a level that at one point the 379 acres under Tokyo’s Imperial Palace were assessed at a value greater than the entire state of California. However, the downturn was swift. By August 1990, the Japanese market had plummeted to half of its peak.</p> <p>Roughly 29 years have passed and the Tokyo Stock Price Index or TOPIX (1,695) is still 42% below its 1989 peak. The aversion to Japanese equities today seems just as great as the insatiable demand investors’ exhibited just three decades ago.</p> <p>One principal reason for the antipathy has been Japan’s lackluster economic performance. Annual real economic growth since 1994 has averaged less than 1%. Over that time period, the TOPIX has only fared slightly better. The Index has delivered 2.1% in local terms and 1.6% in USD terms given the slight depreciation of the Japanese yen.</p> <p>Japanese policy makers have not been indifferent to the economic malaise. Stimulus measures have been both firm and consistent. In fact, government debt, the one area where Japan’s growth plans have succeeded, has expanded to 236% of GDP.</p> <p>Putting recent experience aside for the moment, we would argue that a story is developing in Japan that investors may be missing. One of the potential reasons for the market’s unawareness to Japanese opportunities is its persistent and unwavering focus on growth.</p> <p>It is not uncommon for investors to focus on growth as the single most important factor generating returns. Higher growth is “good” while lower growth is “bad.” And here’s the point in the analytical framework where investors may risk making a meaningful mistake.</p> <p>While economic growth can be a critical factor in equity market performance, it is certainly not the only factor; and in many cases, likely not the most important. This type of single-factor analysis overlooks key variables at the company level such as return on capital, interest rates and entry points (i.e. valuation). Regarding the last point, it is completely plausible to generate above-average rates of return from a business in a state of decline assuming the purchase price reflects the economic reality.</p> <p>From a macro perspective, we concede that Japan’s economy remains lackluster. From a micro perspective, however, a more interesting story emerges. There is a subset of companies within the Japanese economy undergoing a transformation. As part of this metamorphosis, management teams are paying greater attention to creating shareholder value.</p> <p>Moreover, Japan’s equity market remains deep, liquid and well organized in our view. Pockets of considerable industry fragmentation are poised for a first-mover advantage, especially given the trifecta of cash-rich balance sheets, ultra-low interest rates and valuation support. Finally, a prolonged lack of interest in Japanese equities by foreign investors has arguably made the equity market reasonably inefficient by developed-market standards.</p> <p>Good managers have been able to deliver returns that global investors would find attractive, even while investing in Japan’s “no-growth” economy. We track several funds that have successfully outperformed not only the TOPIX over the past 10 years, but the MSCI World Index as well. We follow these managers closely and know them well; they offer particular approaches to investing in a country that effectively remains an outlier in the investing world, and we believe they have the opportunity to continue delivering strong results.</p> <p>Renowned Harvard economics historian David Landes once wrote, “…economic analysis cherishes the illusion that one good reason should be enough.” This certainly applies in the case of Japan. For many investors, double-digit returns from Japanese equity markets are not supposed to happen. It creates too much conflict with an existing worldview—whereby the dependent variable (i.e. equity returns) originates from a function that is arguably overly predisposed to a single independent variable (i.e. growth). However, for those willing to challenge consensus, the rewards could be meaningful. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.<br /><br /><b>TOPIX (The Tokyo Price Index)</b> is a metric for stock prices on the Tokyo Stock Exchange. TOPIX is a capitalization-weighted index that lists all firms in the “first section” of the TSE, a section that organizes all large firms on the exchange into one group. The second section of the TSE pools all of the smaller remaining companies.<br /><br /><b>MSCI World Index</b>, which is part of The Modern Index Strategy, is a broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries. MSCI is a market leader in global equity indexes and has over $3.6 trillion in assets benchmarked to the MSCI World Index suite.<br /><br /> The TOPIX Index Value and the TOPIX Trademarks are the intellectual property rights owned by the Tokyo Stock Exchange. All rights relating to the TOPIX, including calculation, publication and use of the TOPIX Index Value as well as those relating to the TOPIX Trademarks belong to the Tokyo Stock Exchange. All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.<br /><br /> BLOOMBERG and BLOOMBERG INDICES are trademarks or service marks of Bloomberg Finance L.P. Bloomberg Finance L.P. and its affiliates (“collectively, “Bloomberg”) or Bloomberg’s licensors own all proprietary right in the BLOOMBERG INDICES.</p> </div> Wed, 12 Dec 2018 14:26:54 +0000 ajackson 25281 at https://www.brownadvisory.com Brown Advisory Latin American Strategy https://www.brownadvisory.com/intl/brown-advisory-latin-american-strategy <span class="field field--name-title field--type-string field--label-hidden">Brown Advisory Latin American Strategy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Fri, 10/05/2018 - 10:16</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p style="color:#005593; font-size:18px; font-family:georgia,serif;"><em>Rupert Brandt and Peter Cawston recently joined Brown Advisory, bringing with them the Latin American strategy they have managed for more than a decade. In this conversation, the two portfolio managers share their perspectives on a market in which they’ve invested for a combined 28 years, and why they view Latin America as one of the last great untapped investment opportunities in the world.</em></p> <h4>Q: Can you provide some basic context on the Latin American opportunity?</h4> <p>Well, first things first—this is a big economy and a big opportunity. We are essentially talking about six countries: Argentina, Brazil, Chile, Colombia, Mexico and Peru. Brazil on its own is roughly equal to India in terms of GDP. Taken together, these six countries have a population approaching half a billion people, and produce just under U.S. $5 trillion in GDP<sup>1</sup>.</p> <p>A powerful long-term economic transformation is in progress in Latin America. The dictatorships, currency pegs, hyperinflation and guerilla warfare of the 1980s have gradually been replaced in these six countries by democracy, floating currencies, independent central banks and, for the most part, peace. Inflation is a particularly clear window into the transformation in the region; in five of these six countries, inflation has fallen from the 100% range in the 1980s and early 1990s, to low single digits today (Argentina is much earlier in its transformation but following the same model). Middle class growth (from barely 20% of the population in 2002, to more than 35% today<sup>2</sup>) is also transforming Latin America. In addition to its greater purchasing power, the middle class also has something to lose and is thus, in our view, more supportive of governments with pro-business approaches.</p> <p>Latin America is one of the last big markets in the world to mature, and we see the potential for top-line growth similar to that of emerging Asia in recent years, possibly with much better bottom-line results. Asia’s GDP growth has often failed to translate into high returns on invested capital (ROIC) for Asian companies. One reason is the ease with which Asian companies can borrow, leading to high debt levels in many cases. In Latin America, high interest rates were the norm for many years, so the best management teams there have real discipline around generating a return on invested capital greater than the cost of capital. This helps them transfer GDP growth more readily to their bottom lines.</p> <div class="greyLine"><a> </a></div> <h4>Latin America is Growing Rapidly―Especially Outside of Brazil and Mexico</h4> <p><i>Despite various economic challenges faced in the region over the past twenty years, Latin America's economic growth has outpaced that of developed markets. Notably some of the fastest growth is in Peru, Colombia and Chile―these countries are a notable weighting of Brown Advisory's Latin American Strategy relative to the Latin American indexes. The portfolio information provided is based on a representative account and is provided as supplemental information.</i></p> <p><strong>Real GDP Growth Rate by Country/Region (12/31/2000―12/31/2017)</strong></p> <p class="responsiveImg"><a href="https://www.brownadvisory.com/sites/default/files/latam_gdp_regiongrowth_chart.jpg"><img alt="Real GDP Growth Rate by Country/Region (12/31/2000―12/31/2018)" src="https://www.brownadvisory.com/sites/default/files/latam_gdp_regiongrowth_chart.jpg" /></a></p> <p style="line-height: 14px; font-size: 0.8em;">Source: Bloomberg. Growth rates cited in the right column are annualized.</p> <div class="greyLine"><a> </a></div> <h4>Q: You’ve covered Latin America for 20 years. Why do you think the opportunity is particularly attractive now? Conversely, what are some potential downside risks?</h4> <p>We think that today is a great point of entry into Latin America. First, the region appears to be at an early point in its economic cycle. Latin American economic upturns in the postwar era have all lasted at least five or six years, and this cycle looks particularly promising as all six of our economies are poised to benefit from recent structural reforms, and their currencies are attractively valued vs. the U.S. dollar which should help them compete globally in our view. Corporate margins are not above long-term averages. Economic policy in the region, in our view, offers a fairly benign outlook—interest rates are reasonable (with the notable exception of Argentina), private sector debt is relatively low, and Latin America is not unwinding a major quantitative easing program like many other regions.</p> <p>Second, we believe that currencies in the region are undervalued. We do not try to forecast currency movements, but we always want a view on whether currency is more of a risk or opportunity at a given moment. Right now it appears to be an opportunity—the real effective exchange rate vs. the U.S. dollar is below its 20-year average in most of the markets in which we invest, despite the improved economic conditions in these countries.</p> <p>Finally, the valuation picture looks attractive in our view. Our portfolio has generated admirable earnings growth since the strategy's inception, and the companies we own were producing an adjusted 19% return on equity and had an adjusted 0.8x net debt/EBITDA ratio (excluding financials)<sup>3</sup> as of late September 2018. Those are robust results for a portfolio trading at approximately 13x estimated adjusted 2019 earnings – a multiple that should rise if earnings accelerate as we expect<sup>3</sup>. We see this as an unusually low valuation at the beginning of an economic acceleration, offering incremental return potential for proactive investors. So we see all of these economic, currency and valuation factors converging to produce an attractive outlook over a five-plus year time horizon.</p> <p>There are always risks in emerging markets, however. A recession in the developed world, a Chinese debt crisis, a retrenchment of commodity prices, or a reversal of positive structural trends in these countries--all of these are possibilities that could set Latin American markets back. And the region’s stock markets are still vulnerable to rapid inflows and outflows of foreign capital (an inherent challenge for any emerging market portfolio).</p> <p>Time has taught us to be patient about the "two steps forward, one step back" pattern that can play out in Latin America. Setbacks occur in different countries at different times, and these situations sometimes—not always—create opportunities for us to add alpha. The latest ongoing example is in Argentina. For the past several years, Argentina’s new pro-market government has been actively reforming the economy—deregulating prices, sorting out the fiscal deficit, sorting out inflation and encouraging private investment. A big part of the country’s economic story is rooted in its agricultural sector, and when it suffered its worst drought in 50 years in 2018, it triggered significant currency weakness and a selloff in its equity markets. The government has responded in an orthodox manner, taking steps such as raising interest rates sharply to stem inflation. We believe that the long-term fundamentals in Argentina are still very promising, and we expect to see the economy recover and re-establish attractive GDP growth in 2019. Given current equity valuations combined with a relatively inexpensive currency, we have had the opportunity to invest in some appealing Argentinian companies at attractive prices.</p> <div class="greyLine"><a> </a></div> <h4>The Rise of the Latin American Middle Class</h4> <p><i>The middle-class explosion that has driven growth in emerging Asia is also occurring in Latin America. The percentage of Latin Americans with middle class incomes has risen dramatically since the early 2000s, which has led to a boom in consumer spending and, indirectly, the popularity of more market-friendly governments.</i></p> <p><strong>Middle Class / Poverty Population Trends In Latin America, 2003-2016</strong></p> <p>(Expressed as % of population within daily USD spending ranges)</p> <p class="responsiveImg"><a href="https://www.brownadvisory.com/sites/default/files/latam_populationpoverty_chart.jpg"><img alt="The Rise of the LatAm Middle Class" src="https://www.brownadvisory.com/sites/default/files/latam_populationpoverty_chart.jpg" /></a></p> <p style="line-height: 14px; font-size: 0.8em;">Source: World Bank. Poverty level defined as income of approximately $5.50 USD per day or less; middle class defined as income between $13 and $70 USD per day.</p> <div class="greyLine"><a> </a></div> <h4>Q: Do you think investors need specific exposure to Latin America?</h4> <p>We think it makes sense to invest in Latin America, given the bottom-up opportunity and compelling valuations. But benchmark-driven emerging market (EM) strategies don’t offer a lot of Latin American exposure currently. These indexes are market-cap weighted and backward-looking in their construction, so they will not reflect a higher Latin American allocation until share prices have meaningfully rerated in response to the economic resurgence we are seeing in the region. For that reason, we think that investors seeking to capitalize on that resurgence are better served by having specific Latin American exposure.</p> <p>That being said, we think our value-add is more rooted in stock selection than in regional exposure. We focus primarily on absolute returns, and don’t guide the portfolio relative to any benchmark. One of our portfolio companies, Nutresa, is a good example—we own it for fundamental reasons, not because it gives us exposure to the region or to Colombia. Colombia offers tailwinds to be sure—it’s a free-market democracy where GDP per capita has grown 2.5x since 2000<sup>4</sup>. But the bulk of our thesis is based on the company itself. We believe that it has excellent brand strength across its core categories including cold cuts, chocolate, pasta and coffee, leading to a 60% aggregate market share in Colombia, which accounts for 60% of its business<sup>5</sup>. It has a strong distribution network that gives it a competitive advantage against multinational entrants in our view. Moreover, comparisons with other countries strongly suggest that demand for Nutresa’s products will rise as GDP/capita and the middle class grow, so it has an immense runway for growth.</p> <h4>Q: How does your strategy differentiate from other Latin American strategies?</h4> <p>We have <strong>a particular focus on "underpenetration” in the portfolio </strong>(i.e., situations where an industry has not fully realized its potential in a given country). This focus leads us to companies that have the potential to capture, in essence, three sources of growth. As noted, we believe key Latin American countries are poised for attractive nominal GDP growth; underpenetrated industries offer the potential to grow faster than overall GDP; and finally, our research seeks to uncover companies that can gain share and grow faster than their industries. We believe this focus on underpenetration is a major reason why our portfolio companies have generated strong earnings growth since the strategy's inception, during a decade-plus period that we would describe as peak-to-trough for the region's economies. </p> <p>Additionally, we believe that <strong>our benchmark-agnostic approach offers greater diversification</strong> of country and currency risk than benchmark-driven strategies.The MSCI Latin American Index is market-cap weighted, so Brazilian and Mexican companies can represent as much as 80% of the Index at times. The Index can also have meaningful weights in companies that we think are unattractive from a fundamental standpoint— state-owned businesses with poor governance influenced by politics, energy and other commodity companies, and companies in slower-growth sectors such as telecommunications. Petrobras—driven by the inherently unpredictable price of oil, and governed by political appointees that change with every election—is a good example; it's a large constituent within the Index, but it is not the kind of model we want to back with our clients’ capital.</p> <p>In contrast, we seek to invest broadly across countries with solid long-term fundamentals and improving policy environments, and in high-quality growth stocks with long growth runways that operate in clearly underpenetrated domestic industries. Our portfolio is more diversified than the Index across the six major economies in Latin America (for example, Peru made up about 15% of our portfolio as of June 30, 2018, vs. only about 4% of the Index<sup>6</sup>). We only invest in "private" (i.e., not state controlled) companies with managers clearly aligned with shareholder interest; we don’t invest in state-controlled companies and we avoid commodity and low-growth stocks; and, we only invest in companies where we think long run results are relatively predictable and we believe that profits will compound well over time.</p> <p>A benchmark-agnostic approach will inevitably have periods when it exceeds and lags benchmark indexes that other strategies track more closely. However, over the long term our strategy has generated higher returns than the MSCI Latin American Index, at similar levels of volatility, since its 2006 inception.</p> <p>Finally, we believe that we know these markets very well after many years of visiting and investing in Latin America. There are about 100-150 companies of real interest to us. We each visit the region several times per year, so between us we usually spend 15-20 weeks a year in the countries we invest in and conduct 300-400 meetings with this select list of firms each year. In addition, we attend Latin American conferences and meet Latin American companies in London when they are doing non-deal roadshows (many come to London once or twice per year). So we’re very close to the data and to each company’s strategy and management team.</p> <h4>Q: How can investors access the strategy?</h4> <p>Investors can access the strategy through the existing UCITS Fund or through a segregated mandate. In the U.S., the strategy is available via segregated mandate, and we have plans to launch an SEC-registered mutual fund in the near future. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <p> </p> <p style="font-size:10px; line-height: 1.5em;"><sup>1</sup>Source: World Economic Outlook Database, April 2018, International Monetary Fund.<br /><sup>2</sup>Source: The World Bank, LAC Equity Lab: Poverty – Poverty Rate. Data from 2000–2016 updated and published in April 2018.<br /><sup>3</sup>Source: Bloomberg, Brown Advisory and broker estimates. Characteristics exclude cash and cash equivalents.The return on equity or <strong>ROE</strong> figure cited is an adjusted trailing 12-month weighted average. Companies with a negative ROE were removed from the calculation. The calculation is as of Sept. 19, 2018. Further details on calculation methodology are available on request. The unadjusted ROE is 17.0%. The unadjusted estimated 2019 earnings are 13.9x. The portfolio information provided is based on a representative account and is provided as supplemental information.<br /><sup>4</sup>Source: International Monetary Fund.<br /><sup>5</sup>Source: Grupo Nutresa Corporate Presentation/Fact Sheet.<br /><sup>6</sup>Source: Brown Advisory.</p> <p> </p> <p> </p> <div class="greyLine"><a> </a></div> <p><a href="http://www.brownadvisory.com/disclosures/latin-american-composite">Click here to view Latin American Composite Disclosures</a></p> <p>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.</p> <p style="line-height: 1.5em; font-size: 0.7em;">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.<br /><br /><strong>Return on Invested Capital (ROIC)</strong> measures a company's profitability in the context of the capital it invests in its business. It is calculated as NOPAT/IC; where NOPAT (net operating profit after tax) is (EBIT + Operating Leases Due 1-Yr)*(1-Cash Tax Rate) and IC (invested capital) is Total Debt + Total Equity + Total Unfunded Pension + (Operating Leases Due 1-Yr * 8) –ExcessCash.<br /><br /><strong>Alpha</strong> is used in finance as a measure of performance. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark which is considered to represent the market’s movement as a whole. The excess return of an investment relative to the return of a benchmark index is the investment’s alpha.<br /><br /> The <strong>MSCI Emerging Markets (EM) Latin America Index</strong> captures large and mid cap representation across 5 Emerging Markets (EM) countries in Latin America which include: Brazil, Chile, Colombia, Mexico, and Peru. With 109 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.<br /> BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS,BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG BONDTRADER, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS, BLOOMBERG.COM and BLOOMBERG LAW are trademarks and service marks of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries.<br /> All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.</p> </div> Fri, 05 Oct 2018 14:16:00 +0000 ajackson 24881 at https://www.brownadvisory.com Why Invest in Europe and Asia (Even as U.S. Stocks Charge Ahead)? https://www.brownadvisory.com/intl/why-invest-europe-and-asia-even-us-stocks-charge-ahead <span class="field field--name-title field--type-string field--label-hidden">Why Invest in Europe and Asia (Even as U.S. Stocks Charge Ahead)?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Tue, 10/02/2018 - 12:30</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Diversification is a powerful tool for investors. It makes sense to spread investments into different asset classes and different global regions to balance risk and reward. But in recent years, a number of investors—especially those in the U.S.—have started to question why they should allocate to non-U.S. equities at all. U.S. stocks have generally been clear outperformers since the 2008-09 financial crisis, and it hasn’t really been close: Over the ten years since the financial crisis, U.S. equities have returned more than 11% per year (for USD-based investors), while outside the U.S., equity returns were closer to 5% per year for the same period. (For currency-hedged investors, the difference is less dramatic due to currency trends over this period, but the basic narrative is the same.)</p> <p>Recency bias is a powerful force, and it drives many smart people to assume that what they have seen recently is the “new normal.” But the truth is that the return differential between U.S. and non-U.S. stock has cycled back and forth regularly for many decades. There is no reason to expect that this cycle has ended, and/or that one side has somehow “won.” Moreover, despite persistent strength in U.S. markets ten years after the financial crisis, there are a number of fundamental factors supporting a “relative comeback” for both developed and emerging non-U.S. markets.</p> <div class="greyLine"><a> </a></div> <h4>The U.S. / Non-U.S. Stock Contest: A Split Decision, Historically</h4> <p><i>A quick review of recent history shows that picking either side of this contest would have left you sorely disappointed in your choice during many of the past 40 years:</i></p> <p><strong>Relative Performance, U.S. Equities vs. Non-U.S. Equities (USD)</strong><br /> One-Year Rolling Time Periods (12/31/79—9/30/18)</p> <p class="responsiveImg"><a href="https://www.brownadvisory.com/sites/default/files/chart_globalDiversification92518.jpg"><img alt="Relative Difference Between U.S. and Non-U.S. Equity (USD) Returns" src="https://www.brownadvisory.com/sites/default/files/chart_globalDiversification92518.jpg" /></a></p> <p style="line-height: 14px; font-size: 0.8em;">Source: Bloomberg. U.S. equities are represented by the Russell 3000® Index. Non-U.S. equities are represented by the MSCI EAFE Index from 1979-1987, and the MSCI ACWI ex. U.S. Index from 1988-2018.</p> <div class="greyLine"><a> </a></div> <p>In the 1980s, non-U.S. stocks were big winners over the U.S., as Japanese markets boomed and the U.S. “Black Monday” crash in 1987, among other factors, weighed on market returns. Then, in the 1990s, U.S. stocks benefited greatly from an internet-driven technology renaissance, while later in the decade non-U.S. markets were stung by the Asian Financial Crisis in 1997 and the Russian government debt default a year later. The 2000s were another period of broad outperformance for non-U.S. stocks, and as we’ve noted, U.S. stocks have reigned since the global financial crisis of 2008-09.</p> <p>We see here a general pattern of multiyear cycles when one “side” of this equation outperforms the other, and a series of boom and bust events that would have been difficult to predict in advance, but ended up benefiting or hurting one region over others in an outsized manner. None of this was easily predictable before it happened—and in truth, none of it offers much in the way of predictive value for us going forward. But we know that regional results have varied wildly over the years, and fortunes have shifted quickly. Against that backdrop, we think the best way to earn attractive returns while reducing risk is to diversify one’s portfolio across the globe. And by diversification, we mean balance in allocation less from quarter to quarter, or year to year, but rather over long periods, to balance when one region or the other struggles.