PUTTING THE PIECES TOGETHER...more than ever by the challenge of putting together the pieces in the...

2014 | ANNUAL REPORT

PUTTING THE PIECES TOGETHER

The Pleasure of a Puzzle

The first jigsaw puzzle was produced in the 1760s by John Spilsbury, a London cartographer, to help British children learn their geography. Spilsbury mounted one of his maps on a sheet of hardwood and cut around the borders of the countries using a fine-bladed saw. The challenge for the children was to accurately reconstruct the map.

In 1880, what had previously been known as “dissections” for children came to be known as jigsaw puzzles. Puzzles for adults emerged around 1900 and, by the onset

of the Great Depression, a full-blown craze was in progress in the U.S., according to Anne D. Williams, author of The Jigsaw Puzzle: Piecing Together a History. The New York Times captured the source of the mania at the time:

“The jig-saw appeals to the creative sense… A man starts placing it together and soon finds that he is building something, that something is growing under his eyes by the labor of his hands… He is venturing into uncharted seas, seeking the known from the unknown.”

As we reflect on our progress in 2014, we are inspired more than ever by the challenge of putting together the pieces in the complex puzzles that we face. How to

best serve clients today and five, 10 and 20 years from now? How to structure our firm to remain singularly focused on the interests of our clients? How to grow and develop our team while maintaining our client-first culture? And how to help the communities in which we work and live?

We recognize how difficult these puzzles are, and we know that some puzzles will shift and morph before we can solve them. We present this year’s annual report to show some of the progress we have made in putting the pieces together for our clients, shareholders, colleagues and communities.

Brown Advisory 2014 Annual Report ||| Putting The Pieces Together 1

Terry Beaty Private Client Portfolio Manager

“In 2007, we decided to combine our firm, Beaty Haynes, with Brown Advisory. We were reassured by the common focus of the two firms on serving clients, and we were impressed by Brown Advisory’s breadth of capabilities, especially in the area of alternative investments. Over time, these types of investments have proven to be valuable tools for clients.”

Sheryl Zhou, Ph.D. Equity Research Analyst

“As research analysts, we are flooded with data every day. Our most important job is to piece together the relevant information and ignore the noise. Then we must collaborate and challenge each other in order to make the best decisions that we can.”

John Poulton Strategic Advisor

“For many families that we work with, the advice that we provide—structuring and managing their assets, as well as navigating retirement, family changes, business succession and other turning points in their lives—helps clients make good decisions that matter as much to them as the investment performance we generate.”

Logie Fitzwilliams Head of International Business

“We opened a London office in 2008 and today look after institutional clients in more than 30 countries. Initially attracted by our U.S. equity strategies, our clients asked us to manage global strategies, which we are excited to launch this year. In 2012, we also created an international private client team to manage portfolios for families outside the U.S. Our personalized approach has been extremely well received in the U.K. and we are looking forward to expanding the team this year.”

2 Brown Advisory 2014 Annual Report ||| Putting The Pieces Together


Table of Contents

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Introduction to Brown Advisory..........................Letter from the President & CEO; Our Clients; Our Mission;

Our Culture

Our Clients........................................................2014 Reinvestments; Balanced Portfolios; Single Strategies

Our Shareholders............................................Director Spotlight; Boards of Directors

Our Colleagues................................................Employee of the Year; Promotions; Mentoring

Our Communities...........................................Organizations Our Colleagues Support

Tomorrow...........................................................Looking Forward

Putting the Pieces Together for:

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Letter from the President and CEO

Dear Shareholders:

We are pleased to share with you the 2014 annual report for Brown Advisory. The purpose of this report is to provide an update on the firm’s performance as a business and its financial condition. As important, we use each year’s annual report to continue the dialogue with our clients, our shareholders and our colleagues about the mission of Brown Advisory and the steps that we are taking to strengthen further our team, infrastructure and the client experience.

We believe that we made great progress at Brown Advisory during 2014 in pursuit of our ongoing mission to build an investment and strategic advisory firm with one purpose—to deliver to our clients first-rate investment performance, creative and thoughtful strategic advice, and the highest level of client service. We ended the year with the privilege of advising on $51.7 billion in client assets, an increase of 10.3% over the prior year. But we look beyond our client asset number to gauge the health of the firm. Here are a few other data points that help to convey where we spent much of our time, energy and resources:

■ Our client base remains very stable with retention rates of 99.4% in our private client business and 96.5% in our institutional client business.

