Westwood Holdings Group Inc · NYSE:WHG
Westwood — 2010 SmidCap Conference
46 slides from Westwood's conference presentation, Jun 8, 2010
Slide 1: 2010 SmidCap Conference
Exhibit 99.1 2010 SmidCap Conference June 9, 2010 Brian O. Casey Susan M. Byrne President & Chairman & Chief Executive Officer Chief Investment Officer
Slide 2: Forward-Looking Statements
Forward –Looking Statements Statements in this presentation that are not purely historical facts, including statements about our expected future financial position, preliminary estimates, results of operations or cash flows, as well as other statements including words such as “anticipate,” “believe,
Slide 3: Agenda
Agenda I. Firm Overview II. Investment Process & Products III. Growth Opportunities IV. Financial Highlights V. Summary
Slide 4: Firm Overview
WESTWOOD Firm Overview
Slide 5: Westwood Overview
Westwood Overview • Asset management firm focused on Value & Income products • Serving institutional, private client and mutual fund investors since 1983 • Track record of providing strong long-term risk-adjusted returns • Client-centered culture; interests aligned with equity-based incentives • Pub
Slide 6: Product Distribution
Product Distribution TM • Separately managed portfolios • Enhanced Balanced asset • Capped expense ratios • Sub-Advisory allocation model • Institutional share class • Collective funds • Commingled funds • Defined contribution plans • Separately managed portfolios • Other institutions • A share clas
Slide 7: Investment Process & Products
Investment Process & Products
Slide 8: Overview of Investment Process
Overview of Investment Process • Idea generation Research • Proprietary fundamental research Analysts • Make buy & sell recommendations • Led by senior analysts 4 Research • Weekly due diligence meetings to review analyst recommendations Groups • Approved securities move to list of portfolio candida
Slide 9: Investment Performance vs. Benchmark
Investment Performance vs. Benchmark Our investment teams have delivered excess returns across Value & Income products 1-Year 3-Year 5-Year Since Performance through 3/31/10 Trailing Trailing Trailing Inception LargeCap Value(Inception: 1/1/87) 42.2% -3.0% 4.7% 11.9% Russell 1000 Value 53.6% -7.3% 1
Slide 10: Low-Quality Stocks Drove The 2009 Market Rally
Low-Quality Stocks Drove The 2009 Market Rally Performance Ranked by Quality Indices Performance Ranked by Characteristics C&D BETA Small Size B- Low Price Not Ranked B or Worse Low Price/Cash Flow Trailing Earnings Yield B Low PE to Growth B+ ROE (1-Yr Average) B+ or Better Return on Capital A- A+
Slide 11: After Beta Rallies, Quality & Value Typically Outperform
After Beta Rallies, Quality & Value Typically Outperform Top 50 stocks measured on FCF yield/ Beta/ ROE relative High Beta Performance relative to the S&P500 the average market 240% 160% 149% 200% 140% 160% 120% 100% 120% 80% 80% 59% 60% 40% 40% 29% 0% 22% 20% -40% 0% -80% 1/91 - 2/92 1/97 - 3/00 1/
Slide 12: 2003 Calendar Year Performance
2003 Calendar Year Performance Westwood LargeCap lagged in the last low quality rally as well... Past performance is not a guarantee of future returns. Performance provided is gross of management fees. Please see appendix for full performance disclosures. The disclosures provided are considered an i
Slide 13: LargeCap Value Portfolio Statistics
LargeCapValue Portfolio Statistics Five Years ended December 31, 2007 But, in the five year period starting in 2003, Westwood outperformed substantially as the recovery matured and risk appetites fell. Past performance is not a guarantee of future returns. Performance provided is gross of management
Slide 14: Growth Opportunities
WESTWOOD Growth Opportunities
Slide 15: Growth Opportunities
Growth Opportunities • Significant capacity remains in seasoned products • Subadvisory mandates o Access to broad distribution infrastructure & global market access o Support partner distribution network vs. building proprietary distribution network • WHG Funds o Three-year track record achieved in
Slide 16: Corporate Development Opportunities
Corporate Development Opportunities We will seek to augment organic growth by pursuing strategic opportunities • Mutual fund asset acquisition opportunities o PhiladelphiaFundacquisitionadded$52millionin assetsto WHGLargeCapValuefund in Q4 2009 o Incrementallyprofitable– minimalongoingcosts o Benefi
Slide 17: Significant Product Capacity Remains
Significant Product Capacity Remains Seasoned Products Assets Under Estimated (>3 year track record & Management Maximum Capacity Asset Growth Product >$100 Million in assets) As of 3/31/10 AUM Potential Inception LargeCap Value $5.5 billion $25 billion $19.5 billion 1987 SMidCap Value $2.8 billion