</p> <h4>Continental Confidence: A Review of our Approach to European Equities</h4> <p>However, diversifying blindly takes away one’s ability to make educated choices on markets that look fundamentally attractive. We strike a balance—we seek broad diversification, then lean our weightings in one direction or another based on our fundamental outlook for various regions.</p> <p>For several years after the crisis, we consciously underweighted Europe; austerity as well as the economies of Greece and several other “peripheral” EU nations held back Europe’s recovery relative to the U.S. Our clients in Europe have a different starting point for geographic equity weightings than those in the U.S. (investors typically use benchmarks that emphasize home markets, to align risk with their home economies and currencies), but across the board we recommended a tilt away from Europe and toward the U.S.</p> <p>Then, after six years we regained a greater degree of optimism about Europe and began shifting assets back in that direction, as we noted in <a href="https://www.brownadvisory.com/en/theadvisory/european-re-entry-why-we-are-shifting-portfolios-toward-european-stocks">an article in 2017</a>. Europe’s economic picture had improved markedly at the time, with debt crises fading into the rearview mirror and broader leading indicators such as purchasing manager sentiment heading in the right direction. Equity valuations in Europe at the time were more attractive than those in the U.S. These arguments still generally hold today in our view.</p> <p>We should note that at both ends of this decision-making spectrum, our shifts were incremental, not dramatic, and represented overall movements of 3-4% of our overall portfolio mix. We may look back in 12-18 months and see that our recent incremental shift toward Europe was slightly positive or negative. But we believe we will feel comfortable with our decision to remain invested globally, so we have the potential to capture opportunity and weather risk in a balanced manner. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <p> </p> <p> </p> <p> </p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.<br /><br /><strong>Russell 3000® Index</strong> is a market-capitalization-weighted equity index maintained by the FTSE Russell that provides exposure to the entire U.S. stock market. The index tracks the performance of the 3,000 largest U.S.-traded stocks which represent about 98% of all U.S incorporated equity securities.<br /> “FTSE®”, “Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies.<br /><strong>MSCI EAFE Index</strong> is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. &amp; Canada. It is maintained by MSCI Inc., a provider of investment decision support tools; the EAFE acronym stands for Europe, Australasia and Far East.<br /><strong>MSCI All Country World Index</strong> Ex-U.S. (MSCI ACWI Ex-U.S.) is a market-capitalization-weighted index maintained by Morgan Stanley Capital International (MSCI) The MSCI All Country World Index Ex-U.S. includes both developed and emerging markets.<br /> All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.<br /> BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS,BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK, BLOOMBERG BONDTRADER, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS, BLOOMBERG.COM and BLOOMBERG LAW are trademarks and service marks of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries.</p> </div> Tue, 02 Oct 2018 16:30:46 +0000 ajackson 24896 at https://www.brownadvisory.com NOW 2018 Conference: Our Investment Team’s Roundtable Recap https://www.brownadvisory.com/intl/now-2018-conference-our-investment-teams-roundtable-recap <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 Conference: Our Investment Team’s Roundtable Recap</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/14/2018 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=GHo13TwkrE4&amp;index=9&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><i>The NOW conference is always memorable, but this year’s conference included some particularly compelling and provocative ideas. I wanted to make sure we considered those ideas and their implications for the portfolios we manage for our clients, with truly open minds. So, after the NOW conference, I invited a number of colleagues to join me for dinner so we could gather in a comfortable off-site environment, free of distractions, and connect the dots between what we heard at NOW and what we’re thinking about as investors. I'd like to thank my colleagues <a href="https://www.brownadvisory.com/lisa-cuesta">Lisa Cuesta</a>, <a href="https://www.brownadvisory.com/taylor-graff-cfa">Taylor Graff</a>, <a href="https://www.brownadvisory.com/amy-hauter-cfa">Amy Hauter</a>, <a href="https://www.brownadvisory.com/jane-korhonen-cfa">Jane Korhonen</a>, <a href="https://www.brownadvisory.com/stephanie-mccormick">Stephanie McCormick</a>, <a href="https://www.brownadvisory.com/adi-padva">Adi Padva</a>, <a href="https://www.brownadvisory.com/keith-stone-caia">Keith Stone</a> and <a href="https://www.brownadvisory.com/lyn-white-cfa">Lyn White</a> for their contributions to a rousing and wide-ranging discussion.</i></p> <p><i>I was not surprised at all when the conversations started at a polarizing moment from the conference. At one point, Skip Gates brought up the concept of reparations for historical injustices against African-Americans. If you attended NOW, you’ll remember the nearly physical reaction that rippled throughout the auditorium when the word “reparations” was spoken. A good number of attendees recoiled in displeasure and an equivalent number perked up eagerly.</i></p> <p><i>What pleased me to no end was that our entire group said that they enthusiastically welcomed that uncomfortable moment, and other uncomfortable moments that occasionally occur at our NOW conferences. They all believe what I believe, which is that the point of NOW is to not just to expose us to provocative ideas. We want the conference to force us to open our eyes, look at those new ideas, and consider whether we should respond by redirecting our actions and energies along a more fruitful path.</i></p> <p><i>Our group covered a wide range of topics during a freewheeling two-hour conversation. I’ve done my best to capture the more interesting takeaways in the summary you'll find on the next few pages. There is no doubt that the NOW conference, and our small group’s recap conversation, addressed many important questions about the future of society; in this write-up, we have tried to keep the focus on our efforts to invest successfully for our clients.</i></p> <h4>On the Social and Environmental Factors That Are Driving Business and Investing</h4> <p>Race, gender, political and identity schisms are roiling our society to an extent not seen since the civil rights era. While the direct ties to our work as investors may not be immediately obvious, they are definitely there: We strongly believe that the companies that thrive over the long term will be the ones that can openly address these challenges and in so doing find opportunities for growth. Moreover, we want to be one of those companies.</p> <p>In that vein, it was interesting to hear the results of the Edelman Trust survey in the session led by Matt Harrington, Edelman's COO. We heard that people are losing faith in governments and placing more trust in corporations; notably, 64% of respondents want CEOs to take the lead on a lot of society’s issues. Jane Korhonen, a portfolio manager in our Washington, D.C . office, saw this as an almost unimaginable shift in trust away from traditional institutions and toward corporations to solve the world’s problems.</p> <p>But the shift is occurring nonetheless. I asked Lisa Cuesta and Keith Stone, both of whom focus on the startup/venture universe, for their thoughts on the movement among startups to align business with mission. They are both seeing a lot more mission-aligned thinking on the part of companies and venture funds alike. In many cases, mission drives passion, and this passion can be a powerful force for startups in their initial push to get off the ground. They said, that mission is often a clear catalyst for recruitment, customer delight and business growth; one example is Grove Collaborative, a firm whose entire business is based on providing “clean living” e-ecommerce—a collection of organic household products made available through a subscription service. There is no real reason for that company to exist—there are plenty of ways to get organic household products already. But Grove succeeds because it is so passionate and mission-driven. This drives their people, the information they offer, the community they’ve built. They’ve earned a position as a deeply trusted source and beloved brand, and grown very rapidly. In this case, the mission alignment drove their superb execution, which led to success.</p> <p>Taylor Graff noted that today’s corporate environment is truly different than what it was 20 years ago: in the past, profit versus mission was a binary choice and a trade-off, but today, markets, consumers and prospective employees have all shifted considerably in a manner that allows companies to earn positive ROI when they allocate capital in line with their mission.</p> <p>With this in mind, I asked Adi Padva, Lyn White and Amy Hauter—all of whom examine public companies for us in the equity and credit markets—how they engage with companies on these social and environmental issues. They all identified the surge in the number of companies that proactively address these issues today in quarterly presentations, versus just a few years ago. Sustainability is becoming almost a required component of corporate presentations to the investment community; however, companies vary widely, and they also noted the need to be watchful and separate authentic business commitments from greenwashing.</p> <p>Amy also noted that the merits of an investment may be straightforward when it comes to financial returns, but mission-related evaluation is more subjective. She cited a number of renewable energy bonds we own that were issued under the Green Bond Principles, so we know that the proceeds are going to good projects. But some of those bonds are issued by oil companies, utilities that also burn coal and so forth. Investors will respond differently to these—some are uncomfortable with the issuers, while others are pleased by the positive environmental impacts produced by the projects being funded. We consider all of these things when we invest, but we need to make sure we’re transparent about what we own and why so our clients can make these judgment calls for themselves.</p> <h4>On Artificial Intelligence</h4> <p>This year’s conference was subtitled “Humanity in a Time of Intelligent Machines,” and the ramifications of AI were discussed throughout the day—not just the viability of the technology, but the challenges of integrating AI into society.</p> <p>Lisa shared an interesting anecdote related to self-driven cars, a market that is providing a spark for AI innovation. When she worked at Google, she wrote an internal article about her fear of driving, and as a result the company invited her into its pilot program for autonomous vehicles. She commuted in a self-driving car for an extended period, and the car worked perfectly. This was in 2013. The technology is there. Her point was that the big hurdles for AI will be just as much about adoption, acceptance and psychology as they will be about the technology itself.</p> <p>We asked each other for guesses on when we will see the tipping point for autonomous vehicles and what will catalyze the big push for driverless vehicles to become the rule, not the exception. No one wanted to take the bait with a specific guess—a moment of pride for me, we strongly discourage speculation at our firm!—but a number of folks were quite optimistic about anticipated progress. Adi noted that there are some really strong business drivers here and that they may override resistance faster than some think. Insurance companies will factually benefit from driverless cars, based on the actuarial numbers. The cost for the self-driving systems are declining rapidly. And constant connection with mobile devices makes driving less desirable for people, and FAR less desirable for a family whose kids are learning to drive.</p> <p>On the question of who will win the driverless vehicle race, Keith noted that in the end, miles driven will be a key success factor, both for developing robust technology and for winning approval from regulators. Google has a big head start, and new entrants face the natural and financial limits on how many physical miles a given company can record in a day. But he cited Zoox, a portfolio company of one of our venture managers, as an example of a company using AI creatively; it is using AI to run simulations of driving miles, which is letting the company build knowledge much faster than it could by logging physical miles on the road, and it is catching up rapidly with companies like Google. This approach is also helping Zoox in its efforts to reimagine cars from the ground up—it is testing vehicle concepts that depart significantly from standard vehicle designs, and virtual simulations allow them to evaluate various designs before building physical models.</p> <p>In terms of other applications for AI, Lisa noted that while we are still many years away from “real” AI, the machine learning capabilities available today can still be commercialized, and there are markets where this machine learning is in high demand. NextGen Venture Partners (which recently joined Brown Advisory) invested in a company called Customer Science that, in a nutshell, helps firms with a lot of customer data make use of that data. It has lots of offline customers with a dire need to compete with Amazon and other digitally native companies, and understand how their customers think and behave the way the digital companies do. Another example: Unilever bought Dollar Shave Club for $1 billion, and it wasn’t because they’re selling $1 billion worth of razor blades—it was for the company’s ability to understand how its customers think and shop. It was DNA that Unilever didn’t have.</p> <p>Jane raised the uncomfortable issue of how AI might directly affect the investment management business. She doesn’t think we should fear losing our jobs to robots, and neither do I, but we both see AI as a great opportunity for companies like ours. She hopes to be able to use AI to better understand our clients; to better understand how to translate each client’s risk profile into concrete portfolio parameters; to better understand how clients they want to see information reported to them. I wholeheartedly agree, and I suspect that AI will affect our business in a lot of ways that aren’t yet fully apparent.</p> <h4>On Trade Wars</h4> <p>Taylor had a number of thoughts regarding the healthy debate on trade we enjoyed at the conference. Those who attended the conference heard a friendly but spirited debate over the merits of protectionism versus free trade. Rather than argue on one side or the other, Taylor noted that the policy developments we’ve seen this year are less about who’s right on trade and more about the fact that free trade opponents are winning the war of words among a wide swath of the voting public. As investors, we know that companies have been huge beneficiaries of free trade, and if they can’t successfully convince the public of the merits of free trade, they may lose the favorable environment they’ve enjoyed.</p> <p>The U.S. has staked out a highly protectionist stance so far this year, at least by the standards of the last few decades of U.S. policy. Where we go from here is really in the hands of other countries and how they respond. As we have noted in other settings, we don’t want to venture guesses about how trade negotiations may play out, but we know that the overall environment is a bit of a minefield for multinational companies whose earnings guidance this year and next depend on free trade and open borders. As such, we’ve tried to account for this rising risk in our asset allocation work, leaning away from large caps and into smaller companies, in both the U.S. and emerging markets, whose businesses are relatively local and not dependent on exports.</p> <h4>On Blockchain</h4> <p>Everyone at our gathering agreed that blockchain technology offers enormous potential. But so far, the bulk of the activity in this market has been focused on cryptocurrency, and as we’ve seen, participation in Bitcoin or other cryptocurrencies is really more about speculation at the moment than it is about investment in a disruptive technology. Lisa noted that NextGen has met with a number of companies in the past 12–18 months, some of which had pretty solid businesses—but these companies are becoming hopelessly distracted by the initial coin offering route and by trying to build convoluted business models around the issuance of their own currency.</p> <p>I struggle to support arguments in favor of buying into cryptocurrency right now. Some people tout the network effect that will buoy a cryptocurrency if enough people get behind it, but the value of the currency today is largely based on its scarcity—it takes a significant investment of resources to produce even one incremental unit of Bitcoin. How can you build network effect when it is so hard to scale up volume? Lisa noted that proponents of these currency systems argue that their value stems from their stability and reliability in comparison to fiat currencies, especially from sovereign entities that perennially struggle with inflation. But that is also a tough argument to support given the volatility we see in the crypto market today.</p> <p>The real issue with cryptocurrency is that it is a product created for the purpose of transacting, but it is still in the early stages of scaling up and does not yet make sense as a transaction medium. Keith noted that the wild speculative environment that has occurred around Bitcoin has essentially no relation to the eventual intended purpose of Bitcoin. Not only is the price far too volatile today, but it is still essentially cost-prohibitive to conduct Bitcoin transactions over normal financial channels.</p> <p>But we have to recognize that even in its immature state, the market is building rapidly. Coinbase booked $1 billion in revenue last year, and it oversees more accounts than Charles Schwab. That’s a major company. Whether or not we think any of this makes sense right now, a lot of people do, and we need a view on it.</p> <p>Lisa warned that this wave feels different than previous technology waves. In the past, the “nerds in the garage” were always the ones leading the charge at first, and the money followed behind. But with crypto, a lot of the early attention is just driven by the money pouring in. It remains to be seen whether the attention we’re seeing in the space translates to real transformation. When I think back to the dawn of the internet, we saw the creation of world-changing technology that started to change the world, but the early companies were eviscerated because they didn’t really understand how to translate the technology into a really transformative business. We had companies like Pets.com trying to move traditional business models to the web in a very ham-handed fashion or companies that spent investor capital without restraint. There are for sure thoughtful people building thoughtful businesses around blockchain as we speak, but I also think it’s likely that 10 years from now, there will be transformative blockchain businesses that are not even scribbled on a napkin yet.</p> <h4>On Philanthropy and Leadership</h4> <p>We were fortunate to hear from David Rubenstein during the NOW conference, and he gave us a lot to think about regarding how the successful and fortunate can think about giving back to the world.</p> <p>Stephanie McCormick offered several thoughts during our dinner conversation about how Rubenstein’s words related to her experience counseling clients on matters of philanthropy and legacy. She made a point of emphasizing how personal a matter it is when a client is exploring how much of their wealth they should give back. The Giving Pledge is a wonderful commitment, and we admire folks like Warren Buffett, Bill Gates and David Rubenstein, who have signed up to give away a majority of their wealth to philanthropic causes. With any of our clients, we can only help them answer the question of “how much” through an extended series of conversations over time, in which we discuss family obligations, legacy goals, estate planning constraints and a host of other factors. The answer for everyone is different.</p> <p>That being said, she really appreciated Rubenstein’s discussion about aligning mission with giving. We have a number of clients at Brown Advisory who have come to us in just the past few years, and they really haven’t had people talk to them before about that alignment or encourage them to really explore that question of mission. It’s worth exploring, and sometimes you need a push to get outside your comfort zone. Helping your local community is of course an admirable and worthy goal, and in most communities, there are a variety of established structures to help you do that. When you define your mission more ambitiously (in Rubenstein’s case, his mission is to help America be a better place—that’s fairly ambitious!), you can end up a little bit further out on a limb. There’s less structure to help you accomplish your goals, you probably need to work harder to define your goals crisply and you may want to be more creative in your activities. Obviously, we aren’t all in a position to buy copies of the Magna Carta and essentially gift them to the public commons as Rubenstein has! But Stephanie felt strongly, and I certainly agree, that his model for thinking about philanthropy can be of value for a lot of our clients.</p> <p>In fact, I felt like the discussion of the Rubenstein session helped us to really pull together a lot of the lessons from the day and tie them to this fundamental notion that it’s wise to really open up our minds when it comes to how we can contribute and give back to society. We talked during the day about grand philanthropic efforts, about making investments in companies that think wisely about society, about the societal implications of technologies like AI, and about individual actions to build a more diverse and inclusive workplace or community. It all makes a difference.</p> <p><img alt="" src="/sites/default/files/u1/chewsig.jpg" style="width: 150px; height: 78px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 14 Jun 2018 14:27:19 +0000 achen 26246 at https://www.brownadvisory.com Market Volatility—Italy Edition https://www.brownadvisory.com/intl/market-volatility-italy-edition <span class="field field--name-title field--type-string field--label-hidden">Market Volatility—Italy Edition</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/07/2018 - 08:18</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>For the past few weeks, Italy’s political situation has rattled investment markets. Investors fear that the nation’s political direction may lead to credit problems in Italy, and/or lead the country to exit the EU. We avoid reacting to “as it happens” news stories, but we need to look at the facts behind any emerging economic scenario and determine the scale and scope of the risk.</p> <p>As background, Italian elections in March resulted in a fractured parliament; the two leading parties are both populist, and both have espoused skepticism about the EU and the common currency in the past. These parties agreed in mid-May to join forces and form a coalition government; the transition period that followed was extremely contentious but the new government was sworn in on June 1.</p> <p>Investors are concerned for two main reasons:</p> <ol class="one-column-list"><li>Italy’s economy—the world’s ninth largest—is not very healthy. Its debt/GDP ratio is 130% (second only to Japan among major economies), and its GDP has grown by less than 0.5% over the past 20 years). Its population is shrinking, presenting a tangible obstacle to future growth. Italy’s creditors are already nervous about these conditions; the recent political issues exacerbated their worries.</li> <li>This is a Euroskeptic coalition, and many investors fear an Italian exit from the EU and/or broad EU destabilization. Few expect a direct referendum on exiting the EU, but the new government’s platform calls for a combination of tax cuts and welfare spending that will almost certainly result in conflict and tension with Brussels.</li> </ol><p>So far, markets have reacted substantially to the first concern, but in very limited fashion to the second. During May, two-year Italian bond yields leapt from -0.3% to a peak of 2.8% before settling back closer to 2%—a very large move in a short period of time. Italian stocks fell more than 9% in May (see chart), with Italian bank shares tumbling more steeply.</p> <p>However, losses have been mild elsewhere; the German stock market was down but to a much lesser extent in May, and the U.S. stock market advanced. Bond yields in other higher-risk EU countries like Spain and Portugal moved up, but only slightly.</p> <div class="greyLine"><a> </a></div> <p align="center" class="responsiveImg"><a href="http://www.brownadvisory.com/sites/default/files/u1/stock_market_returns_italy_chart.jpg"><img alt="Stock Market Returns in May (Italy vs. Other Worldwide Benchmarks)" src="/sites/default/files/u1/stock_market_returns_italy_chart.jpg" style="width: 800px; height: 478px;" /></a></p> <p style="font-size:.8em;">Source: Bloomberg. As of May 31, 2018. Italy, Germany, World and U.S. market returns are represented by the MSCI Italy Index, MSCI Germany Index, MSCI ACWI and MSCI U.S. Index respectively (see below for index definitions).</p> <div class="greyLine"><a> </a></div> <p>All this suggests that investors are currently sanguine about contagion risk. Partly because of the 2011 Eurozone crisis, the EU has far more robust mechanisms to ameliorate a debt crisis now. Further, exports to Italy are not a large part of other European economies—for Germany, Italy represents just 2.5% of total exports, and the figure is lower for other major EU nations. Finally, we believe that concerns about Italy should be viewed alongside the healthy fundamentals and attractive valuations that support a more positive view on European stocks.</p> <p>Before this scenario unfolded, a pessimistic view of Italy alongside a positive outlook on the rest of Europe likely made sense. At the moment, we believe that it still makes sense if one holds to the view that Italy’s actions will have muted spillover effect on other economies. Investors should remain on guard, however, for signs to the contrary. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.<br /><br /> The <strong>MSCI Italy Index</strong> is designed to measure the performance of the large and mid cap segments of the Italian market. With 24 constituents, the index covers about 85% of the equity universe in Italy.<br /> The <strong>MSCI Germany Index</strong> is designed to measure the performance of the large and mid cap segments of the German market. With 65 constituents, the index covers about 85% of the equity universe in Germany.<br /> The <strong>MSCI ACWI Index</strong> is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world. The MSCI ACWI is maintained by Morgan Stanley Capital International (MSCI), and is comprised of stocks from both developed and emerging markets.<br /> The <strong>MSCI U.S. Index</strong> is a market capitalization weighted index designed to measure the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.<br /> All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.</p> </div> Thu, 07 Jun 2018 12:18:05 +0000 achen 24296 at https://www.brownadvisory.com NOW 2018 | Towards Artificial General Intelligence? https://www.brownadvisory.com/intl/now-2018-towards-artificial-general-intelligence <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | Towards Artificial General Intelligence?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 11:51</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=J0eGkl8muGU&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=6"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>In a first for NOW, the multitalented Ashley Llorens kicked off the 2018 conference with a killer hip-hop performance that had the crowd putting their hands in the air. While we all would have enjoyed a longer set from Llorens (who performs around the world as SoulStice), he soon moved his presentation to his “other” area of expertise: He leads the Intelligent Systems Center at the Johns Hopkins University Applied Physics Lab, where he spearheads research and development activities in machine learning, robotic and autonomous systems, and applied neuroscience.</p> <p>Llorens took the audience through an exploration of artificial general intelligence, or AGI, which refers to a future state when machines are able to develop and evolve as human beings do. He believes that we are nearing an inflection point in the long path toward AGI, but we still have a long way to go in terms of functionality as well as societal trust in truly intelligent machines.</p> <p><strong>General intelligence, AI, Machine Learning and deep learning.</strong> Humans are the best example of what Llorens defined as general intelligence—nature has designed our function. From all of the inputs we take in from the world around us, the outputs of human general intelligence are actions directed toward basic goals, like survival and procreation, and more complex ones, like self-improvement and entertainment. Today, artificial intelligence (AI) is not general but specialized. With driverless cars and other AI systems, humans design the function according to a finite, anticipated set of scenarios. We see the limitations of specialized AI when the machine encounters a scenario that it is not specifically programmed to navigate.</p> <p>In recent years, research at the cutting edge of AI has made some progress in breaking through these limitations. Machine learning is an emerging science in which people help machines design their own function, and machines can achieve an intelligence that is not specifically programmed. Llorens contends that we are far from machines achieving the type of general intelligence that humans possess, but he believes we are at an inflection point in the evolution of machine learning.</p> <p><strong>Basic functions of AGI.</strong> Llorens broke down the output of intelligence into four main functions: perceive, decide, act and team. He reported that we are making progress in all four areas, but that material limitations remain across all four.</p> <p>In terms of perception, machines now perform speech and object recognition with lower error rates in many applications than humans. However, machines are still incapable of reasoning or intuition. In terms of decision-making, computers can now beat the best human players of complex strategy games like chess and go. These algorithms can now learn from self-play and are capable of adapting themselves to other games with different rules. Regarding action, machines still struggle to navigate the physical world, and regarding team-based or collaboration intelligence, machine-to-machine communication is still in its infancy.</p> <p><strong>Calibrating trust in intelligent systems.</strong> Even if and when we can close these gaps in AGI function, society still needs to get comfortable with trusting intelligent machines. Llorens highlighted four key areas of consideration. First, we need to gain comfort with evaluation and comparison—will we refuse to accept 15,000 fatalities per year from driverless cars, even if we know that human drivers kill 30,000 each year? Second, we need to build resiliency to adverse influences and find ways to prevent those who would seek to “fool” AI systems for their own benefit. Third, we need strong policy platforms so we can, for example, make smart decisions to use systems that we don’t fully understand if those systems work better than the systems we do understand. Finally, we need to align the goals of machines with our own goals; in other words, for widespread adoption, we need machines to do what we intend, not just what we explicitly ask for. While it may be many years before a robot can truly behave, act, sing and dance like a human, it is not too early to begin preparing ourselves for a world where we coexist with intelligent machines. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 15:51:49 +0000 achen 26251 at https://www.brownadvisory.com Welcome to the NOW 2018 Review and Videos https://www.brownadvisory.com/intl/welcome-now-2018-review-and-videos <span class="field field--name-title field--type-string field--label-hidden">Welcome to the NOW 2018 Review and Videos</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 11:51</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=GHo13TwkrE4&amp;index=9&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> Thu, 31 May 2018 15:51:49 +0000 achen 26261 at https://www.brownadvisory.com NOW 2018 | 50 Years after MLK: Does Race Matter? https://www.brownadvisory.com/intl/now-2018-50-years-after-mlk-does-race-matter <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | 50 Years after MLK: Does Race Matter?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 11:41</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=wRNfYORYnJM&amp;index=1&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Fifty years after Dr. King’s assassination, many Americans are examining how we’ve changed for the better as a country and where we still fall short. Dr. Gates, one of the country’s most respected voices on race in America, opened our panel on this topic at NOW 2018 with a blunt question: Fifty years later, what changes would please Dr. King about America today? Our panelists each gave the country mixed grades in terms of positive change since 1968: on one hand, progress in terms of reversing segregation and elevating a generation of diverse, barrier-breaking leaders; on the other hand, persistent disparities and injustices faced by poor people of color. It is true that the percentage of African-Americans making at least $75,000 annually has more than doubled in 50 years, and those making $100,000 or more has nearly quadrupled. However, the percentage of African-Americans at or below the poverty line has not improved, nor has the unemployment rate for African-Americans overall.</p> <p>Cecilia Munoz of New America mentioned a disturbing statistic about how maternal health disparities for black women have worsened: Black women are three to four times more likely to die from pregnancy-related causes as white women, according to the Centers for Disease Control and Prevention. This is not just an unacceptable disparity; it is actually worse today than it was 25 years ago.</p> <p>The discussion moved from race divides to class divides—this was fitting, given Dr. King’s devotion to the related-but-distinct issues of class and race. The panelists noted that we view many problems today through a racial lens when a class-based lens may be more helpful. The xenophopia and resentment we see today are in many cases strongly connected to people who feel economically insecure—they feel like someone else is getting ahead and they are not. Discrimination, based on class or race or of any kind, distances us from Dr. King’s philosophy of the “beloved community” in which people of different backgrounds recognize that we are all interconnected and that our individual fates are inextricably linked to the fates of others.</p> <p>Munoz specified that her role as a policymaker is to help expand the middle class and create economic advancement. She spoke of the benefits of bringing unlikely partners together in policy efforts; it makes it harder to demonize the other side once you start working productively with them. Dr. Alexander uses philanthropy in her role at the Andrew W. Mellon Foundation to address race and class. She described how philanthropy can provide a lever to elevate brilliant voices in arts and humanities that might otherwise not be heard. And Right Rev. Sutton, the Episcopal Bishop of Maryland, underscored how religion and religious communities can help us recognize each other’s humanity and elevate thinking from a “me” mentality focused on salvation or the afterlife to an “us” mentality focused on the here and now.</p> <p>Sutton also cautioned that tallying 50 years of human achievement is complex and perhaps subjective—we are constantly as humans taking two steps forward and one step back. While it can be difficult to face our shortcomings, we can all take action today and in the future—speaking up instead of remaining a silent bystander, promoting inclusive language, being intentional about diversity and inclusion—in ways that Dr. King would view as positive change. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 15:41:54 +0000 achen 26256 at https://www.brownadvisory.com NOW 2018 | Free Trade, Tariffs and Trouble https://www.brownadvisory.com/intl/now-2018-free-trade-tariffs-and-trouble <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | Free Trade, Tariffs and Trouble</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 11:17</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=0DRlgS6CuiY&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=14"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Current news of tariffs and trade wars is the latest evidence that the ideology of free trade and globalization is under attack. This battle isn’t being fought in classrooms or among academics (most economists view free trade as broadly beneficial for the global economy), but on the front lines of social media. “Free trade supporters have lost the debate completely in… this new space,” stated Andrew Wilson during our NOW 2018 panel on trade policy.</p> <p>According to Wilson, free trade proponents have a communication problem: Despite convincing arguments, they have steadily lost ground to inflammatory anti-trade rhetoric that connects emotionally on issues like jobs or security. Social media has enabled extreme views on trade to become a part of mainstream thinking.</p> <p>Carla Hills, a former U.S. trade representative and chief negotiator on NAFTA, noted that many Americans don’t understand the extent to which future U.S. growth depends on international trade. “With five percent of the world’s population producing 15 percent of the world’s output, we can’t just look inward. We need the markets overseas.” The data backs her up: A recent Peterson Institute report found that freer trade helped annual U.S. GDP grow by $2.1 trillion between 1950 and 2016.</p> <p>Ron Kirk had a different experience with trade and NAFTA, as mayor of Dallas in the 1990s. NAFTA helped open up new markets for local businesses, but he saw the instinctive fear that in some cases transcended logic, among many who feared their jobs would be outsourced due to NAFTA. He recalled a Dallas factory worker who had complained to him that NAFTA had led to his factory being shuttered—in reality, the worker’s job had been lost years before NAFTA was signed.</p> <p>Over time, many more U.S. manufacturing jobs have been lost to technological advancements and automation than to trade. Neither the public nor the private sector adequately trained or invested in those displaced workers. Thea Lee noted that free trade policies have generally failed to proactively protect U.S. workers, and ultimately these failures have contributed to the recent populist backlash. In Lee’s view, future trade policies are set up for failure if they do not adequately address workers’ rights and important issues such as environmental protection.</p> <p>While disagreeing on several points, the panelists found consensus on several key points. They agreed that the current administration’s trade moves have been poorly communicated, creating a great deal of uncertainty for U.S. businesses and major U.S. trade partners. This uncertainty could drag the economy down if it begins to affect business decisions and overall sentiment. Also, they all felt that the World Trade Organization, while not perfect, is still our best option for resolving trade disputes because it is the only mechanism we have for enforcing global trade discipline. As Kirk described the organization, it is “the best house on a bad block.”</p> <p>Finally, the panel all emphasized that education and investment in U.S. workers are critical for U.S. competitiveness in the future. Many displaced workers don’t have the skills for better jobs that are now abundant in America. Hills discussed the millions of high-paying, technology-oriented jobs that are currently unfilled in the U.S. due to a lack of skilled workers. Kirk also called for better education and skill training so we can compete with China. Lee argued that advocating for workers through fair policies and education is a win-win: It would address trade issues and also serve domestic political agendas. Finally, Wilson noted that proper education and skill training would also address the communication and messaging problem for free trade supporters by replacing fear with confidence among many workers. If the U.S. can educate its working class to excel in a broader range of emerging industries, maybe it can replace fear with confidence as the dominant narrative thread when it comes to free trade. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 15:17:08 +0000 achen 26271 at https://www.brownadvisory.com NOW 2018 | Closing the Gender Wealth Gap https://www.brownadvisory.com/intl/now-2018-closing-gender-wealth-gap <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | Closing the Gender Wealth Gap</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 11:02</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=SS7OShMwMGU&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=2"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The typical woman who works full time earns 79 cents for every dollar earned by a typical man. We hear this income statistic a lot. It’s disheartening, more so when you learn that the disparity is even worse along racial lines. Black women earn 63 cents for every dollar earned by white men; Hispanic women, 54 cents.</p> <p>It’s good that we are talking about the gender income gap between men and women, but we are not talking enough about the equally important gender wealth gap. Panelist Elena Chávez Quezada, who founded the Closing the Women’s Wealth Gap Initiative, told us that women control 33 percent of the wealth that men do. This holds true even for women who work full time and have never married, despite the fact that those women have almost closed the gap with men who’ve never married (97 cents for every dollar). Far more disturbing: single black and Hispanic women own less than a penny for every dollar owned by white men. Older women are twice as likely to live in poverty as older men.</p> <p>Meanwhile, 50 percent of college students are women; 50 percent of business owners in this country are women; 72 percent of high school valedictorians are women. Why isn’t progress on income equality leading to progress of wealth equality?</p> <p>It is common knowledge that women did not have the same access to capital as men throughout U.S. history, but some of the egregious inequalities in recent history forced double and triple takes during our panel. Until 1974, women couldn’t access credit in their own name. And it wasn’t until 1988 that women were able to take out a business loan without a male relative co-sign. 1988! Of course, the painful history of racial injustice in the U.S., from slavery to Jim Crow laws to redlining, has systematically blocked both men and women of color from building wealth.</p> <p>To address the gender wealth gap, the panelists say that parity starts with finding solutions to the big, tangible barriers that women in our country currently face. For example, low-income women in subsidized housing are required to pay 30 percent of their income toward their housing. This may sound reasonable, but it creates a strong adverse incentive: The more they make, the more they pay. These types of scenarios create impossible choices for low-income women—working a second job might provide a bit more income, but is less likely to enable any sort of wealth-building. Sherry Riva and her team at Compass Working Capital are addressing situations like this; within its family self-sufficiency program, Compass provides support services built around a HUD program that allows families to capture in a savings account any increase in rent triggered by an increase in income. Compass helps low-income women and families out of poverty and creates an orientation toward the future.</p> <p>Other solutions are often more obvious, such as programs that offer financial coaching on budgeting, saving for a down payment on a house, saving for retirement and other aspects of financial planning. Employers can help with purposeful attention to benefit programs, such as clear retirement choices with automatic investment options, and more generous maternity and paternity leave. And government can also play a role in subtle ways—for example, policies that limit predatory student lending practices would disproportionately benefit women, who are more likely to have predatory student debt that persists even through a bankruptcy.</p> <p>Access to financial education and resources affects women at all levels of wealth—the gap exists for relatively well-off women just as it does for poorer women. The fact that women haven’t had the same access to capital, business networks and mentors as their male counterparts has resulted in women-owned businesses staying small rather than scaling up to larger enterprises with the frequency that businesses owned by men have. Providing women with access to these resources, especially at critical moments, can be a huge step toward closing the gender wealth gap. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 15:02:26 +0000 achen 26266 at https://www.brownadvisory.com NOW 2018 | The Changing Nature of Trust https://www.brownadvisory.com/intl/now-2018-changing-nature-trust <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | The Changing Nature of Trust</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 10:51</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=Y_jSON3DV48&amp;index=14&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>For 18 years, Matt Harrington has been studying, analyzing and synthesizing the evolution of society’s trust in four institutions: government, business, NGOs and media.</p> <p>Harrington oversees global operations for Edelman, a leading global communications marketing firm that partners with many of the world’s largest and emerging businesses and organizations. Through the Edelman Trust Barometer, a widely followed online survey with over 33,000 respondents from 28 countries, Harrington and his team gather data about trends in how trust has changed over time and how people in different countries perceive their public and private leaders.</p> <p>The barometer presents its findings in a series of “readings” using a scale from 1 to 100, with 100 equating to complete trust in an institution. Broadly, groups with scores of 60–100 are referred to as “trusters,” 50–59 are “neutral” and 49 and below are “distrusters.”</p> <p>In his presentation at NOW, Harrington covered three themes that emerged from the 2018 Trust Barometer survey.</p> <p>The U.S. and China are a world apart: The barometer identified a major split between nations where trust is rising versus others where it is falling dramatically. The most notable example: Trust in China has risen meaningfully in the past year, while in the U.S., trust has plummeted. Over the past year, China’s trust in its public and private leadership has grown the most, while the United States’ trust has fallen. Looking specifically at trust in government, China scored an 84 in its view that government will do what is right, while the U.S. scored a 33—down quite a bit from its score of 47 just last year. China views government as its most trusted institution, while the U.S. views government as its least trusted by far.</p> <p>People want truth but struggle to find it: From the decline in faith in traditional journalism to the rapid rise of less reliable sources of information, trends in media have been a source of great concern to most people around the world for years. The barometer confirmed this point: The media (broadly defined in the survey to include social media platforms) emerged as the least trusted institution globally. Harrington presented examples across the world that showed a high skepticism in the news we are reading. Seven out of 10 respondents worry about false information or fake news being used as a weapon. One particularly dramatic example: the “informed public” in the U.S. (defined via income and education criteria as well as news consumption habits) scored a 68 in overall trust in 2017, but that figure plummeted to 45 in 2018, just one year later.</p> <p>A surprising revelation from the 2018 survey was that 50 percent of respondents stated that they consume news “less than weekly”—this response covered traditional consumption as well as information shared by others or pushed to respondents in a feed of any type. So many people have become suspicious of the media and upset by ever-increasing political vitriol, and we have all likely come across friends or colleagues who are choosing to disengage at various levels. However, the fact that half of all respondents have disengaged from the news media to such an extreme extent is a worrying development.</p> <p>People are placing their faith in new leaders: Trust in government has dropped around the world, and respondents are looking to businesses and CEOs to take a stand and lead. Sixty-four percent of respondents want CEOs to take a lead on issues of importance, rather than waiting for governments to impose change through regulation. Recently, we have seen many examples of CEOs taking a stand on a variety of issues such as diversity, guns, equal pay, sexual harassment and other issues. The survey also suggests that people want businesses to act broadly, to engage their local communities and to build trust by activating the entire organization. (As a side note, in our equity research process, we often see these leadership characteristics emerge at companies that implement successful sustainable business strategies that ultimately drive their financial results.)</p> <p>The topic of trust came up many times throughout the NOW 2018 panel discussions. The Edelman barometer and Harrington’s presentation helped all of us at the conference to expand our understanding of trust and to appreciate how it is evolving differently within different demographic groups around the world. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 14:51:28 +0000 achen 26281 at https://www.brownadvisory.com NOW 2018 | What Makes a Great Leader? https://www.brownadvisory.com/intl/now-2018-what-makes-great-leader <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | What Makes a Great Leader?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 09:49</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=iruw6v5lE4A&amp;index=9&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>What do the Magna Carta, the Washington Monument and giant pandas have in common? Those who have followed David Rubenstein’s career know that he has supported all of these causes and many others through his exemplary philanthropic efforts. During the NOW 2018 conference, Rubenstein and Brown Advisory CEO Mike Hankin engaged in a rapid-fire conversation that covered Rubenstein’s thoughts on a wide range of topics, from the Founding Fathers to Facebook and Twitter.</p> <p>Rubenstein is a co-founder and co-executive chairman of The Carlyle Group, one of the world’s largest private equity firms. Since he helped start Carlyle in 1987, it has grown into a firm managing $174 billion from 31 offices around the world.</p> <p>History and patriotism—both resounding themes in Rubenstein’s life—permeated the discussion. He grew up in a modest household in Baltimore, Maryland, and at age six, he took the initial step toward unlocking a fountain of knowledge by attaining his first public library card. He has never looked back; today he aims to read at least 100 books every year, a feat that is especially impressive given the enormous amount of time he devotes to philanthropic work.</p> <p>Rubenstein’s interest in “patriotic philanthropy” is guided by his early experiences in government service. In the 1970s and early 1980s, he served as chief counsel to the Senate Judiciary Committee’s Subcommittee on Constitutional Amendments, then as President Carter’s deputy assistant for domestic policy. He brings a passion and intellectual command of government, policy and history to his humanitarian endeavors, and wants others to learn from history so that we can all do better in the future. He cited a few painful reminders of the decline of historical knowledge in the U.S.: According to the Annenberg Public Policy Center, 75 percent of Americans can’t name the three branches of government, and more than 30 percent do not know their First Amendment rights.</p> <p>Why did he purchase a copy of the Magna Carta to put on display? Why did he pledge millions to repair the Washington Monument? Rubenstein values history as a tangible, physical asset, and he feels that experiencing the real thing is more inspiring than simply viewing a memory on a computer screen.