■ We welcomed 87 new colleagues to the Brown Advisory team in 2014. These additions increased our “bench strength” throughout the firm but also brought notable expertise. Professionals such as Stephanie McCormick in our private client portfolio management group, John Devine and Stuart Dorsett

in our strategic advisory group, and Mick Dillon on our equity investment team, all reaffirm our ability to attract leading experts. Notably, we did not suffer the loss of any colleague choosing to leave our firm during the year.

■ Our new business is substantial and is the result of broad-based activity throughout the firm. Total new client assets in 2014 were $8.4 billion, representing $2.9 billion in private client and institutional balanced account assignments (we refer to the latter as outsourced chief investment officer or OCIO clients) and $5.5 billion in single-strategy assignments for institutional clients. Flows net of withdrawals by private and OCIO clients were $2.0 billion, and additions to accounts from existing clients were $2.1 billion or 25% of new client assets. By comparison, according to Goldman Sachs, the average organic growth rate in 2014 for the asset management industry was -0.1%.

■ On the institutional side of the firm, investment styles in which we have made significant investments in recent years, such as Flexible Equity and Small-Cap Value, experienced healthy inflows of client assets. Even asset classes in less favored parts of the markets won meaningful new business.

■ We are fortunate to work with dynamic, interesting and thoughtful private and institutional clients in all 50 U.S. states and in 34 countries and territories. These clients add meaningfully to the Brown Advisory network by bringing to our firm helpful insight from their experiences. Many of our clients are leaders in industry, health care and education and add perspectives that benefit all of our clients.

■ Our interest in listening to our clients and other


voices and opinions was again manifested in our Navigating Our World (NOW) client conference. The fourth of these biennial conferences was held in Washington, D.C., in April. While NOW 2014 is months behind us, its impact remains fresh and reflects our effort to listen to experts from around the world on a provocative agenda of issues.

■ We continued to demonstrate healthy progress toward our financial goals. Revenues for 2014 were $220.6 million, an increase of 23.6% over 2013 revenues of $178.5 million. We have now experienced cumulative annualized revenue growth of 18% for the 17 years that we have been a private and independent firm.

We are proud of our colleagues for achieving these results and grateful for the support of our clients and shareholders. But, frankly, we recognize that we face many challenges ahead—known and unknown—and must think hard about how to succeed on behalf of our

clients and the firm in an uncertain future. We discuss regularly the dangers of developing overconfidence based on our past results. Instead, we know that only by constantly pushing ourselves to think and plan for the future do we, as individuals, have a chance to help our clients and the firm.

The theme for this year’s annual report—the “puzzles” confronting Brown Advisory—was developed at our recent annual planning session. Since 1998, when Brown Advisory became an independent firm, we have regularly set aside time to force ourselves to take a fresh and intense look at ourselves. What are the challenges before us? Do we have the resources necessary to deliver results to our clients? Do we understand what it takes to be successful? We know well that to be valuable, these planning sessions must take us out of our comfort zone and push each of us to look in the mirror and ask: What can I do differently in order to continue to improve? This year, we organized our


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planning around the idea that we face two puzzles, one relating to our clients and one to the firm.

The first puzzle involves looking back on the last five years or so and thinking about which puzzle pieces will be necessary to be successful moving forward. Many investors have seen their portfolios roughly double in that time period, achieving annualized returns for balanced accounts of 10% to 12%. Few people in the immediate aftermath of the global financial crisis would have predicted such an achievement. But the passage of time—recall that many people thought it would take five to seven years for portfolios just to recover their losses—and thoughtful and patient commitment to reinvesting in the financial markets have clearly paid off. Investors who emphasized U.S. equity markets over non-U.S., and small-cap U.S. companies over large caps, who accessed more illiquid investments in alternative asset classes such as private equity and real estate, and who de-emphasized exposure to foreign currencies and emerging markets, were especially well rewarded.

