Affiliated Managers Group, Inc. · NYSE:AMG
Affiliated Managers — GW&K Investment Management — Investor Presentation (March 2021)
43 slides from Affiliated Managers's investor presentation, March 2021
Slide 1: AMG GW&K ESG Bond Fund, Fourth Quarter 2020
GWak AMG GW&KESG Bond Fund Fourth Quarter 2020 FOR INVESTMENT PROFESSIONAL USE ONLY - NOT FOR USE WITH OR DISTRIBUTION 10 THE GENERAL PUBLIC
Slide 2: Investment Management guiding principles
GWak INVESTMENT MANAGEMENT The guiding principles on which our firm was founded still define our investment approach today. They are the foundation for all of our investment strategies and have contributed to our long-term investment success and lasting client relationships. Clients First Clear Obje
Slide 3: Table of Contents
Table of Contents Section 1: Company Overview Section 2: ESG Bond Fund Section 3: Appendix Supplemental Strategy Data Biographies Disclosure Statement 3
Slide 4: Section 1: Company Overview
SECTION 1 COMPANY OVERVIEW GWskK | 4
Slide 5: Company Overview
December 31, 2020 Company Overview GW&K Investment Management ABOUT GW&K Boston based firm founded in 1974 - Trusted manager for over four decades Affiliate of Affiliated Managers Group since 2008 - A stable partner for long-term success Senior management continuity - Average 29 years with fir
Slide 6: Portfolio Management
December 31, 2020 The Organization GW&K Investment Management Harold G. Kotler, CFA Chief Executive Officer, Chief Investment Officer Thomas F.X. Powers T. Williams Roberts III Co-President Co-President Marketing Client Services Sales >> INVESTMENTS >> Compliance/Risk Mgmt. Technology Operatio
Slide 7: Investment Philosophy
Investment Philosophy GW&K Investment Management GUIDING PRINCIPLES The guiding principles on which our firm was founded still define our investment approach today. They are the foundation for all of our investment strategies and have contributed to our long-term investment success and lasting clien
Slide 8: Section 2: GW&K ESG Bond Fund
SECTION 2 GW&K ESG BOND FUND GWak | *
Slide 9: Investment Professionals
December 31, 2020 Investment Professionals GW&K ESG Bond Fund Investment Committee HAROLD G. KOTLER, CFA Team members average 20 years experience Chief Executive Officer, Chief Investment Officer Cohesive team process enhances our ability to find 54 Years Experience attractive opportunities. Man
Slide 10: Strategy Options
December 31, 2020 Strategy Options GW&K ESG Bond Fund Strategy options to meet individual clients' risk tolerance and long-term portfolio objectives. All rely on GW&K's core research strengths across multiple sectors. All emphasize diversification to help manage risk. Short-Term Intermediate C
Slide 11: Why Focus on ESG?
