The US accounts for about half of the stock market capitalisation of the world's equities, so access to money managers in that country is often essential. WealthBriefing spoke to a firm that is building its capabilities in London.

It may be the case that some US firms have pulled in their horns internationally in recent years in the face of rising costs, lack of critical mass or other forces, but as far as one wealth management house is concerned international expansion suits it just fine.

One business with an unashamed US heritage and a focus on delivering expertise about the US market worldwide is Brown Advisory, the investment firm created in 1993 as a separate entity within Alex Brown & Sons. The firm became independent following a management buyout from BT Alex Brown in 1998, starting life as an independent firm with $2 billion of AuM. Today, it manages approximately $52 billion in assets. The client base is geographically diverse and includes high net worth individuals and institutional investors.

While 2008 was a memorable year for all the wrong reasons for many financial firms, Brown Advisory chose that year to launch its London office - its first expansion move outside US. Last May, Brown Advisory launched its Global Leaders equity investment strategy, the firm’s first to invest in equities outside the US. It aims to establish world-class credentials internationally in that strategy team over the next decade.

And as the firm makes clear, with the Uncle Sam accounting for half of the market capitalisation of the global stock market, expertise in US stocks is a must-have skillset for investors.

This publication recently interviewed Logie Fitzwilliams, head of international business, and Tim Hathaway, director of research.

Fitzwilliams said that since the London office opening in 2008, when the asset management offering was an institutional once, it has grown to be a diverse investment management business with around $6 billion in international assets under management and 28 employees.  

He was keen to stress Brown Advisory’s employee ownership structure. Long-term perspective has been fundamental to its success and evolution, resulting in low turnover in staff and alignment of the firm’s interests with those of its clients, he said. To put that into context, at the end of last year, Brown Advisory had a total of 503 employees across seven locations. Headquartered in Baltimore, it has five other offices on the US East Coast as well as its international business based in London. 

“At the heart of Brown Advisory is its belief in research-driven active portfolio management. Research lies at the heart of the investment process, which includes rigorous fundamental due diligence in order to identify differentiated companies and construct portfolios that are positioned to outperform the market,” Fitzwilliams said.

What sort of clients does the firm have? “The firm seeks to offer their institutional equity strategies to a wide range of clients, including but not limited to, pension funds, charities, endowments, family offices, fund of funds, global private banks and wealth managers. In the eight years since opening the London office, the team have built a very strong network and diverse client base throughout London, the UK, Europe, Asia and the Middle East,” he said. “In December 2012, Brown Advisory launched a private client offering in the UK, leveraging both our institutional brand in the UK as well as our expertise in private client investment management, a business we are highly experienced in and regarded for in the US,” he said.

“We believe our firm’s American heritage is an advantage for us across all aspects of our business. Firstly, seven out of our eight equity strategies are US-focused, it is an area we have significant expertise. The eighth strategy, the Brown Advisory Global Leaders strategy, strongly leverages the expertise of the US equity team, which is hugely valuable given that over 50 per cent of the world’s market capitalisation is in the US,” he said. 

Brown Advisory is registered with the US Securities and Exchange Commission and the UK Financial Conduct Authority, which Fitzwilliams said means it can look after US expats and US-connected individuals and families. In an age when regulatory and tax rules such as the Common Reporting Standard and FATCA take their toll, those advantages are important.

As far as Europe goes, “we continue to focus on expanding our presence in London, specifically in the private client business,” he said, but pointed out that, rather than helter-skelter growth, it favours “measured and deliberate growth so as not to jeopardise or dilute the interests of our existing client base.”  

Investment philosophy
His colleague, Tim Hathaway, said: “We are trying to own businesses for a long period of time rather than trade stocks. We influence performance by the choice of the businesses we choose to own, the proportion of their shares within the portfolio and the price we pay for ownership. By getting these criteria mostly right and dodging periodic folly, we believe that our performance over time will take care of itself.

“Valuation is key across all of our strategies. We seek to understand the company’s business model, we meet with management and visit headquarters prior to initiating a position, and we use upside/downside analysis to understand the potential for outcomes skewed in our favour,” he said.

The Brown Advisory "network" (a reference to the connections employees and board members of the firm have with outside experts) is "extremely useful in engaging with sectors such as healthcare and pharma when it comes to conducting the bottom-up research analysis,” Hathaway said. 

The firm's Global Leaders equity investment strategy, launched last May, is managed out of London by Mick Dillon and supported by a team of research analysts situated in the US and UK. Available as a UCITS vehicle, and with a maximum of 40 holdings, the fund has made a notable start by outperforming the Russell Global Large-Cap Net Index by over 800 basis points through December 2015.
 
One of the first funds on the UCITS platform was the US Smaller Companies Fund. Managed by Chris Berrier since its inception, the fund is concentrated for a small-cap portfolio with about 60 holdings. The fund generated an 8.9 per cent return in 2015, far outpacing results of the Russell 2000 Growth Index, which fell by 1.4 per cent. 

Here is the roster of funds Brown Advisory offered to clients outside the US: 
Non-US Funds (UCITS)
American Fund

Global Leaders Fund

US Equity Growth Fund

US Equity Value Fund

US Flexible Equity Fund

US Flexible Equity SRI Fund

US Small-Cap Blend Fund

US Smaller Companies Fund