But we must be frank with ourselves. The best investment strategies for the next five years might not be the ones that have been helpful to clients over the

last five years. Different puzzle pieces, and different concentrations or allocations, will be necessary. With more positive data on employment and energy costs, and borrowing costs still very low, the world looks a lot different today than just a few years ago. But it is far from certain that we will have the luxury of riding a wave of continued economic growth in the U.S. Signs of deflation abroad, unemployment among Americans without college degrees, and structural challenges to healthy economic activity abroad are major concerns. We are also very well aware that some of what impacts our ability to be successful investors will be things that we cannot predict, much less control. After all, consider that just one year ago, few people thought we would be seeing oil selling at $50 per barrel.

What will it take to be able to look back five years from now and conclude that we have been successful investors on behalf of our clients? This puzzle will require consideration of many different asset classes and investment strategies. It will also require us to be really tough on ourselves and ask which investments should we make because we think, starting from ground zero, we have a chance of being successful. In other words, just because something has worked in the


THE IMPORTANCE OF GROWTHOur firm’s growth provides us the resources to reinvest to serve our clients better. Over the past 10 years, our average asset growth was 26% and revenue growth was 20%.

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much of the second puzzle. As discussed in past annual reports, important components of Brown Advisory include: (i) our relentless focus on meeting our clients’ objectives without the conflicts faced by other firms in our industry; (ii) our use of equity to attract and retain talented investment, strategic advisory and client-service professionals; (iii) our commitment to a team-oriented and “flat” organizational structure, which we believe is conducive to asking the hard questions of each other that are necessary to make good investment decisions; and (iv) our embrace of outside views as evidenced by our independent boards of directors and outside shareholders, many of whom are successful investors in the U.S. and overseas.

We believe strongly that these components place us in a very good position to design investment portfolios and deliver thoughtful strategic advice for our clients that meet or exceed their objectives. Other puzzle pieces include reinvesting in the firm, by recruiting new colleagues with demonstrated skills, by deepening our internal and external manager research teams, and by developing innovative technology systems, such as TouchPoint, that enhance the client experience. We discuss in this annual report some of the areas of focus for new investments in 2015 and beyond.

It is important to us that we share with you our thoughts on planning for the future and the use of the “puzzle” theme in this year’s planning process. We want you to know that there is nothing that we take for granted. Each year, we commit to you to do what is necessary to earn the support of our clients. We know that only by pushing ourselves hard will we develop and connect the puzzle pieces necessary to be successful.

Thank you very much for your support. We look forward to tackling the challenges of the future with you.

Sincerely,

past, and is well known, does not mean that it will fare as well in the future.

The second puzzle is as important as the first. In order to be successful investors on behalf of our clients—i.e., to solve the first puzzle—we must answer several key questions: How should the firm be structured? Where should we focus our energies? Where do we need to make investments in people and technology, and where do we need to make some tough choices about areas of the firm that are not meeting the high bar set by our clients’ needs and expectations? Fortunately, we believe that we have many of the pieces in place to complete


“Solving the puzzle of what clients will need going forward will require us to consider many different asset classes and investment strategies.”


FOR THE PAST THREE YEARS, WE HAVE EXPERIENCED A CLIENT RETENTION RATE OF 98% PER YEAR.

Institutional Investors and Nonprofits

We manage balanced portfolios for a variety of inspiring people, including CEOs, entrepreneurs, political and civic leaders, scholars, athletes, artists, performers and others. In some relationships, we work with just one individual, while in others we advise multiple family members across generations, depending on the desires of the client. Importantly, we invest alongside our clients, with 9% of total private client assets held by Brown Advisory employees and their families.

Private Clients Intermediaries and Financial Advisors

We make our strategies available to financial advisors and other investment professionals who share our investment philosophy. We provide our strategies in whichever investment vehicle (separately managed accounts, mutual funds, UCITS funds and subadvisory) and on whatever platforms (broker-dealers, private banks, financial supermarkets, recordkeepers and others) they need. Instead of employing a high-volume, wholesaling model, we focus on building long-term relationships with select professional investors and intermediaries around the world.

We manage single-strategy portfolios for some of the largest and most discerning pension plans, banks and insurance companies in the world—and we seek to maintain close relationships with the consultants who advise them. We also oversee entire portfolios in our capacity as an outsourced chief investment officer (OCIO) for a variety of foundations, endowments and other nonprofits around the U.S. Our professionals personally serve nearly 400 nonprofits, which gives us an understanding of both the investment and governance challenges facing these organizations.