Slide 18: Seasoned Products & Capacity Available
Seasoned Products & Capacity Available EstimatedCapacity– asof March31,2010($ millions) $25,000 $3,000 $1,500 $10,000 $2,000 $1,500 100% 94% 90% 80% 70% 60% 50% 40% 30% 22% 20% 17% 15% 12% 10% 2% 0% LargeCap SMidCap SmallCap AllCap Value Income MLP Value Value Value Opportunity Current AUM Remaining
Slide 19: Subadvisory
Subadvisory Subadvisory opportunities– attractivemeansfor enhanceddistributionof scalableproducts • Access to established distribution channels • Generally lower average fee, but high profitability due to low incremental costs • Current Westwood Subadvisory mandates • UBS Pace • PictetFunds • Wilmin
Slide 20: Growth in Subadvisory Assets
Growth in Subadvisory Assets We have added 8 relationships and $895 million in Subadvisory assets since Q1 2008 Note: does not include Westwood Trust or GAMCO Westwood Funds assets Page 14
Slide 21: Pictet & Cie
Pictet& Cie • One of Europe’s oldest (founded in 1805) and largest ($383 B AUM) private banks • Selected Westwood to manage their first U.S. Value fund • 10-city European Marketing Tour with Pictet in Spring 2010 Cities Visited: Lugano, Milan, Paris, Zurich, Geneva, Lisbon, Madrid, Luxembourg, Frank
Slide 22: WHG Funds
WHG Funds WHG Funds • Five funds advised by Westwood Management • Strongassetgrowth – assetshavegrownto over$667millionfrom initialtwo fund launchin December2005 • Targeted primarily to institutional and defined contribution markets Growth in WHG Funds Assets Morningstar Ratings WHG SMidCap (WHGMX)
Slide 23: WHG Funds – Morningstar Ratings
WHG Funds – Morningstar Ratings Proportion of Assets Rated Four or Five Star (Asset Weighted) Source: JPMorgan U.S. Asset Managers – North America Equity Research dated April 14, 2010; Strategic Insight. WHG Funds AUM as of 4/30/10 Page 17
Slide 24: Westwood Trust
Westwood Trust • Consistent asset growth – 13% compound annual growth rate of assets over the last five years • Enhanced Balanced TM – Asset allocation model 9 asset classes managed by Westwood Management 4 asset classes managed by subadvisors – Consultative approach – Low cost, efficient solution –
Slide 25: Collective Funds
Collective Funds • Designed to accommodate large defined contribution plan sponsors • Westwood launched a SMidCap collective fund in Q3 2008 for a Fortune 100 client • Westwood has registered a LargeCap collectivefund • Barriers to entry higher due to cost and administrative complexity • Less crowde
Slide 26: Sovereign Wealth Funds
Sovereign Wealth Funds • One of the largest sources of global assets over the next five years • Westwood is taking a proactive, targeted approach with this opportunity Estimated assets of major sovereign wealth funds, 2007 and 2008 ($ Billion) 470-740 Abu Dhabi Investment Authority 500-875 Saudi Ara
Slide 27: Financial Highlights
WESTWOOD Financial Highlights
Slide 28: Growth in Assets Under Management
Growth in Assets Under Management Quarterly AUM Growth AUM Growth in a Challenging Environment • From Q1 2005 – Q1 2010, Westwood’s AUM has increased by 160%, or a compound annual growth 21% rate of • Over this same period, the level of the S&P 500 index has declined by 1% • From Q1 2005 – Q1 2010,
Slide 29: Revenue Growth
Revenue Growth Q1 2010 revenue was Westwood’s highest quarterly revenue excluding quarters with a performance fee Note: Excludes performance fees of $3.0 million, $80,000 and $8.6 million in Q4 2007, Q2 2008 and Q4 2008, respectively Page 22
Slide 30: Cash Earnings & Growing Cash Balances
Cash Earnings & Growing Cash Balances Liquid Cash & Investments as of March 31, 2010 are 105% higher than at year-end 2005 Note: 2007 and 2008 cash earnings include impact of performance fees of $3.0 million and $8.7 million, respectively; cash & investments excludes shares of Teton Advisors, Inc. P
Slide 31: WHG Quarterly Dividend History
WHG Quarterly Dividend History • We seek to share excess cash with stockholders • High GAAP payout ratio due to significant free cash flow generation • 3.7% yield as of June 2, 2010 close at $1.32 annualized dividend rate Page 24
Slide 32: WHG Stock Performance vs. NYSE Listed Companies
WHG Stock Performance vs. NYSE Listed Companies as of 3/31/10 Top Performer 338.0% Top Performer 63.2% Top Performer 157.0% Bottom Performer -24.3% Bottom Performer -77.4% Bottom Performer -74.6% 1-Year Percentile 3-Year Percentile 5-Year Percentile WHG (2.76)% 96 78.00% 4 145.56% 6 Russell 2000 62.
