Page 37 - Investment Advisor July/August 2021

Impact Manager of the Year
Brown Advisory

Sustainable Core Fixed Income

he Brown Advisory Sustainable Core great impact opportunities. “This was a
TFixed Income strategy had an 8.7% perfect example of where the clients seek-
return in 2020, outperforming both the ing impact weren’t giving up anything
Bloomberg Barclays U.S. Aggregate Index performance-wise to get it,” he says.
(7.51%) and the Bloomberg US Universal Hauter notes, too, that since they have
Index (7.58%). The performance gave it been managing the fund, “we’ve always
the win over 31 top impact funds in its been focused on ESG issues that have
category for the Envestnet/Investment been material to an issuer’s long-term
Advisor Impact Manager of the Year. health, prosperity and resilience over a
Dually managed by Thomas Graff and longer period of time — [which were]
Amy Hauter, the firm uses the full range of a lot of issues we saw arise during the
fixed-income products, such as Treasuries, peak of the pandemic, [such as] employ-
corporates and mortgage bonds, but also ee treatment, customer care, health
searches for social impact qualities. Hauter Tom Amy and safety, other responsible manage-
says they look at “[environmental, social Graff Hauter ment practices.” She says that these are
and governance] research as a value-add “meaningful for issuers, but the pandem-
to our fundamental due diligence process.” Title: Portfolio Title: Portfolio ic greatly amplified their importance.”
The process is integrated from the manager, manager, head And how companies handle these
beginning, she says. “Fixed-income ESG head of of sustainable issues affects Brown’s view of a manage-
analysts sit alongside our fundamen- fixed income fixed income ment team that thinks long term, Graff
tal credit analysts team, and they work Years with Years with says. “Like willing to sacrifice a little
together through every part of that, so Brown: 11 years Brown: 9 years earnings [upside] to garner goodwill with
an idea can come from anywhere.” Years in Years in customers or employees. And now that
The Envestnet analysts noted that financial financial we’re looking at this super-tight employ-
“the strategy’s first quarter 2020 return services: services: ment market, employees who were better
of 2.06% displayed its ability to protect 22 years 10 years treated during the pandemic [most likely
client capital during periods of volatility, will stay]. Even if you don’t care about
while the second quarter return of 4.83% societal impact, business-wise, those
showed the team was nimble enough to Firm headquarters: Baltimore and kinds of things were the right decisions.”
take advantage of wider spread and sub- Washington, D.C. The team has about 60 holdings at
sequent tightening.” Year the firm was founded: 1993 any one time: about 25 to 30 corporate
Graff explains that at the start of 2020, as Alex. Brown, and in 1998 Brown bonds and a smaller number of govern-
“we did think the biggest risk the port- Advisory became a private and ment-backed bonds.
folio faced was recession.” So when the independent firm. Last year was a question mark, but as
pandemic reaction hit the markets, it cre- Graff says, “the biggest positive move
ated “in some ways more volatility than Number of employees: was adding substantially to the longer-
September 2008,” and high-quality com- Approximately 760 term corporate bonds in the middle of
panies had to issue bonds “at extremely AUM as of April 2021: $122.6 billion the pandemic.” Still, “the right man-
high levels. Because we came into the agement team was super important. In
quarter with a decent amount of defensiveness, that also gave April 2020 we had no idea how long this was going to last, how
us some flexibility to rotate out of some very high-quality stuff high unemployment was going to go, what government sup-
and into some of the … longer-dated high-quality, but very wide- port would be. None of that was clear at the time. So you had
spread corporate bonds,” he explains. In the second quarter, they to be with management teams that not only had the financial
were able to “rocket well off that.” wherewithal to survive a long period of decreased revenue,”
They also moved in large size, realizing “it was a once-in-a- but also planned to keep a sustainability program because, in
lifetime opportunity.” And their research teams were able to find the end, that was important to their business, he says. —GS

JULY/AUGUST 2021 INVESTMENT ADVISOR 35