Why Focus on ESG? GW&K ESG Bond Fund ESG factors have always been relevant – whether investors acknowledge it or not. GW&K & ESG INVESTING Fundamental Focus Core to Our Process Smart Investing ESG factors are a vital GW&K has long viewed Companies that focus on component of business and ESG as integ
Slide 12: GW&K's ESG Philosophy & Approach
GW&K’s ESG Philosophy & Approach GW&K ESG Bond Fund We seek to achieve excess investment returns through deep fundamental analysis, careful risk management, and a constant focus on relative value. The consideration and evaluation of ESG factors is a core part of our investment philosophy and process
Slide 13: Investment Philosophy & Objectives
Investment Philosophy & Objectives GW&K ESG Bond Fund TAXABLE BOND MARKET SECTOR PERFORMANCE INVESTMENT PHILOSOPHY We actively manage portfolios across multiple bond market sectors aiming to take advantage of relative value opportunities in changing market environments. Managing risk factors is
Slide 14: Fixed Income Investment Approach
Fixed Income Investment Approach GW&K ESG Bond Fund G W &K’S APPROACH TO MAN AG I N G TAXABLE BOND PORTFOLIOS Multi-sector active approach begins with the core principal of managing risk through diversification, in-depth research, and a focus on quality. Seek out relative value opportunities by
Slide 15: Fixed Income Investment Process
Fixed Income Investment Process GW&K ESG Bond Fund DISCIPLINED, RISK CONTROLLED INVESTMENT APPROACH TOP-DOWN ANALYSIS Analysis of business cycle, valuation trends and market technical Guides outlook on market, sector allocation BOTTOM-UP SELECTION Quantitative & qualitative research techniques
Slide 16: Top-Down Macroeconomic Analysis
Top-Down Macroeconomic Analysis GW&K ESG Bond Fund GLOBAL INVESTMENT PORTFOLIO ALLOCATION RESEARCH COMMITTEE MANAGEMENT COMMITTEE INVESTMENT INSIGHTS ■ Economic Themes ■ Business Cycle Analysis ■ Market Opportunities PORTFOLIO MANAGER ESTABLISHES TARGETS FOR PERFORMANCE DRIVERS TAXABLE B O N D PORTF
Slide 17: Comprehensive Research Approach
Comprehensive Research Approach December 31, 2020 Corporate Bonds GW&K ESG Bond Fund CORPORATE BOND YIELDS AND DEFAULT RATES 20% 10% GW&K GW&K GW&K SECONDARY PRIMARY FOCUS SECONDARY FOCUS FOCUS 16% 7.1% 8% 12% 6% 4.4% 4.2% Average 1 Year Volume- 8% 3.2% 4% Weighted Default Rates 1994- We seek credit
Slide 18: Comprehensive Research Approach
Comprehensive Research Approach Corporate, Taxable Municipals & Sovereigns GW&K ESG Bond Fund FUNDAMENTAL CREDIT RESEARCH PROCESS Fundamentals Valuation Technicals ESG Business ■ Spreads relative to industry ■ Capital allocation policy ■ Environmental ■ Industry characteristics peers ■ Event-risk ■
Slide 19: Comprehensive Research Approach: ESG Focus
Comprehensive Research Approach ESG Focus GW&K ESG Bond Fund Integrating a Wide Range of ESG Factors Environmental Social Governance Carbon emissions Human rights Business ethics Hazardous waste and Labor relations Board management and emissions Employee safety quality Water stress
Slide 20: ESG Focus: Assessing Industry Risk
ESG Focus Assessing Industry Risk GW&K ESG Bond Fund Systematic and Consistent Framework to Assess ESG Risk Exposure Across Industries Assign weighting for each of the three factors across industries to reflect industry-specific characteristics. Factor weightings are informed by the Sustainabili
Slide 21: ESG Focus: Industry Risk
ESG Focus Industry Risk GW&K ESG Bond Fund Indicators for each of the three factors also vary by industry. Assessments of each factor are based on quantitative and qualitative input from company filings, public and private data sources, third party ESG-specific and general research providers. Fa