</p> <p>Rubenstein spoke about the importance of giving back, with one’s time as well as money if possible. He was an early signatory of the Giving Pledge, a commitment from a growing number of extremely wealthy individuals to donate a majority of their wealth to charity. The Greek term <i>philanthropia</i> means “love of mankind,” and Rubenstein brings a level of passion and generosity to mankind that is unmatched by most. He said that being generous makes you feel good and in his opinion helps you to live longer. He said that he hopes there is a special place in heaven for people who give generously: “I can’t guarantee this, but why would you want to take a chance that I’m wrong?”</p> <p>The brisk conversation sped through the decades to arrive at a discussion of our highly polarized society. He noted that our current polarization doesn’t compare to the stark divisions of the Civil War that eventually claimed 6 percent of the U.S. population. Nonetheless, our political leaders are increasingly gridlocked. What if we turned things over to young people? Rubenstein views young people as a creative force—most companies are started by people in their 20s and 30s, and rarely does one see a septuagenarian launch a startup.</p> <p>With Washington falling short at times, Rubenstein noted that society is also placing more faith and confidence in business leaders to solve societal problems. Companies such as Facebook, Apple, Amazon and Google offer products, services and utility to the world, and despite bumps in the road, these firms are largely viewed as positive agents of change. Rubenstein sets a powerful example of someone focused on leading—speaking up, standing up for what is right and inspiring others to collectively raise the future. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 13:49:59 +0000 achen 26276 at https://www.brownadvisory.com NOW 2018 | China and the Race for Artificial Intelligence - Cloned https://www.brownadvisory.com/intl/now-2018-china-and-race-artificial-intelligence-cloned <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | China and the Race for Artificial Intelligence - Cloned</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 09:20</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=QhVz54CJUCg&amp;index=12&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The advent of artificial intelligence (AI) is one of the top technology stories in recent years. Not surprisingly, AI has also permeated public policy discussions, especially with the U.S. and China each putting forth plans to address the future of this technological revolution. The race is on to lead the world in AI innovation, and a panel of experts at NOW 2018 offered insight on the competitive dynamics between the two global superpowers driving progress in AI.</p> <p>The U.S. has led AI research out of the gate, with its national focus on entrepreneurship and the startup infrastructure afforded by Silicon Valley and other innovation hubs. Nick Zhang, founder and CEO of the Wuzhen Institute, a China-based think tank, shared insights on the geographic dispersion of AI development thus far. Zhang presented data on three key indicators—AI company headquarters, AI patent filings and AI venture capital (VC) investment—to show that the U.S. has commanded the majority of AI activity over the past two decades. Notably, between 2000 and 2016, U.S.-based companies received more than 70 percent of total worldwide venture funding in the AI sector. But the activity gap has narrowed over the past five years, and a growing number of startups, patent filings and VC dollars are now driven by Chinese innovation.</p> <p>Although the first stages of AI’s evolution have emanated from the West, China’s state-sponsored goal to lead the AI market by 2030 has accelerated research initiatives throughout Asia. Elsa Kania of the Center for New American Security specializes in Chinese defense innovation and emerging technologies. She highlighted the Chinese government’s role in the country’s pursuit of AI advancement; the government already has taken steps in terms of implementation, allocating data resources to startup companies with test-phase algorithms and establishing fully funded AI research laboratories. China’s proactive steps are particularly notable at a time when U.S. STEM (science, technology, engineering and math) funding is steadily declining—a dynamic that potentially opens the door for China to gain ground on the AI innovation front.</p> <p>Keys to advancement in AI include the development of new algorithms, affordability of computational power and access to actionable data. Both countries have unique resources that offer competitive advantages. Today, the U.S. university system leads the field in algorithm research and, according to Zhang, is on the verge of computational processing innovations that will become the global gold standard. However, the U.S. faces a potentially insurmountable challenge in the form of China’s structural advantage relating to data collection. With a population of mobile and internet users more than triple the size of that of the U.S., China is fundamentally better positioned to collect actionable data for new AI applications.”</p> <p>While a competition pitting two world superpowers against each other makes for good headlines, neither country is likely to dominate all AI disciplines. Investors may benefit from the research race we see today, which is likely to boost research funding on both sides and potentially accelerate breakthroughs in the field. As long-term investors with exposure to innovation centers in the private markets, Brown Advisory seeks investments that can benefit from the disruption potential of AI advancement. Almost all of the VC firms in our portfolio have invested in AI-driven companies, and we expect that trend to continue as AI grows more ubiquitous on a global scale. Sharpened by both the U.S. entrepreneurial ecosystem and China’s robust state-sponsored asset dedication, we expect AI innovation will occur at an increasingly rapid pace, yielding new technologies, social implications and investment opportunities in the years to come. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 13:20:18 +0000 achen 26291 at https://www.brownadvisory.com NOW 2018 | What is the Economic Impact of Political Polarization? https://www.brownadvisory.com/intl/now-2018-what-economic-impact-political-polarization <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | What is the Economic Impact of Political Polarization?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/31/2018 - 09:11</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=KWmu94I6ggw&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=7"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The U.S. economy has improved markedly since the 2008–09 credit crisis. We’ve had 90 straight months of positive job growth and a near-record 36 consecutive quarters of economic expansion. But while all may appear rosy on the surface, when you dig deeper, you can find some worrying trends. Ted Gayer, a leading economic thinker at the Brookings Institution, joined us at NOW for a discussion about some of these trends and how they have been exacerbated by policy and political factors.</p> <p>Productivity growth has been weak in the U.S. for more than a decade—it began to decline in 2005 through the credit crisis and since then has recovered, but at a tepid pace. Despite adding workers, we’re not seeing big gains in output: “We’ve added lots and lots of jobs, but we haven’t gotten a lot of growth out of it,” Gayer noted.</p> <p>Gayer homed in on a specific statistic: labor force participation for “prime-age” men (aged 25–54). Gayer noted, “In the 1940s and 1950s, if you were [in this group], you were either working, looking for work or dead. There was nothing else.” But this figure has steadily declined since World War II, from nearly 100 percent to less than 90 percent today. For several decades, rising employment for women made up the gap, but starting about 20 years ago, labor force participation among women also started to decline. Participation in other developed nations has also fallen, but the decline has been more severe in the U.S. The weakness in participation is compounded by weakness in productivity.</p> <p>Many factors are weighing on productivity; Gayer commented on a few during the session. Many of us spend “2,000 hours a year or more spent watching some screen.” Nearly half of the men who have dropped out of the labor force are on pain medication, and more middle-aged men are dying from suicide and from alcohol and opioid abuse. Gayer raised other questions: Is technological advancement actually driving inequality and a shift in the economic pie toward capital and away from labor? “It’s easy for economists to say, ‘Look—this is what happens all the time. You get a technological innovation, people adjust and you get growth.’ But when ‘people adjust,’ it can be socially dislocating. The ‘adjustment’ that happens to dad will affect the son and daughter a generation later. These adjustment costs are substantial and long lasting. This gets mixed in with opioid abuse and other indicators of social problems. And, indeed, that does contribute to the political climate that we’re in.”</p> <p>To address poor growth, policymakers cut taxes and increase government spending. But they usually do so when unemployment is high and economic conditions are weak. “This time around, we’ve put our foot on the gas at a time when unemployment is really low.” And even before the recent stimulus, debt levels were growing. Why does this matter? Historically, government spending on mandatory items, like Medicare and Medicaid, was proportionally low, while discretionary items, like defense spending, were a larger chunk of the budget. Today, the budget is increasingly dominated by required spending and interest expense on debt. “Everything gets a little bit harder if your federal budget is devoting more and more money just to paying off interest on previous borrowing.”</p> <p>While the Fed is raising interest rates, those rates remain low in historical context. This leads to an important political question, according to Gayer: “Is our partisan environment preparing us for what inevitably will be a recession?” With very low interest rates, tax cuts already in place and government spending pushing debt ever higher, will we have tools available to deal with a recession when it happens? What happens if current policy solutions don’t ultimately address the weak productivity growth they hope to correct and instead simply spark inflation? While we hope that the economy and our policy toolkit evolve with the changing environment, as investors, we need to prepare for a future where we can’t take a robust economy for granted—all the more reason for us to remain devoted to fundamental investment research so we can parse the wheat from the chaff. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Thu, 31 May 2018 13:11:51 +0000 achen 26286 at https://www.brownadvisory.com NOW 2018 | The Global Refugee Crisis https://www.brownadvisory.com/intl/now-2018-global-refugee-crisis <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | The Global Refugee Crisis</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 05/30/2018 - 17:06</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=g6tUilUI0bY&amp;index=5&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The world currently faces one of the most tragic humanitarian crises in modern history. According to the United Nations, more than 65 million people are currently forcibly displaced from their homes, a larger number than at any time since World War II. Today’s refugees are displaced on average for nearly 20 years, longer than at any other time in recorded history. Children born in conflict zones are particularly vulnerable; displaced children living in camps—described as the “lost generation”—have limited access to education and basic resources, and are essentially robbed of their childhoods.</p> <p>A passionate and dedicated panel discussed a range of critical challenges facing refugee communities across the world. Adina Appelbaum spoke about the crisis in North and Central America, and the legal challenges for refugees seeking to represent themselves in the U.S. Sasha Chanoff focused on the issue from an international perspective, recounting his experience in a U.S. rescue operation into the Congo to evacuate massacre survivors. Caryl Stern shared stories from her work with children across the world with UNICEF.</p> <p>Refugees face three options after being displaced. They can return home, they can integrate into the country to which they fled or they can relocate to a country with a program that allows them to resettle. In most cases, these are options in theory only, and refugees have no real choices available to them. Returning home is often unimaginable due to ongoing violence or threat of genocide. Integrating into a destination country has legal challenges with no defined pathway to citizenship. And resettlement programs have limited spots and long waiting periods. The crisis is exacerbated by the fact that refugees are often stripped of their options and prohibited from living outside of the temporary camps where they first settled. Many camps are “temporary” in name only—an estimated $25 billion a year is now needed for the food, water and other costs associated with refugee camps that were initially set up for emergency service but are becoming more and more permanent.</p> <p>The rising tide of nationalism makes integration or resettlement more difficult. Refugees are wrongly stigmatized and painted as existential threats to national security and identity. Countries taking in most of the world’s refugees are often ill-equipped to address their needs, but wealthier countries have not stepped up to help. Many people view refugees through a zero-sum lens—what a refugee receives, a citizen must sacrifice—and on that basis fight vigorously to prevent refugees from resettling.</p> <p>Refugees also struggle with legal representation. In the U.S., for example, refugees can legally seek asylum but are immediately detained by Immigration Customs Enforcement and have no legal avenue to seek release from custody. Migrants escaping violence in their home countries—including children separated from their families—are often detained in the U.S. for the entirety of their case. Refugees are not guaranteed the same legal rights in immigration courts as they would be in other U.S. courts, and refugees often represent themselves without understanding the law, their current status or even the language used in the court proceeding.</p> <p>The panelists stressed that despite the problem seeming overwhelming at times, action on a local and personal scale can have monumental impacts in helping the plight of refugees. Donations help fund programs, organizations and humanitarian missions that save lives; making your voice heard with politicians reminds them that the issue is a top concern of constituents; volunteering in any professional capacity helps underfunded NGOs accomplish their mission. Finally, conversations with family, friends and colleagues about the dangers of xenophobia can help stop fear from descending into race-based hatred. When refugees integrate or resettle, they generally become positive, active citizens in their communities and contribute more to social welfare than what they extract. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Wed, 30 May 2018 21:06:20 +0000 achen 26301 at https://www.brownadvisory.com NOW 2018 | Is Blockchain the New Internet? - Cloned https://www.brownadvisory.com/intl/now-2018-blockchain-new-internet-cloned <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | Is Blockchain the New Internet? - Cloned</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 05/30/2018 - 16:45</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=XvopXd6LsQk&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=4"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Despite the countless benefits of the internet, it suffers from a glaring gap in its fundamental design. To hear popular science author Steven Johnson describe it, this fundamental flaw is that the internet lacks an open-source feature to map each user’s identity. This functionality, or lack thereof, can be viewed as the primary driver behind dominant internet business models that track users’ identities and behaviors, and sell that information to advertisers. But as Johnson discussed in his presentation at NOW, the advent of blockchain technology—the internet buzzword of 2017 and the core engine of cryptocurrencies like Bitcoin—is poised to disrupt the traditional architecture of the internet. And like the internet revolution that came before it, blockchain may just change everything.</p> <p>The discussion of identity and anonymity online tends to produce a strong gut reaction for most of us. It is too easy to envision an Orwellian nightmare where dystopian autocracies track the public’s every digital move. But what if the internet’s lack of functionality to track identity was filled by something other than advertising companies that persuade users to cough up their personal data, then sell that data to the highest bidder?</p> <p>Tim Berners-Lee, the oft-credited father of the internet, is pushing for exactly that. He is drawing from his experience at CERN in the 1980s, where he shepherded the open-source creation of the internet’s core protocols. An international cohort of academics share his vision, and they hope to develop an open-source solution to track digital identity. But Johnson believes that any open-source identity solutions will be impossible to get off the ground.</p> <p>Johnson’s reasoning: He refers to the environment that spawned the internet as “Internet One,” and describes it as an early and relatively utopian environment that was absent any geopolitical or corporate interests. It was simply a group of academics who understood the need for universal standards and protocols to make the nascent internet work. Those early developers were free to collaborate and build their optimal design for the internet, without needing to contend with commercial forces.</p> <p>Today’s “Internet Two” environment is completely different: Corporate behemoths are now motivated by profit to develop closed protocols and compete for their share of captive web traffic, leaving little room for open-source academic consortiums to gain any traction. In addition to the corporate influence over the internet, we now live in a world where nations themselves compete in various ways online—try to imagine internet regulators from Washington to Brussels to Beijing agreeing on a common framework for addressing digital privacy, and you begin to see why Johnson and others doubt that any open-source proposal can succeed.</p> <p>Enter blockchain technology, which Johnson refers to as “digitized trust.” Blockchain circumvents the traditional need for a centralized database like Facebook or Google to ensure that identity, information and transactions are accurate. Instead, a replicated and encrypted database, or “ledger,” is distributed to and shared by all users. Blockchain technology simultaneously allows any user to edit the ledger to record valid transactions, and because the latest verified version of the ledger is constantly replicated and shared among participants, in theory no one can erroneously or maliciously tamper with it.</p> <p>In short, it removes—again, in theory—the need for a trusted third party. In ideal applications, banks would not be needed to stand between buyers and sellers, and firms like Google or Facebook would not be needed to facilitate identity verification across the many websites you use every day.</p> <p>Blockchain is still in its infancy, and we can’t yet predict the direction this technology will take—new paradigm for digital communication, passing fad or somewhere in between. But Johnson views it as a path to taking back our privacy. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Wed, 30 May 2018 20:45:34 +0000 achen 26296 at https://www.brownadvisory.com NOW 2018 | The Economic Imperative of Climate Action https://www.brownadvisory.com/intl/now-2018-economic-imperative-climate-action <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | The Economic Imperative of Climate Action</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 05/30/2018 - 16:35</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=PwtWnqFB7jc&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1&amp;index=3"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>According to recent Gallup polls, 68 percent of Americans believe global warming is caused by human activities. Over 40 percent of Americans either worry a great deal about global warming or think that it will pose a serious threat in their lifetime.</p> <p>The speakers on the NOW 2018 panel "The Economic Imperative of Climate Action," are in the business of providing policy, investment, and data-driven solutions for the climate change crisis. But not all of them were first movers in labeling climate change a problem in need of an urgent answer.</p> <p>Had Jerry Taylor spoken on this panel 10 years ago, when he represented groups like The Cato Institute that resist the idea that climate change is a problem, he would have said that the economic imperative for climate action was minimal and that the consequences of climate change were exaggerated.</p> <p>But over time, he stopped believing the argument he was paid to represent, and today he works with Republicans in Washington to think through policy solutions for a crisis he once dismissed. He told us that Bob Litterman, a top risk management professional at Goldman Sachs, changed his mind. “[Bob] said that there is a wide range of possible outcomes from climate change, and there very well may be a lot of uncertainty. But uncertainty is a reason to hedge. There are outlier outcomes with very major impacts. And that point eventually reduce my old arguments to rubble.”</p> <p>Richard Sorkin and his firm, Jupiter Intelligence, which assesses risk related to severe weather and climate change, also believe in the philosophy that even at low probabilities, the potential losses from outlier climate scenarios demand serious attention from investors and businesses. “If you have a major asset that’s currently just outside of a high-risk flood zone, it doesn’t take a lot in terms of rising sea levels or storm intensification, on the margin, for that asset to degrade from low risk to high risk. We’re already seeing that some of these marginal impacts can become relevant in time horizons as short as five to eight years,” Sorkin said.</p> <p>Sorkin is currently focused on gaining the trust of insurance companies and other prospective clients, some of whom are less convinced than others of the merits of climate risk analysis. Sanjeev Krishnan of S2G Ventures, a multistage food and agriculture venture fund, wrestles with similar issues of trust. “The universe of ‘Big Food’ companies has a lower approval rating than Congress, and consumer preferences are shifting away from large established brands and toward organic and local agriculture. But farmers continue to rely on a system built around traditional nutrient agriculture. That’s what we struggle with. With such fundamental dislocation, how do you build trust in a new system?”</p> <p>Though they battle daily to win the hearts and minds of people and organizations that are highly resistant to climate change warnings, these panelists remain optimistic.</p> <p>Krishnan finds promise in the openness of many farmers to new solutions (“Farmers are looking for the toolkits and the pricing signals to mitigate climate change …it’s already started”); Sorkin is confident that climate action increasingly makes good and obvious business sense (“There is a probability distribution of risk here, and smart decision-makers will factor that in”); and Taylor is optimistic that even seemingly radical notions like a carbon tax can happen. He noted that “green energy is so economically competitive that even a reasonably modest carbon tax would do a lot for market decarbonization. Once it becomes clear that we don’t need fossil fuels to run this economy—that’s the tipping point.” <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Wed, 30 May 2018 20:35:01 +0000 achen 26311 at https://www.brownadvisory.com NOW 2018 | Finding Truth in a World of Disinformation https://www.brownadvisory.com/intl/now-2018-finding-truth-world-disinformation <span class="field field--name-title field--type-string field--label-hidden">NOW 2018 | Finding Truth in a World of Disinformation</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 05/30/2018 - 15:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=SOWRUNwY6sA&amp;index=13&amp;list=PLjvcJceWfdIvX--icgwF1767Y4lxAJip1"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>In a year when border protection is consistently headline news, it is ironic that the media is struggling with a border war of its own—specifically, the border between information and disinformation. News consumers are confronted daily with the challenge of discerning truth from falsehood. Which sources are to be trusted, when such divergent versions of reality are put forth by different media outlets, both traditional and digital, and when accusations of “fake news” and slander have become a normal reaction to any unwelcome story?</p> <p>Propaganda and false news narratives are certainly not new problems—U.S. and world history is filled with examples of dishonesty in the press. But disinformation in the past was often dead shortly after arrival throughout U.S. history. “Early American newspapers—especially those engaged in politics—were full of slander and libel. But their small scale and readership meant that the regular churn would bury the stories which were untrue or lacked merit,” noted Steve Clemons, Washington editor-at-large for <i>The Atlantic</i>.</p> <p>Today’s environment is entirely different. False stories that nonetheless feed into an audience’s predispositions or political opinions can spread like wildfire on social media, with a velocity driven by likes, views and shares. This viral media environment is without precedent in journalistic history. Graham Brookie, who leads the Digital Forensic Research Lab for The Atlantic Council (no relation to the publication <i>The Atlantic</i>), says that this choppy transition from analog to digital is hitting millennials particularly hard. “The youngest generation is fully digital—they’re born with a tablet in their hands. So they are the ones thrust into this transformational movement,” he noted.</p> <p>Brookie's DFR Lab defends fact and truth in journalism; it conducts on-the-ground investigative journalism itself to identify and debunk instances of disinformation in media. Their specific targets include bad actors seeking to weaponize disinformation for the purpose of influencing elections or generating public support for policy initiatives.