In April, we presented our “Bold New World” conference in Austin. Our goal was to convene experts and leaders from across our economy, and examine some of the quantum innovations in technology and deep cultural transformations that are impacting our world. We were fortunate to have an incredible slate of panelists and speakers—our thanks go out to all of them for an energizing and insightful series of sessions. We always seek to listen and learn alongside our clients and friends at our conferences, and look to our speakers to help us broaden our perspective beyond the day-to-day factors we normally think about as investors. Then, after our conferences, we come together as colleagues to discuss our takeaways, and how we might apply what we learned to our investment decisions going forward. Here are some of our impressions, summarized from a roundtable of Brown Advisory colleagues held the day after the conference. On Opportunity Zones A highlight of the day was our panel discussing the impact potential of opportunity zone (OZ) funds. These funds, which seek to direct capital to property and operating businesses within designated low-income geographic zones and provide meaningful tax benefits to investors, were largely the brainchild of the Economic Innovation Group (EIG) in 2015, and were authorized in the tax reform legislation of 2017. John Lettieri, EIG’s president, joined our panel alongside Amy Bell of Tideline, an impact investing consultancy. Neither would claim to be the star of a panel that also included NBA Hall of Famer David Robinson, who has devoted years to community work in San Antonio and is deeply passionate about the potential for OZ funds to make a meaningful difference in communities across Texas. Lettieri offered some excellent guidance about the specific rules that will are expected to govern OZ funds (the initial authorization of these funds in the 2017 tax reform legislation left many questions about tax treatment, investment restrictions and other factors). Recent updates from the IRS provided some good news for investors—namely, more timing flexibility for qualified OZ funds to deploy new investor commitments and broader guidelines for investing in operating companies. Many first-movers to launch OZ funds seemingly have not embraced the impact-oriented intent of the legislation. Looking across the thousands of designated opportunity zones in the U.S., only a small fraction of those regions will are likely to be interesting to investors seeking market-rate returns, and some feel that the motivation behind these funds is more about tax savings and less about community impact. Another concern is the exit strategy for these investments—do these funds spend 10 years building something that tangibly benefits a community, only to sell it to a buyer who could jack up the rent? Brown Advisory has partnered with Ross Baird, founder and president of Village Capital, to create Blueprint Local Investments, an OZ fund platform* that will intends to roll out dedicated, place-based funds in various geographies over time; its first effort is in Texas. The intended biggest takeaway for us in launching Blueprint has been the value of building the program around investment and impact returns. The tax mitigation is certainly of value to our clients, but building the program around authentic impact has been the difference maker in attracting developers and sellers; it’s been a difference maker in attracting strategic partners like David Robinson who care about their communities. We’ve even seen early evidence that cities and states are prepared to offer additional financial incentives, perhaps even streamlined approval processes, for projects in opportunity zones that will aim to offer tangible community benefits (vs. simply being located inside a designated zone). Impact isn’t just a benefit to clients who care about it--it’s been a critical pillar to the early success of the program. On Facebook Our keynote speaker was legendary venture investor Roger McNamee, who has made headlines in recent years for his scathing commentary about Facebook’s dangerous impact on society and specifically on democracy in the U.S. McNamee was an early investor in Facebook, and a proud supporter of Mark Zuckerberg, but his reckoning with the damage he believes Facebook is doing has culminated in his new book, Zucked: Waking Up to the Facebook Catastrophe. McNamee’s talk at our conference added kindling to an already-burning conversation at our firm (and across the investment industry): What are the positive and negative aspects of the data-driven world created by Facebook, Amazon, Google and others, and what is the resulting mix of opportunities and risks for investors in those companies? We tend to focus on tangible risks and opportunities that we believe we can understand and control—in other words, while we worry about social media’s impact on democracy, it is difficult to parse the investment ramifications of that impact. One thing we discussed was McNamee’s vision for turning the internet’s data model on its head, and creating a world where users simply do not share their data without receiving overt value in return. While this vision is attractive in theory, in practice we believe that there needs to be a balance. Firstly, we can’t forget that we do in fact receive tremendous value for sharing our information—free email, free GPS navigation, free guidance to desired services “within 0.1 miles,” and many other services we now take for granted. And of course, being barraged with constant reminders and requests to authorize sharing of location data and other information would make for an untenable user experience. There are plenty of companies—from startup firms to the internet giants themselves–that are thinking about ways to balance user experience with privacy concerns, and thereby beginning an effort to address the legitimate concerns of McNamee and millions of other online citizens. Users have shown that they are willing to give up so much for the benefits offered by the modern internet, so we try to identify high-risk areas where there is actual likelihood of pushback from consumers and regulators. We think that health information is worthy of particular attention for investors looking for privacy or security red flags. The risk of being spammed with location-based coupons whenever you drive into Austin might annoy and anger customers and eventually chase them away, but the risks associated with leaked health information are much more material, creating potential for consumer lawsuits, regulatory pushback and severe reputational damage. Finally, we looped around to the question of whether Facebook, Amazon and Google were killing competition for business, talent and capital through their dominance. We tend to view this as a double-edged sword. It’s true that the technology giants are in some ways squelching competition in their sandboxes—for one, they are soaking up a lot of rising talent in key areas like artificial intelligence. At the same time, excitement around startups has never been higher. A lot of companies are spinning up with unprecedented speed—thanks in large part to the cloud infrastructure that Amazon, Google and others have created. And there is plenty of dry powder in the venture universe, ready to fund new businesses. While it may appear that dominant technology firms have a lock on markets today, the pace of change in technology virtually guarantees new entrants the opportunity to knock those firms from their perch. Our learnings from the conference extended in many other directions. We discussed ideas ranging from health care innovation to community-driven retail concepts to future business opportunities sparked by autonomous vehicles; in many ways Austin was the perfect setting for this conversation—the city has fully arrived as a global hub of innovation and we were grateful to have experts from Austin’s business and academic communities on all of our panels. Perhaps the most important takeaway from this and our other conferences is the need to continually question our assumptions. It is far too easy to forget that our three-year and five-year projections for our investments often get blindsided by innovations that emerge in the blink of an eye, and we owe it to our clients to embrace outside views in an effort to constantly reset our perspective. The views expressed are those of Brown Advisory as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be and should not be relied upon as investment advice and are not intended to be a forecast of future events or a guarantee of future results. Past performance is not a guarantee of future performance and you may not get back the amount invested. The information provided in this material is not intended to be and should not be considered to be a recommendation or suggestion to engage in or refrain from a particular course of action or to make or hold a particular investment or pursue a particular investment strategy, including whether or not to buy, sell, or hold any of the securities 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. 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