Slide 22: Industry Scoring Example – Aerospace & Defense
ESG Focus Industry Scoring Example – Aerospace & Defense GW&K ESG Bond Fund Aircraft and Industrial Parts Commercial and Defense Aircraft INVESTMENT CONSIDERATIONS Supplier Manufacturer ENVIRONMENTAL = 20% 10%: Greenhouse Gas Emissions 3.5 3.5 CORE ESG FACTORS 10%: Material Waste Intensity SOCIAL =
Slide 23: ESG Focus: GW&K Research Process Enhancements
ESG Focus GW&K Research Process Enhancements GW&K ESG Bond Fund KEY ESG CHARACTERISTICS RELATIVE TO INDEX GW&K GW&K GW&K ESG Bond Fund Enhanced Core Core Bond ESG Model Bond ESG Fund Fund Portfolio Level ESG Insights Total Greenhouse Leverage improved company reporting to gain portfolio Gas Emissi
Slide 24: Comprehensive Research Approach: Securitized Sector
Comprehensive Research Approach Securitized Sector GW&K ESG Bond Fund FUNDAMENTAL RESEARCH PROCESS Fundamentals Valuation Technicals ■ Collateral Analysis ■ Cash Flow Analysis ■ Global Supply/Demand » Servicer, Weighted Average » Interest Rate Sensitivity Outlook Coupon, Loan Age, Prepayment » Optio
Slide 25: Monitoring & Surveillance
Comprehensive Research Approach Monitoring & Surveillance GW&K ESG Bond Fund Communication and collaboration is key to our overall process. CREDIT MORTGAGES ■ Maintain detailed research notes and ■ Attribution financial models on internal research ■ Key rate duration platform ■ Sector weightings by c
Slide 26: Trading -- Value Added Approach
Trading -- Value Added Approach GW&K ESG Bond Fund ■ Relationships Clients benefit from the deep knowledge of our trade specialists and the long- standing relationships we have built with an extensive network of over 40 brokers. ■ Flexibility We believe that our size and trading volume provides a co
Slide 27: Risk Management Approach -- Portfolio Construction
Risk Management Approach -- Portfolio Construction GW&K ESG Bond Fund INTEREST RATES FACTOR EXPOSURE IDIOSYNCRATIC Drivers Duration and Yield Curve Sector, Credit, Industry and ESG Individual Securities \\\\ Individual Holdings Constraints Minimums/maximums by sector and AA & above: ~3% +/- 20% of b
Slide 28: Fund Characteristics – Model Portfolio
Fund Characteristics – Model Portfolio February 28, 2021 GW&K ESG Bond Fund SECTOR DISTRIBUTION 40% 30% 20% = % of Index 10% 0% High Yield Investment Agency Local Authority CMBS Agency Fixed- US Treasury Cash Corporate Grade Corporate Rate Proposed GW&K ESG Bond Fund 24% 34% 2% 5% 3% 24% 7% - Bloomb
Slide 29: Fund Characteristics – Model Portfolio
Fund Characteristics – Model Portfolio February 28, 2021 GW&K ESG Bond Fund CONTRIBUTION TO DURATION BY SECTOR CORPORATE INDUSTRY ALLOCATION Proposed Fund Index Relative Proposed Fund Index Relative (Years) (Years) (Years) Consumer Cyclical 20.0% 6.7% 13.3% Capital Goods 11.4% 5.9% 5.5% High Yield C
Slide 30: Historical Performance: Enhanced Core Bond ESG
December 31, 2020 Historical Performance GW&K Enhanced Core Bond ESG Strategy ANNUALIZED RETURNS 12% 10.0% 10.0% 10% 8.8% 7.5% 7.5% 8% 6.7% 6% 4% 2.2% 2% 0.7% 0% QTD YTD 1 Year Since Inception 07/01/2019 GW&K Enhanced Core Bond ESG Composite – Gross Bloomberg Barclays Aggregate Index Quarter YTD 1 Y
Slide 31: Historical Performance: Core Bond ESG
December 31, 2020 Historical Performance GW&K Core Bond ESG Strategy ANNUALIZED RETURNS 10% 8.9% 7.8% 7.8% 8.1% 7.5% 7.5% 8% 6% 4% 2% 1.2% 0.7% 0% QTD YTD 1 Year Since Inception 01/01/2019 GW&K Core Bond ESG Composite – Gross Bloomberg Barclays Aggregate Index Quarter YTD 1 Year Since Inception GW&K
Slide 32: Strategy Summary
Strategy Summary GW&K ESG Bond Fund Proprietary credit analysis focuses on exploitable risk-adjusted relative value RIGOROUS RESEARCH opportunities Distinct quality bias among high yield bonds aims to capture additional yield QUALITY FOCUS with mitigated volatility Adds value to our investment proce