</p> <p>A case study of its work: Just prior to the 2017 German parliamentary elections, a far-right German political party, Alternative für Deutschland, circulated a photo of a German woman among a crowd of darker-skinned men to evoke the spree of widely reported sexual assaults in German cities on New Year’s Eve 2015. Brookie and his team identified the photo as a complete fabrication—using a variety of analytical techniques they identified its components as images of Egyptian democracy riots during the Arab Spring, with an image of a German mode superimposed in the foreground. DFR disseminated the debunked photo through its local media partner, German magazine <i>Bild</i>, in advance of the election.</p> <p>Facebook has been front and center in recent discussions about disinformation in politics, and both panelists underscored its central role in the modern media landscape.</p> <p>“Facebook has a governance problem on their hands,” said Clemons. “Audience growth and higher user engagement is the core of its business model.” But as Facebook transforms from an internet platform into the equivalent of a global media company, it needs to take into account issues of information integrity that were not central issues in its formative years. Older media outlets remain challenged by the rapidly evolving media landscape; as advertising dollars have replaced subscription revenue as the dominant source of revenue, the approach of journalists has had to evolve. “There is still a market for marketplace for long-form, high-quality, complex journalism, but you have to earn your readers back every day,” Clemons noted.</p> <p>Both speakers expressed optimism for the enduring value of objective news. But they cautioned that the consumers of news must play their part in preserving that objectivity and combating disinformation. Brookie reminded us how important it is to approach all news sources with a healthy degree of skepticism, and Clemons hopes that society can find a way to “embed in the system a premium on critical thinking in the citizenry.” <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"><a> </a></div> <p>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.</p> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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.</p> </div> Wed, 30 May 2018 19:27:14 +0000 achen 26306 at https://www.brownadvisory.com 2018 Annual Report | Intangibles https://www.brownadvisory.com/intl/2018-annual-report-intangibles <span class="field field--name-title field--type-string field--label-hidden">2018 Annual Report | Intangibles</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/24/2018 - 14:20</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>In this year’s report we describe our aspiration to build “Brown Advisory 4.0” which, to us, is the next chapter of our firm’s evolution. While it may seem to be a somewhat arbitrary point of inflection, it is intended to raise the bar for our responsibilities to our clients in a very significant way. Through a series of stories that highlight how some of our colleagues are leading the evolution of our business, we hope to articulate clearly to you how we are tackling some of the challenges facing our business, and also set forth where we see some of our greatest opportunities.</p> <p>One of the most immediate and, we hope, visible manifestations of Brown Advisory 4.0 is a statement of our firm’s “purpose”—which you will find at the end of the annual report. The statement itself may be new, but sentiment behind it has been embodied by our colleagues since our inception in 1993. Simply put, our purpose embodies what draws us to work each day at Brown Advisory. We come to work because we care—we care deeply about our clients, our colleagues and our communities—and we are always thinking about how we can make a difference for the future.</p> <p>Thank you for your continued support of Brown Advisory—we hope you enjoy this year’s annual report and will join us in our effort to Raise the Future.</p> <div class="greyLine"> </div> <p style="font-family: 'Roboto light'; font-size: 18px; padding: 0 0 10px 0; display: block; margin: -10px -15px 0 -10px; color: #888; font-weight: 700;text-align:center;">If you would like to request a printed copy of the 2018 Annual Report please click the link below.</p> <div style="text-align:center;margin:auto auto;padding-bottom:20px;"><a class="cta-button" href="http://info.brownadvisory.com/2018-annual-report-order">Request a Hard Copy Annual Report</a></div> </div> Thu, 24 May 2018 18:20:55 +0000 achen 26206 at https://www.brownadvisory.com Manager Q&A: Mick Dillon and Bertie Thomson, Global Leaders Strategy https://www.brownadvisory.com/intl/manager-qa-mick-dillon-and-bertie-thomson-global-leaders-strategy <span class="field field--name-title field--type-string field--label-hidden">Manager Q&amp;A: Mick Dillon and Bertie Thomson, Global Leaders Strategy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Fri, 08/25/2017 - 11:34</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Indeed a host of macro-economic and political events have impacted global markets since Mick Dillon and Bertie Thomson launched the Brown Advisory Global Leaders strategy. However, this duo strives to keep it simple by focusing on what they believe is the constant that cuts through macroeconomic noise: great companies producing shareholder value by delivering a special outcome to their customers.</p> <p>Mick explains, "Companies stand out by providing an exceptional and unique customer experience, which we believe leads to a high return on invested capital".</p> <p>This is not only his belief, but empirically proven through a McKinsey study which found that companies generating high ROIC are also likely to outperform in the long-term. Companies generating ROIC of 25%+ in 2003 sustained that level a decade later 83 percent of the time.</p> <p class="responsiveImg"><img alt="Leaders Tend to Stay Leaders | High-ROIC (&gt;25%) companies typically stay high-ROIC companies and do not have their excess economicscompeted away. As seen below, companies generating high ROIC in 2003 were still still generating high ROIC in2013 in 83% of instances." src="/sites/default/files/u1/mickdillonqa_fig1.jpg" />​</p> <p style="font-size:.7em;line-height:1.5em;padding:5px 0 0 0;">Chart reproduced with permission from McKinsey &amp; Company Inc. as featured in the book, “Valuation: Measuring and Managing the Value of Companies, University Edition." 6th Edition, 2015. ROIC is calculated as % without goodwill. Please see the end of the presentation for important information. The selected sample size is the S&amp;P500 Index.</p> <p>Beyond that indicator, the managers look for companies with three other qualities: solid fundamentals, strong leadership and reasonable valuations. Due to these high standards, less than one percent of potential investments in developed and emerging markets are suitable for the portfolio.</p> <p>This quality bias gives the team conviction in its holdings. They have only replaced seven to eight names in the portfolio per year since its 2015 inception, resulting in portfolio turnover well below peers and holding periods long enough to realise the potential of the companies in which they invest.</p> <h4 style="color:#1192df;">In Their Own Words...</h4> <p><strong>Q: The global equity market euphoria year-todate seems to know no bounds; how do you feel about valuations in this environment?</strong></p> <p><strong>BT:</strong> This question is at the front of many investors’ minds and it is clear that volatility is low and aggregate equity market valuations are above historical averages. As a result of the ‘hunt for yield’, we believe several sectors such as consumer staples, telecoms, utilities, and real estate have become overly stretched. Our performance was particularly impacted in the second half of 2016, having a zero weighting in three of these four sectors and an overall dividend yield below our benchmark Russell Global Large Cap index. But we have avoided these areas intentionally while some of our peers have embraced them. We think in absolute terms, valuing each investment on its merits. We see value in companies with a high return on invested capital (ROIC) and sustainable growth but these can have low or zero dividend yields. Pricing equities relative to bonds only makes sense if you think bonds are cheap. While this did not prove out in our results in 2016, we are boosted by year-to-date performance and feel confident in the long-term prospects for our portfolio.</p> <p><strong>MD:</strong>I would add that we prefer enterprise value of a company divided by its earnings before interest taxes (EV/EBIT) and free cash flow yield as shorthand valuation approaches rather than price-to-earnings multiples. With this in mind, the Global Leaders strategy has an aggregate projected median EV/EBIT multiple of 16.5x which is a modest premium to its benchmark of 14.0x. Using free cash flow yield, the premium is almost indistinguishable with the strategy trading on a historic median 4.4% yield compared to the global equity market which trades on 4.6%. For this modest premium our investors are getting close to double the sales growth (8.2% vs 4.3%) and more importantly double (17.9% vs 8.8%) the ROIC of the market.</p> <p><strong>Q: Given this continuation of an upward market trajectory, are you still able to find new investments that meet your criteria?</strong></p> <p><strong>BT:</strong> Our performance is an output of our stockpicking and we remain focused on searching all four corners of the globe for outstanding companies that trade at discounts to intrinsic value. One question we hear a lot is which areas of the world do we like more than others. We do not buy geographies though, we buy companies. We are excited to have found several European companies over the last year to add to the portfolio which are global businesses trading at discounts to international peers. Uncertainty in the market often creates opportunity, and as patient longterm investors, we look to take advantage of that.</p> <p><strong>Q: Can you give us an example of a special customer outcome?</strong></p> <p><strong>MD:</strong> One of my favorites is Taiwan Semiconductor Manufacturing. They make the chips for Apple, Qualcomm, and other leading technology companies who sell most of the smartphones and devices we all use every day. All of their customers say the same thing: Taiwan Semiconductor de-risks technology for them, and at a fraction of the cost. Morris Chang, the company’s 86-year-old founding chairman, gets it. He always says, “It’s all about the customer." His company provides a truly exceptional outcome for its customers, in that they do not need to worry about manufacturing investment. They can simply competeon the strength of their designs, which is where companies like Apple want to focus.</p> <p>In this way, the company has set itself apart and you can see it in the results. The company has grown from $1.5 billion in revenue in 1997 to nearly $30 billion today, is larger than its next 10 competitors put together, and most important to us, produced ROIC of over 20% each year in the past decade, apart from 2009.</p> <p><strong>Q: Your strategy hit its two-year mark in May. What are some of the things you learned in that time?</strong></p> <p><strong>MD:</strong> One of the biggest lessons we have learned is to pay close attention to disruptive companies that are changing how business is done. For example, the dynamics between suppliers and customers have changed materially. Previously, companies created a product and sold to distributors, who in turn sold to consumers. Suppliers of goods had the upper hand in this model. Now, a company like Priceline has aggregated consumers and built a scalable business model in offering this pool of potential customers to suppliers of goods and services. This is a massive shift in intermediation and has removed a substantial amount of pricing power from the hotel industry. We believe the disruption is so pronounced that loyalty and rewards programs are the last vestiges of the hotel industry’s hold on customers. Priceline continues to dominate the room reservation market, but does not own a single room. In our view this business model is brilliant and we are hoping to identify other similar disruptors in the future.</p> <p>Uncertainty often creates opportunities. When an event causes the market to overreact positively or negatively to a company we already like, it can give us a great entry or exit point. For example, the day after the Brexit vote last year we added to our position in Unilever. In our view, the worst-case scenario for Unilever following a British withdrawal from the European Union was far less than the 10% stock price decline. In our view, this decline presented a great valuation opportunity. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <p>To read more about our current thinking please refer to our third quarter letter found <a href="http://info.brownadvisory.com/gl_3q2017_letter">here</a>.</p> <div class="greyLine"> </div> <p style="font-size:.7em;line-height:1.5em;padding:5px 0 0 0;">Private investments mentioned in this article may only be available for qualified purchasers and accredited investors.<br /><br /> 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 should not be construed as investment research. 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.<br /><br /> All data is sourced from FactSet® unless otherwise noted. FactSet® is a registered trademark of FactSet Research Systems, Inc.<br /><br /> The Russell Global Large-Cap Index offers investors access to the large-cap segment of the entire global equity universe. The Russell Global Large Cap index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to accurately reflect the changes in the market over time. The Russell Global Large-Cap Index is a trademark/service mark of the Frank Russell Company. Russell® is a trademark of the Frank Russell Company.<br /><br /> The S&amp;P 500 Index is a capitalization-weighted index of 500 stocks that is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Standard &amp; Poor’s, S&amp;P®, and S&amp;P 500® are registered trademarks of Standard &amp; Poor’s Financial Services LLC (“S&amp;P"), a subsidiary of S&amp;P Global Inc.<br /><br /> Sectors are based on the Global Industry Classification Standard (GICS®) classification system. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard &amp; Poor’s. “Global Industry Classification Standard (GICS), “GICS" and “GICS Direct" are service marks of Standard &amp; Poor’s and MSCI . “GICS" is a trademark of MSCI and Standard &amp; Poor’s.<br /><br /><strong>Price-Earnings Ratio (P/E Ratio)</strong> is the ratio of the share of a company’s stock compared to its per-share earnings.<br /><strong>FCF yield</strong> is a measure of financial performance calculated as operating cash flow minus capital expenditures. FCF yield calculations presented use LFY and exclude financial services.<br /><strong>EV/EBIT</strong> is a financial ratio used to measure a company’s return on investment. EV/EBIT calculations presented use NTM (next twelve months) estimates.<br /><strong>ROIC, or Return on Invested Capital</strong> is a measure of determining a company’s financial performance. For the Global Leaders strategy, it is calculated as NOPAT/IC; where NOPAT (net operating profit after tax) is (EBIT + Operating Leases Due 1-Yr)*(1-Cash Tax Rate) and IC (invested capital) is Total Debt + Total Equity + Total Unfunded Pension + (Operating Leases Due 1-Yr * 8) –Excess Cash. ROIC calculations presented use LFY (last fiscal year) and exclude financial services.<br /><strong>Dividend Yield</strong> is the ratio of a stock’s projected annual dividend payment per share for the fiscal year currently in progress, divided by the stock’s price.</p> </div> Fri, 25 Aug 2017 15:34:28 +0000 achen 25001 at https://www.brownadvisory.com NOW 2017 | Cultivating the Seventh Sense: An Essential Instinct in the Age of Networks https://www.brownadvisory.com/intl/now-2017-cultivating-seventh-sense-essential-instinct-age-networks <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | Cultivating the Seventh Sense: An Essential Instinct in the Age of Networks</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 07/17/2017 - 16:18</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p style="float: right; padding: 0px 0px 10px 10px; font-size: 0.8em; width: 480px; text-align: center;"><img alt="Brown Advisory | NOW London 2017 | Navigating Our World | Cultivating the Seventh Sense: An Essential Instinct in the Age of Networks" src="/sites/default/files/u1/nowlondon2017_logo.jpg" style="width: 480px; height: 97px;" title="Brown Advisory | NOW London 2017 | Navigating Our World | Cultivating the Seventh Sense: An Essential Instinct in the Age of Networks" /><br /><img alt="Joshua Cooper Ramo, Co-CEO and Vice Chairman of Kissinger Associates and the author of the book The Seventh Sense at Brown Advisory's NOW Conference" src="/sites/default/files/u1/ramo_2.jpg" style="width: 480px; height: 270px;" /></p> <p>Ramo is currently the co-CEO of Henry Kissinger’s consultancy firm and a board member of Starbucks and FedEx. His business career took off in Beijing in 2002, following a distinguished tenure at TIME magazine, where he became the youngest senior editor and foreign editor in the magazine’s history. Still, he began his talk and introduced the origins of his book with an anecdote of what he referred to as “an $800 million dollar mistake.” He explained a job offer he received in the 1990s from two men “in flip-flops and shorts” who were starting an Internet company from a small warehouse in Silicon Valley. After some deliberation, he declined the offer, as he could not imagine “who in their right mind would use something called Yahoo?”</p> <p>This example was the first time he had directly encountered people who clearly saw a certain set of forces that would transform the world and were preparing to act on it. He noted that Friedrich Nietzsche, when discussing the Industrial Revolution, used the term “sixth sense” to describe the instinct people needed to deal with that profound movement. Similarly, Ramo uses the term “seventh sense” to describe the frame of mind needed to embrace and master the current revolution: network empowerment.</p> <p><img alt="Joshua Cooper Ramo, Co-CEO and Vice Chairman of Kissinger Associates and the author of the book The Seventh Sense" src="/sites/default/files/u1/ramo_4.jpg" style="width: 320px; height: 212px; float: left;padding:0 8px 8px 0;" />Connectivity, according to Ramo and many others, is the “unstoppable feature of our age,” defining both the huge challenges faced by existing institutions and the creative forces behind the rapid changes we are seeing. Consider that many institutions, from government to the media, are definitively less respected by their constituents than they were 10 years ago. Real-time information about natural disasters, disease outbreaks, terror attacks and other events often reveal the cracks in society’s solutions for dealing with these events. These and other factors related to connectivity are chipping away at the bedrock of traditional institutions. However, at the same time, connectivity is powering an energetic and aggressive creative energy. People and ideas are milliseconds apart where it was once days. Networks beyond a certain size become far more powerful than their constituent parts—the more people use a network, the more effective it becomes, and the more inevitable it becomes that others will join that network to gain its benefits. Many examples—from Microsoft Windows in the 1990s, to Google in the 2000s, to Facebook and LinkedIn in the recent decade—demonstrate this network effect.</p> <p>Ramo concluded with a plea to the audience to try and step back and watch this broader megatrend and its impact. The nature of hyperconnectivity in the media can ironically lead us to focus on individual events as they happen, but not as part of a broader pattern. We do so at the risk of missing just how much the power of networks plays into many of the unpredictable events roiling society today. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.</p> </div> Mon, 17 Jul 2017 20:18:37 +0000 achen 21326 at https://www.brownadvisory.com NOW 2017 | What Next? Making Sense of the Global Economy https://www.brownadvisory.com/intl/now-2017-what-next-making-sense-global-economy <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | What Next? Making Sense of the Global Economy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 07/17/2017 - 16:13</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p style="float: right; padding: 0px 0px 10px 10px; font-size: 0.8em; width: 480px; text-align: center;"><img alt="Brown Advisory | NOW London 2017 | Navigating Our World | What Next? Making Sense of the Global Economy" src="/sites/default/files/u1/nowlondon2017_logo.jpg" style="width: 480px; height: 97px;" title="Brown Advisory | NOW London 2017 | Navigating Our World | What Next? Making Sense of the Global Economy" /><br /><img alt="Fresh from a one-on-one conversation with Donald Trump and his senior economic advisors, and on the heels of the UK general election, Zanny Minton Beddoes, Editor-in-Chief of The Economist, will share her distinctive perspective on “Trumponomics,” the global economy and UK politics, and set the stage for our speakers throughout the afternoon." src="/sites/default/files/u1/zany_2.jpg" style="width: 480px; height: 270px;" /></p> <p>Those looking for a security blanket may have been disappointed. Minton Beddoes delivered a thoughtful and perceptive critique of the global environment. The main body of her talk began with a thought experiment: If we had gained perfect political foresight 12 months ago—foreseeing the Brexit vote, a Trump presidency, a Macron victory out of nowhere in France, a coup in Turkey and a challenged UK election—would we have forecast record highs in global stock markets? The point of the question was to remind us of the perils of prediction, and of the huge disconnect between politics and markets—or, as she said, the “front and back pages of the newspaper.”</p> <p>She noted that we live in enormously volatile times, and rather than expecting a reversion to the mean, we should instead be preparing for a continuation of dizzying change in the world, led by a broad rejection of the status quo.</p> <p>Minton Beddoes offered the audience a whistle-stop tour of the globe. A synchronized global upturn has buoyed markets, aided by stability and improvement in the emerging world, and a return of “animal spirits” to U.S. markets. The Trump presidency has so far not delivered on extreme fears or hopes—in Minton Beddoes’ words, on the fears of “Dark Donald” or the hopes for a “latter-day Reagan.” Investors were not spooked by the former initially, looking more to the potential benefit of infrastructure stimulus, tax cuts and regulatory relief. She commented that so far, the new administration has not produced meaningful detriment or benefit to the global or U.S. economy, and businesses in the U.S. are largely undistracted by the theatre in Washington.</p> <p><img alt="Zanny Minton Beddoes, Editor-in-Chief of The Economist, at Brown Advisory's NOW, Navigating Our World Conference" src="/sites/default/files/u1/zany_3.jpg" style="width: 320px; height: 212px; float: left; padding: 0px 8px 0px 0px;" />​Minton Beddoes was far from sanguine regarding the U.K. and focused some discussion on the upcoming Brexit negotiations—we note here that The Economist has long been a standard-bearer for internationalism, especially in reference to the U.K. In her view, the country’s government is ill-prepared for the impending talks, with constructive conversations largely stalling in recent months as the countdown clock continues to tick. Signs of weakness in the U.K. economy and a general election that only emphasized the divided views of the public were adding to a “febrile” popular mood as the government attempts to carve a path forward. Minton Beddoes left the topic with the suggestion that the country may have been caught “on the crest of the populist wave”—just as it was potentially subsiding elsewhere.</p> <p>Even so, she believes that the prospects for Europe overall have improved. A Macron victory has stemmed a broad nationalist surge for the moment, and a Franco-German alliance has the potential to bolster the Eurozone and solidify its strategic importance. Meanwhile, the economy has picked up some steam, and some genuine signs of reform momentum could mean progress in areas like labor legislation.</p> <p><img alt="Zanny Minton Beddoes, Editor-in-Chief of The Economist, at Brown Advisory's NOW, Navigating Our World Conference" src="/sites/default/files/u1/zany_4.jpg" style="width: 320px; height: 212px; float: right;padding:0 0 0 8px;" />In her closing remarks, Minton Beddoes pushed our time horizons out to the long term. When historians look back at the first 20 years of the 21st century, they will note many things, such as a huge financial crisis, the emergence of China as a true global power, a demographic shift in developed markets and, possibly dwarfing all these factors, a period of enormous technological change. Drawing parallels with the industrial revolution in the late 1800s, Minton Beddoes noted that we may yet see wholesale shifts in society of a similar scale, with major disruptions to the industries and ways of life to which we are accustomed, and major changes in the role of the state. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.</p> </div> Mon, 17 Jul 2017 20:13:12 +0000 achen 21321 at https://www.brownadvisory.com NOW 2017 | Shifting Alliances: America’s Changing Relationship with Asia and the Middle East https://www.brownadvisory.com/intl/now-2017-shifting-alliances-americas-changing-relationship-asia-and-middle-east <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | Shifting Alliances: America’s Changing Relationship with Asia and the Middle East </span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 07/17/2017 - 16:08</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=_xpOz0a5N_4&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Under Secretary of State Clinton, the U.S. began to pivot its diplomatic and military focus toward Asia. Asia encompasses 40% of global gross domestic product, four of the top 10 trading partners of the U.S. and almost two-thirds of the world’s middle class. (Blinken described the Trump administration’s decision to abandon the Trans-Pacific Partnership in January 2017 as “pulling the gun out of the holster, finding your foot, aiming very carefully and pulling the trigger.” The idea that the U.S. would limit its economic access to Asia is “criminal,” in his words.) He believes that going forward, the true wealth of a nation should be measured largely by its ability to liberate its human resources. Focusing on China, he applauded the efforts to loosen the country’s economic reins in recent years but noted that there has not yet been an accompanying easing of the social and political restrictions and pressures. At some point, Blinken believes, the rapidly growing middle class will ask for this.