Slide 33: DeMarche 100 Best Companies in the United States
DeMarche100 Best Companies in the United States DeMarcheAssociates Names Westwood Holdings Group, Inc. Among “100 Best” Companies August 26, 2009 Westwood Holdings Group, Inc. has been named one of the “100 Best Companies in the United States”by DeMarcheAssociates, Inc., a leading U.S. investment re
Slide 34: Summary
WESTWOOD Summary
Slide 35: Summary of Strategic Priorities
Summary of Strategic Priorities Ongoing Priorities • Serve clients attentively • Generate competitive investment performance • Service consultant relationships • Leverage referral sources at Westwood Trust • Increase visibility of WHG stock Near Term Priorities • Match manufacturing capability with
Slide 36: www.westwoodgroup.com
www.westwoodgroup.com 200CrescentCourt Suite1200 Dallas,Texas 75201 T. 214.756.6900
Slide 37: Disclosures
WESTWOOD Disclosures
Slide 38: Cash Earnings Reconciliation
Cash Earnings Reconciliation Cash Earnings Reconciliation ($ thousands) 2005 2006 2007 2008 2009 Q1 2010 GAAP net income $ 3,636 $ 4,508 $ 7,944 $ 10,543 $ 7,895 $ 2,933 Add: Restricted stock expense 2,114 4,500 5,316 6,735 7,666 1,891 Add: Stock option expense 250 126 - - - - Add: Intangible amorti
Slide 39: LargeCap Value Disclosure Information
LargeCapValue Disclosure Information PERFORMANCE RESULTS: LARGECAP EQUITY COMPOSITE LARGECAP EQUITY LARGECAP EQUITY January 1, 1999 through March 31, 2010 COMPOSITE RETURNS COMPOSITE RETURNS Reporting Currency: USD Creation Date: January 1994 Gross of Net of Russell 1000 S&P Gross of Net of Russell
Slide 40: SMidCap Value Disclosure Information
SMidCapValue Disclosure Information* PERFORMANCE RESULTS: SMIDCAP COMPOSITE SMIDCAP EQUITY January 1, 1998 through March 31, 2010 COMPOSITE RETURNS Reporting Currency: USD Creation Date: July 1997 Russell Gross of Net of Russell 2500 Percentage Fees Fees 2500 Value Gross of Net of Total Assets Perce
Slide 41: SmallCap Value Disclosure Information
SmallCapValue Disclosure Information PERFORMANCE RESULTS: SMALLCAP VALUE COMPOSITE January 1, 2004 through March 31, 2010 SMALLCAP VALUE Reporting Currency: USD Creation Date: January 2004 COMPOSITE RETURNS Percentage Gross of Net of Russell Gross Net of Total Assets Percentage of Non-Fee Fees Fees
Slide 42: AllCap Value Disclosure Information
AllCapValue Disclosure Information PERFORMANCE RESULTS: ALLCAP VALUE COMPOSITE ALLCAP VALUE July 1, 2002 through March 31, 2010 Reporting Currency: USD Creation Date: July 2002 COMPOSITE RETURNS Gross of Net of Fees Fees Russell 3000 Value Gross Net of Total Assets Percentage of Fees Fees Russell Nu
Slide 43: Income Opportunity Disclosure Information
Income Opportunity Disclosure Information PERFORMANCE RESULTS: INCOME OPPORTUNITY INCOME OPPORTUNITY January 1, 2003 through March 31, 2010 COMPOSITE RETURNS Reporting Currency: USD Creation Date: January 2003 Gross Net of 10 Yr Treas of Fees Fees S&P 500 Nareit 3 Mo T-Bill Note Benchmark¹ Total Gro
Slide 44: Fixed Income Disclosure Information
Fixed Income Disclosure Information FIXED INCOME FIXED INCOME PERFORMANCE RESULTS: FIXED INCOME COMPOSITE COMPOSITE RETURNS COMPOSITE RETURNS January 1, 1999 through March 31, 2010 Reporting Currency: USD Creation Date: January 1994 Gross of Net of Gross of Net of Fees Fees BCGC Fees Fees BCGC ANNUA
Slide 45: Balanced Disclosure Information
Balanced Disclosure Information PERFORMANCE RESULTS: BALANCED COMPOSITE BALANCED BALANCED January 1, 1999 through March 31, 2010 COMPOSITE RETURNS COMPOSITE RETURNS Reporting Currency: USD Creation Date: January 1994 Gross of Net of 60% S&P500 / Gross of Net of 60% S&P500 / Fees Fees 40% BCG/C Fees
Slide 46: Morningstar Disclaimer
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