Brown Advisory Ethical Selection Q1 2022 commentary

SaxoSelect Commentaries
Instruments tradedStocks
Asset classesUS Stocks
Investment style Fundamental analysis focussed on ethical, social and governance (ESG)
Quarterly return-9.71% (net of fees)
2021 return28.81% (net of fees)
Annualised volatility (since inception)22%

Market overview 

The first quarter of 2022 has been filled with numerous macro events. The world finally seems to be coming out of the trenches of COVID, the US economy is strong, the consumer balance sheet remains incredibly healthy, and demand is generally resilient despite well-documented supply chain issues. At the same time, geopolitical instability in Ukraine and Russia and related sanctions are slowing the global economy and are certainly adding fuel to the fire around rising inflation—which appears to be less transitory than originally thought. As all of this goes on, the US Federal Reserve is raising interest rates and shifting from quantitative easing to quantitative tightening; this should cause ripple effects in nearly every securities market. Considering all of this together, it is certainly an unprecedented market environment. 

Turning to the portfolio’s quarterly results, the lack of meaningful energy exposure—a sector that has had minimal exposure historically given the heightened ESG risks and limited sustainable drivers among hydrocarbon production—was one of the largest detractors to performance relative to the benchmark. Materials and Healthcare were also underperformers due to stock-specific weakness in a few names. On a positive note, the portfolio’s performance within communication services was strong; in particular, the avoidance of Meta Platforms was additive to performance in the quarter.

Despite the underperformance in this challenging environment, Brown Advisory Ethical Selection investment team continues to believe in their process, which has driven outperformance over the long term by using rigorous bottom-up security analysis, ESG alignment of investments and thoughtful portfolio construction. This process should lead to meaningful outperformance in the long run.

Portfolio performance (net of fees)

Since inception (March 2019) 67.37%

Best-performing positions Q1 2022 (note performance shown for the quarter reflects the performance of the security during the part of the quarter it was owned by Brown Advisory, not necessarily the performance of the security itself for the full quarter)

  • WEX outperformed in the quarter following a strong 2022 guide in addition to rising fuel prices, which benefits their Fleet segment. The company hosted an investor day during the quarter where it discussed several business opportunities in electric vehicle charging and employee benefits (healthcare savings accounts)—important sustainable drivers for Wex.

  • Assurant benefitted from its operating performance and also a well-received investor day that demonstrated the attractiveness of the company's continued transformation to a capital-light business model. During the investor day, the company highlighted its unique trade-in and upgrade business, which helps to extend the life of consumer electronics, supporting customers’ sustainability efforts while also enabling affordable access to mobile devices. Building on this business, Assurant is also accelerating efforts to create a first-mover advantage to support electric vehicles. 

  • Jack Henry outperformed in the quarter given strength across various business segments, particularly within their core Banking segment as banks resume their technology expenditure and payments. 

  • United Rentals reported quarterly results ahead of consensus estimates. The company provided guidance for 2022 based on continued favourable industry trends, such as strong equipment rental demand from a broad array of end markets (including electric grid and power infrastructure, rail services, broadband, public transit and water) and higher prices for used equipment sales. The company also maintained a strong safety record despite integrating multiple acquisitions and growing headcount by 12 percent during the year.  

  • Zurn Water Solutions reported a strong quarter relative to estimates in addition to strong guidance. The company also announced the acquisition of Elkay during the quarter, which can be seen as a favourable combination for shareholders.  

Worst-performing positions Q1 2022 (note performance shown for the quarter reflects the performance of the security during the part of the quarter it was owned by Brown Advisory, not necessarily the performance of the security itself for the full quarter)

  • Sherwin Williams underperformed given raw materials–related issues: massive shortages hurt ability to generate topline, while accelerated input cost inflation hurts margins.

  • Marvell underperformed during the quarter given general weakness in the sector coupled with continued supply constraints. Despite this, the company continues to report very strong results, and is committed to achieving net-zero emissions—they are setting a science-based target.

  • KKR underperformed during the quarter given general weakness in capital markets. We remain confident in the company’s ability to fundraise and harvest realisations in the coming years. From an ESG perspective, KKR continues to be a leader in promoting employee equity ownership at several of its portfolio companies—a rare practice that allows all employees to benefit in the company’s success.   

  • Zoetis underperformed during the quarter due to a heightened competitive narrative that we believe is overblown coupled with general weakness in the sector.

  • Charles River underperformed in the quarter on the back of macro concerns related to wage inflation, elevated turnover and a tough biotech funding environment. 

Changes to the portfolio throughout the quarter

During the quarter, Brown Advisory Ethical Selection investment team took advantage of market weakness to add Zurn Water Solutions, Eastern Bankshares, HB Fuller and Best Buy to the portfolio. At the same time, the team eliminated Fortive, Teleflex, and Choice Hotels to make room for the additions, with higher conviction in the companies’ long-term business strategies.  


This material is provided for marketing and/or information purposes only. Fee charges mentioned herein are subject to change – you may find the latest updated pricing information on the description page for the respective portfolios. None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets does not take into account your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied. Although every endeavour has been made to ensure that our trading platforms are secure and reliable, please note that as with all facilities and systems, our trading platforms may be vulnerable to temporary disruption or failure. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with systemic failure, i.e. failure of hardware and software.  

See the full Managed Portfolio Disclaimer for more information. Please also consider our Risk Warning and General Business Terms before trading with us.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.