</p> <p><img alt="Antony Blinken, Former United States Deputy Secretary of State at Brown Advisory's NOW Conference with Peter Mallinson, Vice Chairman, Brown Advisory Limited" src="/sites/default/files/u1/alliances_2.jpg" style="width: 320px; height: 212px; float: left;padding:0 8px 8px 0;" />Turning to India, he described the world’s largest democracy as being in a very strong economic position. With favourable demographics, 40% of its gross domestic product from foreign trade and status as the world’s leading defense importer in recent years, India is poised to drive global growth over the coming decade. Where it falls short is human development and ease of doing business—areas that will need to improve if India hopes to attract continued investment from the developed world.</p> <p>The U.S. and its allies are facing a number of threats around the world—Blinken listed North Korea, Iran and ISIS, among others. Blinken was deeply concerned about North Korea and its leader, Kim Jong-un, believing the situation there has reached “an acute phase.” In recent years, North Korea has sped up its progress on nuclear arms development and, in Blinken’s opinion, is “a few years away” from having the capability to reach the continental U.S. with a nuclear intercontinental ballistic missile. He noted that “we looked very hard at military options, and the truth of the matter is that there is simply not a good one.” He believes that the only hope is to try to get Kim Jong-un to the negotiating table by convincing China, which represents 90% of North Korean trade, to implement sustained economic sanctions.</p> <p><img alt="Antony Blinken, Former United States Deputy Secretary of State at Brown Advisory's NOW Conference with Peter Mallinson, Vice Chairman, Brown Advisory Limited" src="/sites/default/files/u1/antony_1.jpg" style="width: 320px; height: 212px; float: right;padding:0 0 8px 8px;" />With recent terrorist events in the U.K., Blinken’s comments about curbing the influence of ISIS were especially relevant. The good news, he said, is that the U.S. and its allies will shortly take away ISIS’ self-declared caliphate in Mosul, Iraq, and that should render impotent one of the organisation’s primary narratives—that it is building a physical state. The bad news: Given how difficult it has become to travel to Iraq and Syria, ISIS is now telling followers around the world to “stay at home, attack at home.” To combat this more dispersed threat, intelligence and information sharing among countries is now even more essential. The U.S. has worked very hard to convince countries around the world to connect to Interpol so that information can quickly be used to monitor and detain individuals that have become radicalised. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.</p> </div> Mon, 17 Jul 2017 20:08:17 +0000 achen 21316 at https://www.brownadvisory.com NOW 2017 | Innovation Beyond Silicon Valley https://www.brownadvisory.com/intl/now-2017-innovation-beyond-silicon-valley <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | Innovation Beyond Silicon Valley</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 07/17/2017 - 15:21</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=9l_nBjpcmLA&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><a href="http://www.brownadvisory.com/now-2017-bio-stan-boland" style="color:#636363;text-decoration:underline;" target="_blank">Stan Boland</a>, CEO of U.K.-based FiveAI, has spent his career innovating in the communication sector, mainly in the semiconductor and telecom space, and is acutely focused on how artificial intelligence (AI) has the potential to revolutionize many industries. Academia is a primary source of innovation in AI; for example, the science to improve autonomous driving is evolving in top universities around the world. Boland says that the current technology cannot assure safe driving despite the hype, and experts are working to solve the problem of reconstructing the world dynamically with predictive capabilities. A key ingredient, he says, may be a more extensive sensor set on vehicles; today this could add as much as $40,000 to the cost of the car, but Boland believes this could be amortised over the duration of ownership, at least in the developed world.</p> <p><a href="http://www.brownadvisory.com/now-2017-bio-melinda-mellie-price" style="color:#636363;text-decoration:underline;" target="_blank">Mellie Price</a>, a serial entrepreneur, who is the Executive Director of Commercialization at The Dell Medical Center at The University of Texas at Austin, now focuses on the health care sector and mentioned that AI is playing a game-changing role in radiology. Universities such as hers are newer players in the innovation ecosystem, particularly in the realm of early-stage ventures. She believes that people working in communities that nurture startups are more collaborative than those working in environments populated by larger, more traditional companies.</p> <p>Speaking about Silicon Valley, Price noted that term sheets for deals based there are, in her view, too optimistic, which contributes to higher failure rates. Further, she feels that entrepreneurship in the San Francisco Bay Area is being commoditised—and she values startups that have taken the time to work with accelerator programs.</p> <p><img alt="David Blumberg, Founder and Managing Director of Blumberg Capital and Mellie Price, Executive Director of Commercialization at The Dell Medical School at The University of Texas" src="/sites/default/files/u1/innovation_2.jpg" style="width: 320px; height: 212px; float: left;padding:0 8px 8px 0;" /><a href="http://www.brownadvisory.com/now-2017-bio-david-j-blumberg" style="color:#636363;text-decoration:underline;" target="_blank">David Blumberg</a>, Founder and Managing Director of Blumberg Capital, has a global perspective on innovation, supported by the presence of his firm in San Francisco and Tel Aviv. From this perspective, he finds a range of investment opportunities. For example, he talked about the role of technology in changing transportation from a product to a service, and cited a German company looking at ways in which people in the developing world who require cost-effective transportation can share seats in cars.</p> <p>Against that backdrop, he sees his firm as not just an investor in startups but also an intermediary between startups and larger corporations. Venture firms are often able to offer a solution to corporations seeking a certain capability or an entrée into a particular niche; he also looks to share opportunities that may not be ideal for venture backing but could be a good strategic fit for a larger business.</p> <p>Blumberg added that regulatory and structural changes on Wall Street have led to less frequent IPOs for venture-backed firms, and that those IPOs now only occur when companies are more mature. As a result, a larger proportion of value accrues to entrepreneurs and venture backers.</p> <p><img alt="Stan Boland, CEO of FiveAI" src="/sites/default/files/u1/innovation_3.jpg" style="width: 320px; height: 212px; float: right;padding:0 0 8px 8px;" />When asked about macro risks for new companies, the panellists tended to minimise such factors and emphasise a greater focus on selecting the right opportunities. For Blumberg, one area of focus is financial technology, which tends to be heavily regulated for large institutions but offers more opportunity in the small and medium enterprise segment. Price noted that the time frame to invest in health care is often incompatible with the investment horizon of most funds, with the exception of health care information technology.</p> <p>Overall, the discussion demonstrated the breadth of opportunities available across a number of disparate industries, regions and technology realms, and highlighted the fact that investors who ignore innovation outside of Silicon Valley do so at their peril. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.</p> </div> Mon, 17 Jul 2017 19:21:07 +0000 achen 21311 at https://www.brownadvisory.com NOW 2017 | Creating Value in an Age of Disruption https://www.brownadvisory.com/intl/now-2017-creating-value-age-disruption <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | Creating Value in an Age of Disruption</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 07/17/2017 - 15:03</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=aizKIOy9QB0&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The panel noted that disruption is not a new phenomenon: As long as there have been companies, there have been new upstarts and business models that have threatened to unseat those companies. What is new today is the delivery of disruption (from many more directions than in the past) and the pace of that delivery (much more rapid than in the past). <a href="http://www.brownadvisory.com/now-2017-bio-rupert-soames-obe" style="color:#636363;text-decoration:underline;" target="_blank">Rupert Soames</a>, Group CEO of Serco, a U.K.-based business services group, made the point that a discerning eye is key. When dealing with rampant change, it is essential to understand which issues simply scratch the surface of your business and which ones truly threaten to cut to the core.</p> <p>Disruption is an omnipresent consideration today. If a business is agile, disruption can be an exciting prospect, and present meaningful opportunities. On our equity research team and, in particular, within our Global Leaders strategy, we focus extensively on the idea of exceptional customer outcomes. A high proportion of the opportunities that arise from disruption stem from something exceptional being delivered to the customer. In the consumer realm, this may mean capitalising on the disruption of the Internet to create more personalised experiences, or providing a leap forward in convenience through home delivery, new pricing models or other innovations. <a href="http://www.brownadvisory.com/now-2017-bio-ron-dennis-cbe" style="color:#636363;text-decoration:underline;" target="_blank">Ron Dennis</a>, Chairman of high-end automotive firm McLaren, noted that his firm’s intention is always to deliver something special for the consumer, but the end result of this can lead to disruption versus its industry’s status quo.</p> <p><img alt="For companies to be successful over the long term, they need strong leaders who can deliver exceptional customer outcomes. Our esteemed panellists have led large, complex, global businesses. Mick Dillon will lead the panel in an exploration of the challenges—and opportunities—involved in building and leading businesses in the midst of intensive economic, political and demographic shifts; cyber threats; and environmental and social conflicts that are ongoing around the world." src="/sites/default/files/u1/disruption_2.jpg" style="width: 320px; height: 212px; float: left;padding:0 8px 8px 0;" />The panel agreed that disruption in business and replacement of old models with new ones are occurring at a much faster speed today. This poses challenges for companies and their managers, as it becomes harder to justify speculative investment in capital or R&amp;D and far more difficult to navigate longer product development cycles in a rapidly changing environment. <a href="http://www.brownadvisory.com/now-2017-bio-dame-fiona-kendrick-dbe" style="color:#636363;text-decoration:underline;" target="_blank">Dame Fiona Kendrick</a>, Chairman of Nestlé U.K. and Ireland, talked about how in the face of disruption elsewhere, it is even more important to focus on longer-term value engines, like brands and talent.</p> <p><img alt="Ron Dennis CBE, Chairman of McLaren Technology Group, Dame Fiona Kendrick DBE, Chairman and CEO of Nestlé UK and Ireland, and Rupert Soames OBE, Group Chief Executive of Serco" src="/sites/default/files/u1/disruption_3.jpg" style="width: 320px; height: 212px; float: right;padding:0 0 8px 8px;" />In a discussion on disruption, it was perhaps inevitable that Brexit—perhaps the most disruptive force looming over the U.K. economy today—would come up. Our three panellists spanned the consumer, automotive and business services industries, so it was a good opportunity to hear from leaders across the economy. To their credit, the panellists did not offer speculation about the eventual outcome of Brexit negotiations, nor did they claim any silver-bullet answers. They emphasised an increased focus on varied issues such as talent retention, migration and tariffs that are likely to be important for their businesses as they attempt to navigate this transformative period.</p> <p>Overall, the discussion underlined the importance of agility and adaptability for businesses as they confront uncertainty and capitalise on disruptive change. <img alt="" src="/sites/default/files/u1/b-box-logo.jpg" style="width: 12px; height: 16px;" /></p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.</p> </div> Mon, 17 Jul 2017 19:03:17 +0000 achen 21306 at https://www.brownadvisory.com NOW 2017 | Welcome https://www.brownadvisory.com/intl/now-2017-welcome <span class="field field--name-title field--type-string field--label-hidden">NOW 2017 | Welcome</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/43" typeof="schema:Person" property="schema:name" datatype="">ajackson</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 06/19/2017 - 08:16</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=4B4kY0dZSH0&amp;t=2s"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Thriving in Uncertain Times</p> <p>Welcome to NOW London 2017. We thank you for taking time to join us in a forum where we can listen to and reflect on important issues that are shaping our world. NOW, which stands for Navigating Our World, is designed to stretch our minds, broaden our perspectives and illuminate meaningful trends.</p> <p>Launched in 2008 to mark our 10th anniversary as an independent firm, NOW is Brown Advisory’s flagship investment conference. NOW embodies our firm’s strong belief in the value of seeking fresh and diverse views, listening carefully to experts across a variety of disciplines, and challenging conventional assumptions. We believe that thoughtful attention to varied perspectives helps us make better decisions for clients.</p> <p>We hope that you find NOW London 2017 to be informative and provocative.</p> </div> Mon, 19 Jun 2017 12:16:24 +0000 ajackson 24971 at https://www.brownadvisory.com EUROPEAN RE-ENTRY: Why We Are Shifting Portfolios Toward European Stocks https://www.brownadvisory.com/intl/european-re-entry-why-we-are-shifting-portfolios-toward-european-stocks <span class="field field--name-title field--type-string field--label-hidden">EUROPEAN RE-ENTRY: Why We Are Shifting Portfolios Toward European Stocks</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/01/2017 - 02:47</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Asset allocation—at least for us—is an exercise in nuance. We move slowly and carefully when it comes to shifting our portfolios away from one asset class or region and toward another. This approach is due to the value we place on patient and disciplined decision-making, especially in light of factors that must be evaluated in shades of gray, not black and white.</p> <p>Take Europe, for instance. Since the 2008–09 credit crisis, market sentiment on European stocks has shifted back and forth, from despair to confidence, depending largely on sentiment regarding the EU’s prospects as a viable political and economic entity. Throughout this period, we often saw windows in which we believed that European valuations were more attractive, but we were cautious due to Europe’s high debt levels and struggles to generate economic growth. (Note the titles of some of our articles on Europe in recent years, such as “Road to Recovery,” “Continental Divide” and “Europe’s Slow Climb.”) Thus, we consistently maintained a reduced weighting in European equities in the years since the crisis (relative to the blended benchmarks typically used by our clients to measure portfolio results).</p> <p>Over the long term, that stance has paid off. We maintain a model portfolio internally to track the results of our asset allocation stances. In that portfolio, our underweight to European stocks has been a strong contributor to our returns; in fact, since the model’s inception on Sept. 30, 2010, this underweighting was the largest positive contributor to the model’s relative performance out of all of our asset allocation decisions.</p> <p>But after more than six years, we are ending this stance, and recommending a return to a neutral weighting in European stocks. Again, this is a nuanced shift in our thinking, rather than a drastic one; “let’s take a neutral position” is hardly a rallying cry. But it is a meaningful change worthy of discussion after a long period of time.</p> <p>We have a number of reasons for our renewed comfort level:</p> <p><strong>Improving economy:</strong> The weakness of Europe’s macroeconomic outlook in recent years was one of the primary red flags we saw for European stocks. The 2008–09 global credit crisis, the ongoing debt crisis in Greece and other concerns have led to multiple years of austere economic policy in Europe, dampening growth prospects.</p> <p>However, global growth trends are improving broadly, and economic indicators in Europe have steadily improved since the middle of last year following the Brexit surprise. We emphasize leading indicators when developing our economic outlook, including purchasing manager surveys and leading economic indicator composites. Although leading indicators are typically built on “soft” data that measure sentiment, they have proven over time to be much more helpful in predicting recessions and GDP movement than the “hard” data of economic results. As noted in the chart to the right, purchasing manager sentiment has improved notably in Europe over the past year, and we see similar indications in other statistics we track.</p> <p>Additionally, we believe that tail risks in Europe have eased of late. Recent political events have shaken confidence in the EU, but the victory of Emmanuel Macron over far-right candidate Marine Le Pen in France’s presidential election assuaged fears of a French exit from the EU, an event that likely would have triggered market volatility and heightened uncertainty. (The French election continued a recent trend—in several elections this year across Europe, the nationalist candidate lost and underperformed vs. expectations.) Collectively, the data and indicators we study suggest a reduced risk of recession in the region.</p> <p>Further, we see room for the European economy to grow. Broad unemployment remains well above pre-crisis levels, low inflation should encourage the European Central Bank to maintain loose monetary policy, and broadly, there is far greater slack in the economy in Europe than in the U.S. This may bode well for European stocks; while we can’t predict the specific movements of any economic cycle, we know that in general, we want to invest when leading indicators are improving but before an economy has fully recovered.</p> <p><img alt="Sentiment for the European economy has improved inrecent months; for example, purchasing managers inEurope are now expressing equally positive views aboutmanufacturing expansion as their counterparts in the U.S." src="/sites/default/files/u1/europereentry_fig1.jpg" style="width: 378px; height: 527px; float: right;" />​</p> <p><strong>Better valuations:</strong> A key driver of our improved view on European stocks is simply that prices and valuations for those stocks are currently much more attractive to us than what we see in U.S. stocks.</p> <p>Most investors look at price-to-earnings (P/E) ratios as their gauge of stock valuation, and by this metric, the disparity between Europe and the U.S. is not particularly notable. European stocks have traded at lower P/E ratios than U.S. stocks since the middle of 2004. While the gap between the two has widened in the past few years, it has not widened dramatically. However, when measuring valuation using EV/EBITDA (enterprise value divided by earnings before interest, taxes, depreciation and amortization), a metric that we consider to be more accurate and helpful, the divergence of Europe from the U.S. is much clearer. As noted in the chart below, European stocks were trading 12% cheaper than U.S. stocks as of the end of 2015 on an EV/EBITDA basis; that gap widened to 20% by the end of April 2017.</p> <p>This widening discount is less a function of European stocks becoming cheaper and more a function of U.S. stocks growing more expensive. Nonetheless, the disparity is a key factor in our decisions about how to allocate capital between the two regions.</p> <p><strong>Currencies:</strong> Our analysis shows that between 1978 and 2014, currency movement explained 50% of the U.S. dollar returns of European stocks. We cannot predict the near-term movement of currencies—and we do not believe that anyone can do so consistently—but we also cannot ignore the importance of this factor. All we can do is look at a range of economic scenarios and seek to understand which currency appears favorably positioned from a currency perspective at any given moment in time.</p> <p>All else being equal, U.S. dollar-based investors will see weaker performance from their European stock holdings when the dollar strengthens vs. the euro. For example, if a French stock rose by 5% in France but the dollar gained on the euro by 10% during that period, a dollar-based owner of that stock would see a 5% decline in that stock in dollar terms. This has been the reality for much of the last few years: The dollar, buoyed by a recovering U.S. economy, and expectations for higher inflation and future Fed hikes, has strengthened considerably vs. the euro. This has led to the euro falling to historically low levels vs. the dollar in purchasing power parity (PPP) terms. (Think of PPP as the equilibrium point where a dollar would buy an equivalent basket of goods and services in the U.S. and in Europe.) As of March 31, 2017, the euro was undervalued by 25% vs. the dollar in PPP terms—meaning that a dollar could buy 25% more in Europe than it could in the U.S. We have not seen that much of a disparity since the euro first launched as the EU’s common currency.</p> <p class="responsiveImg"><img alt="When measured on an EV/EBITDA basis, European stocks are trading at their steepest discount relative to U.S. stocks in the post-crisis era." src="/sites/default/files/u1/europereentry_fig2.jpg" />​</p> <p>From where we are today—with the U.S. at or near the end of an extended growth cycle and with signs pointing to improving growth in Europe—we believe that dollar-based investors are more favorably positioned for investing in European stocks from a currency perspective. Again, we are not implying that we can predict the near-term direction of currency markets or the extent to which they will move; we are merely developing a high-level perspective based on recent history and current economic indications.</p> <p>Opportunity to generate alpha: Finally, we note that over time, active managers focused on European equities generally have been able to add more value from stock picking than those managing U.S. equities. That has remained true in recent years, despite the macroeconomic headwinds that European markets have faced. Many of the best-performing European equity managers have outperformed their benchmarks notably in the years since the 2008–09 recession, while comparatively fewer top-performing U.S. large-cap managers have been able to beat the market consistently.</p> <p>Brown Advisory’s Strategic European Equity Fund, subadvised by Wellington Management, is highly differentiated from the MSCI Europe Index. The strategy’s portfolio manager, Dirk Enderlein, focuses on high-quality companies that are market leaders globally and within Europe, and many of its holdings are poised to benefit from stronger growth in core European markets. Meanwhile, Brown Advisory’s Global Leaders strategy allocates capital across the globe but in recent quarters has added several European names, including Hiscox in the U.K., Schindler Group in Switzerland, Henkel in Germany and Safran in France. The managers of Global Leaders are generally agnostic with respect to regional allocation, but currently their research is repeatedly leading them to ideas in Europe.</p> <p>To be sure, we are keeping a wary eye on Europe’s lingering issues. Europe still faces high debt levels in Greece and other countries and ongoing questions about isolationist political trends. Most importantly, Europe needs to build the promising economic sparks we’ve seen in the past year into a true flame. But with economic, currency and valuation factors all leaning in their favor, we are increasingly confident in the prospects for European equities.</p> <div class="greyLine"> </div> <p style="font-size:.7em;line-height:1.5em;padding:5px 0 0 0;">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 should not be construed as investment research. 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.<br /><br /> The <strong>S&amp;P 500® Index</strong> represents the large-cap segment of the U.S. equity markets and consists of approximately 500 leading companies in leading industries of the U.S. economy. Criteria evaluated include market capitalization, financial viability, liquidity, public float, sector representation and corporate structure. An index constituent must also be considered a U.S. company. Standard &amp; Poor’s, S&amp;P, and S&amp;P 500 are registered trademarks of Standard &amp; Poor’s Financial Services LLC (“S&amp;P”), a subsidiary of S&amp;P Global Inc. The <strong>MSCI Europe Index</strong> captures large and mid cap representation across 15 Developed Markets countries in Europe. With 442 constituents, the index covers approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe. All MSCI indexes and products are trademarks and service marks of MSCI or its subsidiaries.</p> </div> Thu, 01 Jun 2017 06:47:36 +0000 achen 25006 at https://www.brownadvisory.com 2016-2017 Annual Report | Step Ahead. https://www.brownadvisory.com/intl/2016-2017-annual-report-step-ahead <span class="field field--name-title field--type-string field--label-hidden">2016-2017 Annual Report | Step Ahead.</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 05/01/2017 - 12:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Asking the tough questions is essential in our pursuit to step ahead.</p> <p>Inherent in our promise to clients is a responsibility to be honest, transparent and forthright about the challenges we face.