ii ACE 40 investments:
Brown Advisory US Sustainable Growth Fund

Why we recommend it

The fund is managed by Karina Funk and David Powell, who in our opinion, have complementary skills. Funk joined the group in 2009 when the firm she worked for, the ESG-focused Winslow Management, was acquired by Brown Advisory. She spearheads the ESG work for this strategy. Powell, who joined Brown Advisory in 1999, operates out of the firm’s Baltimore headquarters alongside most of its centralized equity research staff. The pair has run this strategy since its 2010 launch in separate accounts. 

The managers seek proven, profitable, tough-to-disrupt business models with shares trading at attractive valuations. They expect steady—not blazing—growth and this forms a part of what the team means when they say they look for “sustainable business advantages,” or SBAs. But SBAs also have an explicit ESG element. The simple idea is that sustainability practices such as resource conservation or responsible treatment of customers and employees can spur revenue growth, reduce costs, or increase brand value. Every holding in this portfolio must have a clear SBA thesis.

The managers build a relatively concentrated portfolio of 30 – 40 stocks, and while they aim to reduce single stock risk by limiting individual stock sizes to a maximum holding size of 5%, the portfolio can have significant sector bets.

Fund performance relative to the fund’s benchmark the Russel 1000 Growth Index has been strong, with the fund generally outperforming during periods of market weakness.

The fund benefits from an experienced manager and an established process. The mangers have complementary skills and benefit from the well-resourced analyst team. Although this is an ESG-driven strategy, much of its analytical ethos is straightforward growth-stock investing. The managers seek companies with proven, profitable, tough-to-disrupt business models, and shares trading at attractive valuations.

Ethical criteria

ii ACE sustainable style: Considers. This means the fund carefully considers an often wide range of ethical and/ or environmental, social and governance (ESG) issues or themes when balancing positive and negative factors.

Fund EcoMarket category: Sustainability Themed. This relates to funds that focus on sustainability related issues and opportunities as part of their investment strategy, often alongside ethical criteria. Their focus is often around longer term societal and environmental trends.

The risks

Ethical screening: In certain market conditions the performance of the fund may differ significantly from others in the peer group that do not exclude specific sectors or companies from a comparable investment universe.

Currency: Your investment may be significantly affected by changes in currency exchange rates.

Portfolio concentration: The fund has a concentrated portfolio compared with its benchmark, which is the Russell 1000 Growth index, typically investing in 30-40 stocks.