Slide 33: Appendix
SECTION 4 APPENDIX GWak | 33
Slide 34: Strategy Characteristics -- Option Adjusted Duration
Strategy Characteristics -- Option Adjusted Duration December 31, 2020 GW&K Enhanced Core Bond Strategy We seek to minimize portfolio volatility by limiting our duration to +/- 20% of the Aggregate Index's duration. HISTORICAL OPTION ADJUSTED DURATION 6.5 6.0 5.5 5.0 Years 4.5 4.0 3.5 3.0 2Q08 2Q0
Slide 35: Strategy Characteristics -- Sector Weights
December 31, 2020 Strategy Characteristics -- Sector Weights GW&K Enhanced Core Bond Strategy HISTORICAL SECTOR WEIGHTS (%) GW&K Enhanced Core Bond 100% 80% 60% 40% 20% 0% 2Q08 2Q08 4Q08 4Q08 2Q09 2Q09 4Q09 4Q09 2Q10 2Q10 4Q10 4Q10 2Q11 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 2Q16 4Q1
Slide 36: Strategy Characteristics -- Credit Quality
December 31, 2020 Strategy Characteristics -- Credit Quality GW&K Enhanced Core Bond Strategy HISTORICAL CREDIT QUALITY WEIGHTS (%) GW&K Enhanced Core Bond 100% 80% 60% 40% 20% 0% 2Q08 2Q08 4Q08 4Q08 2Q09 2Q09 4Q09 4Q09 2Q10 2Q10 4Q10 4Q10 2Q11 2Q11 4Q11 4Q11 2Q12 2Q12 4Q12 4Q12 2Q13 2Q13 4Q13 4Q13
Slide 37: Investment Professionals
December 31, 2020 Investment Professionals GW&K ESG Bond Fund HAROLD G. KOTLER, CFA NANCY G. ANGELL, CFA Chief Executive Officer | Chief Investment Officer Partner | Co-Director, Fixed Income Harold is one of the firm’s original partners and serves as GW&K’s chief executive officer and chief Nancy i
Slide 38: Investment Professionals
December 31, 2020 Investment Professionals GW&K ESG Bond Fund STEPHEN J. REPOFF, CFA CRISTINA G. DECOTIS Principal | Portfolio Manager Vice President | Senior Credit Analyst Stephen is a principal and a portfolio manager for all of GW&K's taxable fixed income strategies. In Cristi is a credit analys
Slide 39: Investment Professionals
December 31, 2020 Investment Professionals GW&K ESG Bond Fund CHRISTOPHER IOVANNA, CFA M. SEAMUS RYAN, CFA Vice President | Client Portfolio Manager Vice President | Director, Research Chris is an integral member of the taxable bond team working closely with our fixed income portfolio Seamus manages
Slide 40: Investment Professionals
December 31, 2020 Investment Professionals GW&K ESG Bond Fund NATHANIEL MCNAMEE, CFA MAYA MIRSON-TOHME, CFA Credit Analyst Credit Analyst Nate is a credit analyst with almost 10 years of investment experience covering both high yield and Maya is a member of the taxable bond team responsible for rese
Slide 41: Performance Disclosure: Core Bond ESG Strategy
PERFORMANCE DISCLOSURE Core Bond ESG Strategy Calendar Year Returns 3 Year Standard Deviation Composite Statistics Total GW&K Composite GW&K Composite Bloomberg Barclays GW&K Bloomberg Barclays Number of Internal Dispersion Composite Total Firm Year - Gross (%) - Net (%) Aggregate Index (%) Composit
Slide 42: Performance Disclosure: Enhanced Core Bond ESG Strategy
PERFORMANCE DISCLOSURE Enhanced Core Bond ESG Strategy Calendar Year Returns 3 Year Standard Deviation Composite Statistics Total GW&K Composite GW&K Composite Bloomberg Barclays GW&K Bloomberg Barclays Number of Internal Dispersion Composite Total Firm Year - Gross (%) - Net (%) Aggregate Index (%)
Slide 43: Disclosure
DISCLOSURE AMG GW&K ESG Bond Fund Applying the Fund's ESG investment criteria may result in the selection or exclusion of securities of certain issuers for reasons other than performance, and the Fund may underperform funds that do not utilize an ESG investment strategy. The application of this stra
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