</p> <p>This self-reflective exercise is a humbling journey. We set ambitious goals and sometimes come up short. We try new things that do not always work out. We spend time trying to find solutions to questions that have no answers. These stumbles are a fundamental piece of our client-first culture and the price we are willing to pay in our quest to stay a step ahead.</p> <p>In any industry, staying ahead of the game is a nearly impossible pursuit. Only a select few have proven an ability to do so over many years, decades and generations. To stay relevant in the face of unrelenting change, a company—especially an established one—must question the validity of its future existence. This questioning stresses a firm’s thinking quotient and tests its team’s humility.</p> <p>Even after twenty-four years, we feel like our journey is just beginning.</p> </div> Mon, 01 May 2017 16:00:05 +0000 achen 26211 at https://www.brownadvisory.com Emerging Market Banks: Promise Amid Skepticism https://www.brownadvisory.com/intl/emerging-market-banks-promise-amid-skepticism <span class="field field--name-title field--type-string field--label-hidden">Emerging Market Banks: Promise Amid Skepticism</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Mon, 03/13/2017 - 10:37</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>For many investors, emerging markets are an enigma and represent a dichotomy between risk and reward. While these markets offer growth potential supported by secular tailwinds, these are also historically volatile markets and factors such as liquidity problems, political risks, weak regulations and currency instability compound investors’ fears of negative surprises.</p> <p>While the risks in emerging markets merit consideration, we focus on finding emerging markets companies with a meaningful competitive edge, in the belief that such firms can better weather any short-term challenges in their markets and thrive over the long term. In particular, we see strong potential for companies that are well-positioned to serve members of the growing middle class in emerging economies, many of whom will be accessing a variety of services, such as banking and other financial services, for the first time (see chart below).</p> <div class="greyLine"> </div> <h4 style="color:#003767;">Serving the Underserved: The Emerging Markets Banking Opportunity</h4> <p style="color:#003767;">A 2014 study of global banking trends showed growth in the percentage of citizens in emerging markets with access to banking services. While the number of “unbanked” citizens has fallen, banks still have a tremendous opportunity for emerging-market growth—in many regions, well over half of the population still has no relationship with the modern financial sector.</p> <p class="responsiveImg"><img alt="A 2014 study of global banking trends showed growth in the percentage of citizens in emerging markets with access to banking services. While the number of “unbanked” citizens has fallen, banks still have a tremendous opportunity for emerging-market growth—in many regions, well over half of the population still has no relationship with the modern financial sector.&#10;&#10;" src="/sites/default/files/u1/EMBanks_Advisory-fig1.jpg" /></p> <div class="greyLine"> </div> <p>Three banking companies discussed in this article—HDFC Bank, AIA, and Bank Rakyat—are in our view excellent examples of firms poised to capitalize on the long-term secular EM opportunity. Each is generating roughly double the return on assets of typical high-quality banks in developed countries, and each possesses attributes that we associate with successful emerging-market growth investments.</p> <p>The <strong>Housing Development Finance Corporation Bank</strong> (HDFC) is a private Indian bank that provides personal, non-resident Indian (NRI), and wholesale banking to its customers. In a country where approximately 70% of the market is controlled by state-owned banks, HDFC Bank distinguishes itself by building a differentiated franchise that focuses on highyield retail products. Many Indian banks are burdened by government interference, offering their customers limited service while relying on outdated processes and technology, whereas HDFC offers a broad suite of online resources which connect customers to modern resources and products. In addition, HDFC has a proven track record of maintaining strong credit quality throughout the credit cycle. Its established position in an underpenetrated domestic market, combined with a prudent approach to credit underwriting, provides HDFC with what we believe is an opportunity to generate meaningful returns for many years to come. Beyond the online product suite, the bank is also turning gains from technology infrastructure into costcutting measures to improve its overall fiscal health.</p> <p>We see <strong>AIA Group Limited, Inc.</strong> (AIA) as another company with strong advantages in emerging markets. AIA is one of the largest life insurance providers in Asia, and a topthree provider in key markets such as Hong Kong, Singapore, Thailand, and China. AIA’s competitive advantage stems in part from an unparalleled agent network in Asia that allows it to address many underserved local markets. We believe AIA’s life insurance database, one of the largest in Asia, better enables it to price risk. The company is led by a well-respected management team with an intense focus on creating shareholder value. While China is a major driver of new business at AIA, we believe that the firm’s bias toward high-quality, protection-oriented policies steers it away from riskier policies in China and elsewhere and generally helps AIA remain structurally sound. Despite growing fears of a potential Chinese slowdown and concerns about a credit crisis, AIA remains well positioned as the market leader of pan-Asian insurers.</p> <div class="quote" style="padding:15px;">"Key competitive advantages separate these companies from their peers and provide an interesting case study on how we evaluate growing emerging market companies and identify their unique attributes."</div> <p>Finally, Indonesia’s <strong>Bank Rakyat</strong> has found innovative ways to tap into non-traditional growth drivers. Founded in 1896, Bank Rakyat has been partially government-owned since Indonesia’s independence in 1950, and has played a critical role in promoting the government’s social agenda by advancing subsidized credit for rural enterprises. Indonesia has very low levels of financial services penetration, and thus its rural population is largely "unbanked," with no real access to the modern financial sector except through microlending. Bank Rakyat is a crucial lender to the informal economy in these rural region and leads the Indonesian microfinance market. Through this role it has generated approximately a 25% return on equity over the past five years. Its rural credit infrastructure, combined with a community-based approach to lending, creates a difficult-to-replicate formula that creates a wide competitive moat and low levels (&lt;1.5%) of non-performing loans. We believe that Bank Rakyat is well positioned to produce long-term growth, driven by increased adoption of its credit offerings by this largely unbanked population.</p> <p>All three of these companies benefit from unique competitive advantages within their respective markets. While the overall macro outlook for some emerging markets may seem negative, using a bottom-up, fundamental research process helps us identify companies that are well-positioned to capitalize on important trends and succeed over the long term.</p> <div class="greyLine"> </div> <p style="font-size:.7em;line-height:1.5em;padding:5px 0 0 0;">Private investments mentioned in this article may only be available for qualified purchasers and accredited investors.<br /><br /> 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 should not be construed as investment research. 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.<br /><br /> ROE, or Return on Equity, is equal to a company’s net income for a full fiscal year, divided by total shareholder equity.</p> </div> Mon, 13 Mar 2017 14:37:29 +0000 achen 25011 at https://www.brownadvisory.com NOW 2016 | The Reality of Climate Change https://www.brownadvisory.com/intl/now-2016-reality-climate-change <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | The Reality of Climate Change</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=yS68j1J7LvA&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>A change in climate caused by a buildup in greenhouse gases may bring a host of afflictions, including a reduction in crop yields and mass migration of people in several regions, according to the speakers in the NOW session titled, “The Reality of Climate Change: Impacts on Health, Food, Water and National Security.” Disruptive events triggered by climate change in countries with weak governments, fragile economies and crude infrastructure could lead to political instability and a reduction in worldwide trade, according to Sharon Burke, a senior advisor at New America. Global economic growth would slow, harming industrialized as well as developing countries.</p> <p>China holds an especially central role in global warming and efforts at regulating greenhouse gases, both at the domestic and international level, according to Kate Gordon, the vice chair of climate and sustainable urbanization at the Paulson Institute. The country’s regulatory weaknesses and counterproductive business incentives are slowing efforts outlined by China’s government to limit climate change, she said.</p> <p>Beijing is currently focused on shifting the world’s No. 2 economy to be based on services and consumption rather than on industrial manufacturing and government investment. As China’s steel production declines, such industrial output may shift to emerging economies with weaker environmental regulation, Gordon said. Indeed, China’s steel output increased during the 1980s amid a decline in U.S. coal and steel production stemming in part from tougher regulation. In other words, in the absence of effective global measures to limit climate change, China’s reductions in greenhouse gases could lead to increases elsewhere.</p> <p><img alt="Brown Advisory's NOW 2016 | THE REALITY OF CLIMATE CHANGE: IMPACTS ON HEALTH, FOOD, WATER AND NATIONAL SECURITY&#10;In this session, Mark Tercek of the Nature Conservancy and Kate Gordon of the Paulson Institute address the latest findings regarding one of the defining global challenges of the 21st century. The panel will discuss the varying impacts that climate change is having today on food production, water scarcity, public health and even international military conflicts, and how those impacts are likely to evolve in the coming decades." src="/sites/default/files/u1/ClimateChange.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />That said, there are many reasons to be guardedly optimistic that the world may begin to curb climate change, according to Mark Tercek, president and CEO of the Nature Conservancy. This progress was evident in diplomacy leading up to an agreement by 195 countries in December to take steps limiting climate changes. Under the pact, signed in Paris, the signatories pledged to reduce reliance on fossil fuels in favor of more sustainable technologies such as wind and solar power.</p> <p>The campaign against climate change should move forward simultaneously across many fronts. Stepped-up research into energy-efficient batteries could help realize the goal of sustainable transportation, Gordon said.</p> <p>Tercek, while stressing the importance of protecting biodiversity and promoting sustainability in urban areas, said he sees reasons to be “cautiously encouraged about the likelihood that humanity is going to finally get its act together” and begin to slow the growth in greenhouse gas emissions.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:55 +0000 achen 26316 at https://www.brownadvisory.com NOW 2016 | Putin’s World https://www.brownadvisory.com/intl/now-2016-putins-world <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | Putin’s World</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=n2xLC1v2LYg&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>On Feb. 27, 2014, unidentified troops, referred to as “little green men” in news reports, stormed the Crimean peninsula. Within days, the soldiers occupied the Crimean Parliament prior to a vote by lawmakers to replace the regional prime minister with a member of the Russian Unity party and hold a referendum to join Russia.</p> <p>There was little doubt about the allegiance of the little green men. They appeared shortly after Ukrainian President Viktor Yanukovych, an ally of Russian President Vladamir Putin, fled to Russia and was replaced by Arseniy Yatsenyuk, a proponent of Ukrainian integration into the European Union. Although Putin’s opposition to the leadership change was predictable, his invasion of a sovereign nation and annexation of the peninsula was a shock that provoked condemnation from several nations.</p> <p>Inside Russia, the story was very different. According to a poll by the All-Russian Center for Public Opinion Research, 90% of Russians supported the annexation. Putin’s approval rating surged 10% in February and March of 2014, to 71.6%. He had convinced many Russians that their country was strong and impervious to foreign condemnation. Putin also distracted the public from the flagging Russian economy. The upshot—the incursion into Ukraine was a success, at least by the rules of Putin’s world, according to Angela Stent, director of the Center for Eurasian, Russian and East European Studies at Georgetown University.</p> <p>In describing Putin’s world, Stent compared how Russians and the West hold completely different views on historical events. For instance, many Russians believe that the Soviet Union fell not because of economic decay and mismanagement, but because U.S. infiltration and espionage exploited weak leadership, Stent said at the NOW 2016 forum. For his part, Putin sees efforts by the European Union and NATO to expand economic and political cooperation as part of a campaign to isolate Russia and challenge it militarily.</p> <p><img alt="Brown Advisory's NOW 2016 | PUTIN'S WORLD&#10;Vladimir Putin’s actions in recent years have been described as provocative or even belligerent by many observers, yet when viewed from his perspective—as a leader of a once-great power determined to restore Russia’s status in the world—one can gain a greater understanding of his motivations and the forces driving Russia. Angela Stent will discuss the dramatic recent developments in U.S.-Russian relations, and provide insights regarding a different, and potentially more fruitful, path forward for both countries." src="/sites/default/files/u1/putin.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Stent served in the State Department during the Clinton and Bush administrations, and has taught at the Moscow State Institute of International Relations, gaining a rich perspective on Putin and the future of his foreign policy. She likened Putin to a modern-day czar. Although the leading lights in the upper echelons of Russian society are often called oligarchs, “everything they have—it is at the pleasure of the czar,” Stent said. Political power in Russia is more centralized in one individual than at any time in the Soviet era. Putin is popular among the masses, who view him as a strong leader who will return Russia to its rightful place as a major global power. Putin’s political opponents are either disorganized or imprisoned, according to Stent.</p> <p>But all is not well in Putin’s world. Russia’s economy is highly dependent on natural resources, oil being one, and is under tremendous stress because of weak commodity prices. Russia is also suffering from capital flight and brain drain. Russians with substantial intellectual or financial resources are leaving Russia or trying to exchange their rubles for other currencies. The Russian economy needs to diversify and modernize, but government constraints prevent such a growth-friendly transition. After all, capital controls and state ownership further the interests of Putin and his political allies.</p> <p>The mix of an unstable economy amid apparent political stability makes Putin’s future moves difficult to ascertain. “We are dealing with a Putin who is unpredictable,” Stent said. Investors should take a very cautious approach toward Russia and monitor potential flashpoints closely, including Afghanistan, Moldova and Ukraine. The size of Russia’s economy, exceeding $1 trillion, and its significant role in global commodity markets make understanding Putin’s world essential.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:54 +0000 achen 26321 at https://www.brownadvisory.com NOW 2016 | Driverless Cars: Transforming Energy and Mobility https://www.brownadvisory.com/intl/now-2016-driverless-cars-transforming-energy-and-mobility <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | Driverless Cars: Transforming Energy and Mobility</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=Diob550JTxw&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Driverless cars will vastly improve what it means to be “on the road,” according to Lawrence Burns, advisor to Google on the Future of Transportation and Mobility. So-called autonomous vehicles could reduce the 1.2 million annual fatalities on world roads by 80%. Compared with current vehicles, a two-person electric “pod” could be 10 times more energy efficient and dramatically cut per-mile travel costs. Cars would also be used far more efficiently. Currently, the typical vehicle is unused about 90% of the time, logging just 15,000 miles per year compared with the 70,000-mile-per-year average use of a New York City taxi.</p> <p>The radical change in mobility has five concurrent themes—connected, coordinated, shared, driverless and tailored, said Burns, citing his insights from four decades of research at General Motors and his current position as an advisor to Google. The introduction of autonomous vehicles may begin on a large scale as early as 2018, he said.</p> <p>It is easy to lose sight of how far human mobility has progressed. In 1903, crossing the U.S. took 63 days. Thirteen years later, the trip took just five days. Today, Google’s autonomous vehicle has logged more than 1.5 million fully autonomous miles.</p> <p>While consumer demand is fueling the growth of driverless car technology and services such as Uber, regulation is the main force behind development of the electric car, according to Burns. The electric vehicle—including advanced electric and fuel cell drive trains—will probably become commonly used in 2020- 2025, he said. The gasoline-powered engine will not be supplanted in the near term.</p> <p><img alt="Brown Advisory's NOW 2016 | DRIVERLESS CARS: TRANSFORMING ENERGY AND MOBILITY&#10;Technology is redefining the concept of the car as “the ultimate mobile device,” and firms ranging from old-line auto manufacturers like General Motors and Toyota, to cutting-edge technology companies like Apple and Google, are racing to make their mark in the brave new world of driverless vehicles. Larry Burns, seasoned automotive executive and current advisor to Google’s transportation effort, will discuss his views on how the reinvention of the automobile will transform our economy and society." src="/sites/default/files/u1/cars.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Fast Lane</p> <p>Burns suggested that investors get in front of the driverless trend and the need to proactively manage risks. That requires an understanding of what is possible with new technology and new business models, as well as the potential hazards from computeroperated vehicles. He said businesses and investors should keep in mind a maxim—“Do unto others before others do unto you.”</p> <p>Incumbent auto companies face disruption on many fronts. Companies such as Uber, Lyft and Zipcar are changing ownership needs and the use of cars. Tesla is pushing electrification into the mainstream. Google and Apple, and suppliers such as Mobileye, Delphi and NXP Semiconductor are bringing autonomous vehicles within reach. The traditional automakers are racing to catch up. GM has built a partnership with Lyft and is making its first serious foray into mass-market electrification with the Chevy Bolt, which it rolled out before Tesla’s Model 3. At Brown Advisory, we have taken a selective approach to investing in autonomous cars, mindful of the high levels of disruption. We have invested in companies that have enabled greater technological sophistication in cars, including NXP Semiconductor, Amphenol and TE Connectivity. Meanwhile, we are looking for new winners in the transition to a digital auto, as well as the dinosaurs that fail to evolve.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:53 +0000 achen 26331 at https://www.brownadvisory.com NOW 2016 | Strokes, Science & Video Games: Breaking New Neurological Ground in Treating Stroke Patients https://www.brownadvisory.com/intl/now-2016-strokes-science-video-games-breaking-new-neurological-ground-treating-stroke-patients <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | Strokes, Science &amp; Video Games: Breaking New Neurological Ground in Treating Stroke Patients</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=3dNweHM6NiE&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Stroke persists as a scourge even in countries with the most advanced medical care. In the U.S., one out of every five people between the ages of 55 and 75 suffers a stroke, and currently there is no option available to treat or reverse the resulting damage to the brain. A stroke occurs in the U.S. every 40 seconds, making it the leading cause of long-term disability, with 75% of patients homebound within a year.</p> <p>John Krakauer, director of the Johns Hopkins Brain, Learning, Animation and Movement (BLAM) Laboratory, has sought to revolutionize treatment of stroke patients by assembling an eclectic team: animators, computer gamers, Disney/Pixar engineers and dolphin experts from the National Aquarium in Baltimore. He centers his approach on an appreciation for the link between the brain and physical movement, and for the brain's capacity for post-injury healing. Ultimately, Krakauer leverages the human brain's "plasticity," or inherent changeability throughout a lifetime.</p> <p>Clinical studies on mice provided early validation for Krakauer’s ideas. The BLAM lab found that a week after a stroke, intense training and rehabilitation could at best recover about 70% of the rodents' potential abilities.</p> <p>Researchers then induced a second stroke and immediately began retraining the mice, rather than impose a one-week delay. The contrast was dramatic: Intense retraining following the stroke helped the mice regain nearly 100% of prior potential. The results affirmed Krakauer's view that the longer training is delayed, the less a stroke victim would recover in brain function. Immediate and intense training, in his view, is the best way to leverage the brain’s receptivity to healing.</p> <p>Krakauer's approach defies current poststroke therapy, which usually entails two weeks in a hospital bed, in which 60% of the patient’s time is spent alone, with 85% of the time spent immobile. This treatment regimen persists even though data suggest that the brain's ability to recover atrophies four weeks after a stroke.</p> <p><img alt="Brown Advisory's NOW 2016 | STROKES, SCIENCE AND VIDEO GAMES: BREAKING NEW GROUND IN TREATING STROKE PATIENTS&#10;John Krakauer has injected a powerful dose of creativity and spirit into modern medicine since his arrival at Johns Hopkins in 2010. His Brain, Learning, Animation, Movement laboratory (BLAM! for short) seeks to “break down boundaries between the ordinarily siloed worlds of art, science and industry,” as reported in a recent New Yorker profile. He works with “Pixar-grade” designers, engineers—and yes, video game designers—to spark new insights about how stroke patients, and potentially many others, can make quantum leaps in recovery beyond what was previously thought possible." src="/sites/default/files/u1/stroke.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Under current techniques, rehabilitation fails to challenge the brain sufficiently in both range and intensity of movement. Much of the rehabilitation is focused on coping with the loss of brain function rather than the retraining of the brain, according to Krakauer.</p> <p>As an alternative, Krakauer has created an exoskeletal robotic arm that enables stroke patients to play a video game with their arm in which they mimic the movements of a dolphin through water. The semi-autonomous computerized machine and image challenge the brain to make the movements of a multitasking, skilled animal. While the approach has yet to be tested fully in a clinical setting, Krakauer said the device has increased patients' intensity of movement by two orders of magnitude compared with current rehabilitation techniques.</p> <p>Through his research, Krakauer is pushing back the boundaries on knowledge of the relationship between human movement and cognition. His findings may reshape current business models for aiding stroke patients and help advance the treatment of Alzheimer's and other neurological disorders.</p> <div class="greyLine" style="line-height: 20.8px;"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:52 +0000 achen 26326 at https://www.brownadvisory.com NOW 2016 | China’s Age of Ambition https://www.brownadvisory.com/intl/now-2016-chinas-age-ambition <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | China’s Age of Ambition</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=X_Bwp75ErT0&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Friction will probably persist in Sino-U.S. relations as China grows increasingly assertive and discards its long-standing strategy to “hide strength and bide time,” according to Evan Osnos, a China specialist and correspondent with The New Yorker. “We are in an era of strategic anxiety with China,” Osnos said in a NOW presentation. “It’s not at all clear what the intentions of each side is with respect to the other,” and “there will almost certainly be much more friction to come in the next few years.”</p> <p>Beijing has taken a more aggressive stand beyond its borders than any time in decades, rapidly enlarging contested reefs and islands in the South China Sea for military purposes, Osnos said. Still, China does not aim to replace the U.S. overnight as the dominant global power because it recognizes the high cost of leading the world against such threats as Ebola and ISIS. Instead, China wants to rise to the status as one of several great powers in a multipolar world, Osnos said.</p> <p>Washington needs to pursue a nuanced policy as it sustains beneficial contacts in trade and other fields while resisting disruptive moves by Beijing, including its buildup in the South China Sea, Osnos said. “We sometimes use a blunt instrument when we need a scalpel.”</p> <p>Based in Beijing from 2005 until 2013, Osnos won the National Book Award in 2014 for <em>Age of Ambition: Chasing Fortune, Truth and Faith in the New China</em>.</p> <p>The U.S. and China should seek to avoid the “Thucydides Trap,” in which an incumbent power and newly emerging rival fail to resolve differences and eventually clash, Osnos said. Thucydides, a fifth century B.C. historian, chronicled hostilities between Sparta and Athens in History of the Peloponnesian War. Outright conflict has flared in 11 of the 15 cases in history in which a rising power has challenged an incumbent, Osnos said.</p> <p><img alt="Brown Advisory's NOW 2016 | CHINA’S AGE OF AMBITION&#10;Many viewing China from the outside struggle to reconcile how two fundamentally different stories—on one hand the Communist Party seeking to maintain strict control, and on the other the millions of Chinese citizens rapidly reaching new heights of individual success—can take place within the same nation. The New Yorker correspondent Evan Osnos tackles this essential conflict in Age of Ambition: Chasing Fortune, Truth and Faith in the New China, the recipient of the 2014 National Book Award for nonfiction. In this session he will share his views regarding China’s evolution in recent decades, offering in the words of James Fallows a better understanding of China’s process of ‘becoming’ than most people could ever gain by living there." src="/sites/default/files/u1/china.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Growing bilateral competition coincides with an intertwining of interests in such areas as finance, trade, nonproliferation and anti-terrorism, prompting contradictions in the U.S. perception of China, according to Osnos. Americans simultaneously view China’s economy as both strong and vulnerable, while in geopolitics, they see Beijing as both a partner and an adversary, he said.</p> <p>As President Xi Jinping more aggressively pursues China’s global interests, he has amassed more power in domestic politics than any other Chinese leader since Mao Zedong, Osnos said. Xi aims to avert disorder at all costs, having grievously suffered with his family at the hands of the Red Guards during the Cultural Revolution (1966-1976).</p> <p>China’s president, according to Osnos, aims to overcome three challenges to stability:</p> <p><strong>Economic stagnation. </strong>China’s economy has slowed after decades of rapid growth, and public dissatisfaction may swell as expectations for greater prosperity go unmet. Xi recognizes that transitioning from an export- and investment-oriented economic policy toward reliance on services and consumption would likely spur growth, Osnos said.</p> <p><strong>Corruption.</strong> Xi has launched the harshest crackdown against graft in decades, mindful that crooked officials undermine the Communist Party’s credibility and the effectiveness of the government, according to Osnos.</p> <p><strong>Foreign influence.</strong> Xi sees threats to political order from new technology and Western concepts, such as individualism and democracy, Osnos said. He believes a firm hand is the best way to avert such tumult as the collapse of the Soviet bloc more than two decades ago, unrest in Tibet in 2008 and Xinjiang Province in 2009, and the Arab Spring uprisings in 2011.</p> <p>Xi aims to pose a “counterargument to the allure of Western ideas” by promoting the notion of a “Chinese Dream,” in which an increasingly prosperous China becomes a dominant civilization, according to Osnos.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:51 +0000 achen 26341 at https://www.brownadvisory.com NOW 2016 | The Future of College: Is It Worth the Money? https://www.brownadvisory.com/intl/now-2016-future-college-it-worth-money <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | The Future of College: Is It Worth the Money?</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <a class="video-cover popup-video" data-effect="mfp-zoom-in" href="https://www.youtube.com/watch?v=2H7TjIPC910&amp;feature=youtu.be"> <img src="/" alt="Video thumbnail"> </a> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The payoff from higher education is clear—college graduates generate 65% more in lifetime earnings than people with only a high school diploma. Their advantage has more than doubled since the 1980s, largely because innovation has increased demand for highly skilled workers. Still, such gains require a large upfront investment that for decades has increased faster than inflation. This rising cost of a college diploma has helped fuel the growth in student debt.</p> <p>While the burden of such borrowing is widely known, low graduation rates make the debt especially ill-advised, according to the speakers at the NOW 2016 panel titled, “The Future of College: Is It Worth the Money?” For example, community colleges, while charging a student just $6,000 to $10,000 per year, achieve an average graduation rate of just 9%, largely because of the composition of the community college population. Many students are adult learners, transfer students or they are enrolled under an ESOL (English for Speakers of Other Languages) program. The comparatively high student-to-advisor ratio also elevates the dropout rate, according to Philip Bronner, CEO of American Honors.</p> <p>In contrast, private colleges charge as much as $60,000 per year but achieve an average graduation rate of 59%. Catharine Bond Hill, president of Vassar College, said her institution annually spends about $80,000 per student, exceeding the college’s tuition of $52,000. The college fills the gap to meet its commitment to a low studentteacher ratio and to maintain wellregarded faculty and staff. Vassar’s graduation rate is around 90%.</p> <p><img alt="Brown Advisory's NOW 2016 | THE FUTURE OF EDUCATION: IS COLLEGE STILL WORTH THE MONEY?&#10;Skyrocketing costs, proliferation of Web-based alternatives to campus-based learning, a growing sense that college grads are not learning what’s needed to succeed in the modern economy--all of these trends are shaking the foundations of America’s higher education system. Our panel, which includes Catharine Bond Hill, President of Vassar College, Phil Bronner, Co-Founder of American Honors and Raj Date, Managing Partner of Fenway Summer, will offer their ideas about the current state of higher learning and how they propose to transform the way education is delivered." src="/sites/default/files/u1/Education.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />U.S. college dropout rates are elevated in part because lenders and colleges do not accurately determine the probability of graduation among student borrowers. Colleges receive payment from lenders regardless of the success rate among students, according to Raj Date, managing partner at Fenway Summer. With both lenders and schools paying insufficient attention to graduation rates, debt will probably persist as a significant challenge for many students, Date said. The fact that student loans are not forgiven in the event of bankruptcy makes the burden especially onerous.</p> <p>If graduation rates remain low and college costs continue to rise, students and their families will have to become more selective. During the next 20 years, some 500 to 1,000 of the 4,500 colleges and universities in the U.S. will probably consolidate or close down.</p> <p>Restricting student loans is not a reasonable way to push up graduation rates and reduce costs, Hill said. Such a move would put students from lower-income groups at a disadvantage. Instead, institutions could increase affordability by providing online courses. Also, educators should shift the incentive structure to ensure that students, lenders and institutions are accountable for their choices. Promoting responsible decision-making would curb debt, improve graduation rates and ensure that more students graduate onto a path toward prosperity.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:50 +0000 achen 26336 at https://www.brownadvisory.com NOW 2016 | Energy, Money and the New World Economy https://www.brownadvisory.com/intl/now-2016-energy-money-and-new-world-economy <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | Energy, Money and the New World Economy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The benefits to the U.S. from its “revolution” in shale oil production have been far-reaching. The industry generated millions of jobs in the aftermath of the Great Recession. Indeed, former Federal Reserve Chairman Ben Bernanke called the shale boom one of the biggest boosts to the U.S. economy since 2008.</p> <p>Thanks to shale, the U.S. is now a “short-cycle producer,” and many production companies in the U.S. can ramp up or wind down output quicker than most competing sources of oil. Over time, such flexibility will help keep prices relatively low or moderate, though with a potential for volatility, Yergin predicted at the NOW 2016 conference. Major disruptions in supply could change that outlook.Moreover, U.S. oil output nearly doubled from 2008 until 2015, and production now exceeds that of every member of OPEC except Saudi Arabia. Drastically less dependent on oil imports, the U.S. has gained diplomatic leverage in the Middle East and elsewhere. Indeed, without the surge in domestic production, the U.S. would have likely been unable to secure a deal to curb Iran’s nuclear capabilities because oil sanctions would have failed, according to Daniel Yergin, vice chairman of IHS, a global research and information company with 9,000 employees in 33 countries.</p> <p>Although other countries are stepping up efforts to tap energy from shale, they are unlikely in the foreseeable future to challenge the pre-eminence of North American producers, Yergin said. The U.S. holds advantages that are difficult to duplicate, including its approach to regulation and its laws that give landowners mineral rights, he said.</p> <p>At the same time, Yergin said, producers need to pay close attention to the public’s environmental concerns, while noting that shale production is a highly regulated activity. Yergin cited a report by the Obama administration’s committee on the environmental aspects of shale—on which Yergin served—which found that the environmental aspects are generally appropriately managed.</p> <p>Yergin is one of the most soughtafter thought leaders on the interplay of energy, international politics and the global economy. His book—The Prize: The Epic Quest for Oil, Money and Power—won the Pulitzer Prize. His most recent book, The Quest: Energy, Security and the Remaking of the Modern World, describes the new geopolitics of energy, the emergence of new sources of energy and competition among nations to achieve energy security.</p> <p>Even Yergin is reluctant to forecast the price of oil. Anyone tracking the oil industry needs to be prepared for “the inevitability of surprise” from forces including geopolitics, major economic shifts and technological change, he said. Still, he said, he expects to see a better balance in 2017 between oil supply and demand. Oil would need to rise to about $60 per barrel to induce an increase in production, he said, predicting that $100-per-barrel oil is unlikely to be the norm. The wild card would be a major disruption of supply from exporting countries.</p> <p><img alt="Brown Advisory's NOW 2016 | ENERGY, MONEY AND THE NEW WORLD ECONOMY&#10;Daniel Yergin has earned his reputation as America’s, and perhaps the world’s, leading expert on the energy industry. His book The Prize: The Epic Quest for Oil, Money, and Power won a Pulitzer Prize and is still required reading for anyone interested in the history of oil. His follow-up in 2011, The Quest: Energy, Security and the Remaking of the Modern World, was equally prescient in its thesis that the future energy economy would not be characterized by a simplistic replacement of oil by some new technology, but rather a more nuanced combination of traditional and alternative energy sources, all competing with each other. Dr. Yergin will share his views on current events and his assessment of the world’s energy future." src="/sites/default/files/u1/oil.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Oil prices peaked at $147 per barrel in the summer of 2008. For several years, prices hovered around $100 a barrel until the OPEC meeting in November 2014. Since then, the price of oil has fallen, hitting a low of $26 in February 2016 before recovering in May 2016 to a range of $45 to $50. Lower prices have compelled U.S. producers to improve efficiency and accelerate innovation. Yergin estimated that a dollar invested in oil production today has twice the impact of just two years ago.</p> <p>While gas-powered cars are unlikely to disappear anytime soon, Yergin said he expects that public attitudes and regulation will lead to greater use of hybrid and electricpowered vehicles. Tesla has changed public perceptions of the electric car, he said, from the “egg on wheels” of the 1990s to an attractive, stylish and high-tech vehicle. With its Model 3, Tesla aims for volume, supported by the construction of its Gigafactory battery facility. Yergin noted the irony that the first lithium ion battery was developed by Exxon in 1975, when it was thought that the world was soon going to run out of oil.</p> <p>At Brown Advisory, we seek to partner with innovators in the energy industry and companies that show promise of long-term success. Yergin said that pioneers behind the shale revolution showed what Walter Issacson’s biography of Steve Jobs calls a “reality distortion effect’’—a combination of focus and willpower that broke through established wisdom, skepticism and institutional obstacles. Their boldness vaulted the U.S. among the world’s top three oil producers, reducing its imports from 60% of total supply to 25%— an achievement that, a decade ago, seemed definitely out of reach.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:48 +0000 achen 26346 at https://www.brownadvisory.com NOW 2016 | Energy, Money and the New World Economy https://www.brownadvisory.com/intl/now-2016-energy-money-and-new-world-economy-0 <span class="field field--name-title field--type-string field--label-hidden">NOW 2016 | Energy, Money and the New World Economy</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 06/23/2016 - 10:27</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>The benefits to the U.S. from its “revolution” in shale oil production have been far-reaching. The industry generated millions of jobs in the aftermath of the Great Recession. Indeed, former Federal Reserve Chairman Ben Bernanke called the shale boom one of the biggest boosts to the U.S. economy since 2008.</p> <p style="float: right; padding: 0px 0px 10px 10px; font-size: 0.8em; width: 480px; text-align: center;"><a alt="NOW 2016 Logo" href="http://info.brownadvisory.com/now2016recap" title="Welcome to the NOW 2016 Review"><img alt="Brown Advisory's NOW 2016 | Navigating Our World" src="/sites/default/files/u1/NOW2016_Logo_pubs_0.jpg" style="width: 480px; height: 96px;" /></a><br /><img alt="Daniel Yergin at NOW 2016" src="/sites/default/files/u1/Yergin.jpg" style="width: 480px; height: 270px;" /><br /> Photo from the NOW 2016 session titled, Energy, Money and the New World Economy. No video is available for this session.</p> <p>Moreover, U.S. oil output nearly doubled from 2008 until 2015, and production now exceeds that of every member of OPEC except Saudi Arabia. Drastically less dependent on oil imports, the U.S. has gained diplomatic leverage in the Middle East and elsewhere. Indeed, without the surge in domestic production, the U.S. would have likely been unable to secure a deal to curb Iran’s nuclear capabilities because oil sanctions would have failed, according to Daniel Yergin, vice chairman of IHS, a global research and information company with 9,000 employees in 33 countries.</p> <p>Thanks to shale, the U.S. is now a “short-cycle producer,” and many production companies in the U.S. can ramp up or wind down output quicker than most competing sources of oil. Over time, such flexibility will help keep prices relatively low or moderate, though with a potential for volatility, Yergin predicted at the NOW 2016 conference. Major disruptions in supply could change that outlook.</p> <p>Although other countries are stepping up efforts to tap energy from shale, they are unlikely in the foreseeable future to challenge the pre-eminence of North American producers, Yergin said. The U.S. holds advantages that are difficult to duplicate, including its approach to regulation and its laws that give landowners mineral rights, he said.</p> <p>At the same time, Yergin said, producers need to pay close attention to the public’s environmental concerns, while noting that shale production is a highly regulated activity. Yergin cited a report by the Obama administration’s committee on the environmental aspects of shale—on which Yergin served—which found that the environmental aspects are generally appropriately managed.</p> <p><img alt="The price of oil hovered at around $100 per barrel for several years before plunging in November 2014. In May, the price ranged from about $45 to $50 per barrel." src="/sites/default/files/u1/offPeakOilPrices.jpg" style="width: 750px; height: 341px;" /></p> <p>Yergin is one of the most soughtafter thought leaders on the interplay of energy, international politics and the global economy. His book—The Prize: The Epic Quest for Oil, Money and Power—won the Pulitzer Prize. His most recent book, The Quest: Energy, Security and the Remaking of the Modern World, describes the new geopolitics of energy, the emergence of new sources of energy and competition among nations to achieve energy security.</p> <p>Even Yergin is reluctant to forecast the price of oil. Anyone tracking the oil industry needs to be prepared for “the inevitability of surprise” from forces including geopolitics, major economic shifts and technological change, he said. Still, he said, he expects to see a better balance in 2017 between oil supply and demand. Oil would need to rise to about $60 per barrel to induce an increase in production, he said, predicting that $100-per-barrel oil is unlikely to be the norm. The wild card would be a major disruption of supply from exporting countries.</p> <p><img alt="Brown Advisory's NOW 2016 | ENERGY, MONEY AND THE NEW WORLD ECONOMY&#10;Daniel Yergin has earned his reputation as America’s, and perhaps the world’s, leading expert on the energy industry. His book The Prize: The Epic Quest for Oil, Money, and Power won a Pulitzer Prize and is still required reading for anyone interested in the history of oil. His follow-up in 2011, The Quest: Energy, Security and the Remaking of the Modern World, was equally prescient in its thesis that the future energy economy would not be characterized by a simplistic replacement of oil by some new technology, but rather a more nuanced combination of traditional and alternative energy sources, all competing with each other. Dr. Yergin will share his views on current events and his assessment of the world’s energy future." src="/sites/default/files/u1/oil.jpg" style="width: 320px; height: 213px; float: left; padding: 0px 10px 10px 0px;" />Oil prices peaked at $147 per barrel in the summer of 2008. For several years, prices hovered around $100 a barrel until the OPEC meeting in November 2014. Since then, the price of oil has fallen, hitting a low of $26 in February 2016 before recovering in May 2016 to a range of $45 to $50. Lower prices have compelled U.S. producers to improve efficiency and accelerate innovation. Yergin estimated that a dollar invested in oil production today has twice the impact of just two years ago.</p> <p>While gas-powered cars are unlikely to disappear anytime soon, Yergin said he expects that public attitudes and regulation will lead to greater use of hybrid and electricpowered vehicles. Tesla has changed public perceptions of the electric car, he said, from the “egg on wheels” of the 1990s to an attractive, stylish and high-tech vehicle. With its Model 3, Tesla aims for volume, supported by the construction of its Gigafactory battery facility. Yergin noted the irony that the first lithium ion battery was developed by Exxon in 1975, when it was thought that the world was soon going to run out of oil.</p> <p>At Brown Advisory, we seek to partner with innovators in the energy industry and companies that show promise of long-term success. Yergin said that pioneers behind the shale revolution showed what Walter Issacson’s biography of Steve Jobs calls a “reality distortion effect’’—a combination of focus and willpower that broke through established wisdom, skepticism and institutional obstacles. Their boldness vaulted the U.S. among the world’s top three oil producers, reducing its imports from 60% of total supply to 25%— an achievement that, a decade ago, seemed definitely out of reach.</p> <div class="greyLine"> </div> <p style="padding: 5px 0px 0px; line-height: 1.5em; font-size: 0.7em;">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. 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.<br /><br /> 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, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties</p> </div> Thu, 23 Jun 2016 14:27:48 +0000 achen 26351 at https://www.brownadvisory.com 2015-2016 Annual Report | Building on Nuance https://www.brownadvisory.com/intl/2015-2016-annual-report-building-nuance <span class="field field--name-title field--type-string field--label-hidden">2015-2016 Annual Report | Building on Nuance</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Sun, 05/01/2016 - 07:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Nuance is most keenly detected by the patient, careful and considerate mind. At Brown Advisory, nuance lives in our vernacular, the rhythm of our culture and the expertise of our client teams. The innovative and compounding power of making properly nuanced decisions has allowed us to serve clients of the highest and most discerning quality for over 20 years. As stewards for our clients, we believe that this thoughtful attention to even the smallest details and subtleties will help us deliver on our mission.</p> <h4>Our Mission</h4> <p>Our mission is to make a material and positive difference in the lives of our clients by delivering a combination of first-class performance, strategic advice and the highest level of service. We make every effort to deliver these benefits in the most thoughtful way.</p> <p><img alt="We are client first, always; We work as a team; We believe in our people; We protect our equity structure; We never stop reinvesting; We are an investment firm, above all else; We grow; We strive to disrupt; We communicate beyond the doubt; We embrace outside views." src="/sites/default/files/u1/AR_Pencils_0.jpg" style="width: 800px; height: 614px;" title="We are client first, always; We work as a team; We believe in our people; We protect our equity structure; We never stop reinvesting; We are an investment firm, above all else; We grow; We strive to disrupt; We communicate beyond the doubt; We embrace outside views." /></p> </div> Sun, 01 May 2016 11:00:04 +0000 achen 26216 at https://www.brownadvisory.com 2014 Annual Report | Putting The Pieces Together https://www.brownadvisory.com/intl/2014-annual-report-putting-pieces-together <span class="field field--name-title field--type-string field--label-hidden">2014 Annual Report | Putting The Pieces Together</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Fri, 05/01/2015 - 12:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>We are pleased to share with you the 2014 annual report for Brown Advisory. The purpose of this report is to provide an update on the firm's performance as a business and its financial condition. As important, we use each year's annual report to continue the dialogue with our clients, our shareholders and our colleagues about the mission of Brown Advisory and the steps that we are taking to strengthen further our team, infrastructure and the client experience.</p> <p>We believe that we made great progress at Brown Advisory during 2014 in pursuit of our ongoing mission to build an investment and strategic advisory firm with one purpose—to deliver to our clients first-rate investment performance, creative and thoughtful strategic advice, and the highest level of client service.</p> </div> Fri, 01 May 2015 16:00:03 +0000 achen 26221 at https://www.brownadvisory.com 2013 Annual Report | A Look Inside https://www.brownadvisory.com/intl/2013-annual-report-look-inside <span class="field field--name-title field--type-string field--label-hidden">2013 Annual Report | A Look Inside</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Thu, 05/01/2014 - 12:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>Many firms aspire to put clients first, but few can ensure the continuity of client-facing professionals that is ensured by our unique equity structure: Every single employee at Brown Advisory owns equity in the firm. Our insistence on an independent board of directors and outside shareholders underscores our commitment to embracing views from outside Brown Advisory that we believe is critical to sound decision making.</p> <p style="visibility: hidden;">Annual Report 2013</p> </div> Thu, 01 May 2014 16:00:02 +0000 achen 26226 at https://www.brownadvisory.com 2012 Annual Report | Thoughtful Investing https://www.brownadvisory.com/intl/2012-annual-report-thoughtful-investing <span class="field field--name-title field--type-string field--label-hidden">2012 Annual Report | Thoughtful Investing</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Wed, 05/01/2013 - 12:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>It is hard to believe that it has been 20 years since the idea behind Brown Advisory was put into place. Launched as an “independently minded” group at Alex. Brown &amp; Sons, we became an “independently owned” firm in 1998 and have continued in this form ever since.</p> <p style="visibility: hidden;">Annual Report 2012</p> </div> Wed, 01 May 2013 16:00:01 +0000 achen 26231 at https://www.brownadvisory.com 2011 Annual Report | Making Connections https://www.brownadvisory.com/intl/2011-annual-report-making-connections <span class="field field--name-title field--type-string field--label-hidden">2011 Annual Report | Making Connections</span> <span class="field field--name-uid field--type-entity-reference field--label-hidden"><span lang="" about="/user/1" typeof="schema:Person" property="schema:name" datatype="">achen</span></span> <span class="field field--name-created field--type-created field--label-hidden">Tue, 05/01/2012 - 12:00</span> <div class="clearfix text-formatted field field--name-body field--type-text-with-summary field--label-hidden field__item"><p>“ Performance. Advice. Service. Pick three.” That was our vision when we founded Brown Advisory in 1993.</p> <p style="visibility: hidden;">Annual Report 2011</p> </div> Tue, 01 May 2012 16:00:00 +0000 achen 26236 at https://www.brownadvisory.com