OUR CLIENTS

We are humbled by the quality of the people and institutions that we have the opportunity to serve. We work with a variety of clients in all

50 U.S. states and in 34 countries and territories around the world.

OUR MISSION


David SchusterPortfolio Manager

Whether we manage an entire portfolio or a single strategy, we aspire to generate first-class investment performance. We understand that to meet clients’ needs, we need to generate attractive investment results over the long term.

Performance

Brigid PetersonStrategic Advisor

We strive to build long-term relationships with clients and provide proactive advice to help them make sound decisions. We aspire to be the first call clients make when they need to ask someone, “What do you think I should do?”

Advice

Derrick LeakRelationship Administrator

We aim to serve our clients in the manner and time frame they wish, with personalized attention, clear communication and the utmost in confidentiality.

Service

Our mission is to make a material and positive difference in the lives of our clients by delivering a combination of first-class performance, strategic advice and the highest level of service. We make every effort to deliver those benefits in the most thoughtful way we can.

We appreciate both definitions of the word thoughtful: reasoned or insightful, as well as considerate or helpful. We think that the greatest opportunity to help our clients is to bring together the left- and right-brain aspects of thoughtfulness to their financial affairs.

OUR CULTURE


THOUGHTFUL INVESTING

PERFORMANCE

ADVICE

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PUTTING CLIENTS FIRST

This principle pervades everything we do, not only because it is good for our business, but also because we truly care about our clients. We feel privileged to work with them, as they do impressive work: raising successful families, building leading businesses, guiding important nonprofits, overseeing pensions that help people retire with financial security, and otherwise making a difference in the world. We take personal satisfaction in helping our clients succeed. Only if our clients are successful will we be. That is Brown Advisory in a nutshell.


BEING AN INVESTMENT FIRM FIRST

As investors, first and foremost, we know that delivering compelling investment results is paramount to our success. Our clients deserve and expect the long-term performance needed to achieve their goals.

OUR BELIEF IN COMMUNICATION

To rapidly adapt to clients’ needs, we maintain a flat organizational structure, not a rigid bureaucracy. That arrangement makes it particularly important for us all to communicate effectively with each other and with clients, while maintaining the highest standards of information security and privacy protection.

EMBRACING OUTSIDE VIEWS

A key ingredient in making sound decisions for our clients is to surround ourselves with intelligent, experienced people—directors, outside shareholders, clients, other investors and leaders in their fields. We encourage them to question our thought process, and we learn from their experience.

THE IMPORTANCE OF OUR PEOPLE

Every investment firm tries to attract the most qualified professionals, but we place a premium on selecting only those individuals who bring specific skills to the firm in addition to fitting our culture. To field the best team possible, we push each other to develop new skills and expand our knowledge, and we regularly challenge people to switch roles, departments or geographies.

WORKING AS A TEAM

We believe that decisions are best made with input from a group and in the light of each other’s scrutiny, instead of alone and in the dark. We structure our organization and follow processes that force us to collaborate for the benefit of clients. Through the long tenures of our employees, we develop the mutual trust that allows people to speak their minds freely in pursuit of insight.

PROTECTING OUR EQUITY STRUCTURE

We award equity to every employee of the firm, which promotes both a sense of shared purpose and the mentality of owners of the firm, as opposed to just employees. We are and will remain a privately owned company so that we can focus on meeting our clients’ needs rather than being distracted by a preoccupation with quarterly results.

THE IMPORTANCE OF GROWTH

We seek to grow steadily over time in order to provide the resources to serve our clients better, including a broad range of investment capabilities, a large research team and new technology to enhance our services. To attract and retain the best people over time, we need to be a growing firm with expanding opportunities for our employees.

BEING DISRUPTIVE

We are not a commercial or investment bank, and we refuse to act like one. We are entrepreneurial and independent in spirit. Our instinct is to find out which way the “herd” is going and to develop our own opinion of which way to go. In our pursuit of staying relevant to clients, we are not afraid to be different.

CONTINUING TO REINVEST

To serve our clients consistently over future generations, we must continually reinvest and endeavor to build a financially strong, diversified business that will endure challenging times. Moreover, we need to adapt to a changing world by successfully anticipating our clients’ needs and evolving our business and infrastructure accordingly.

Putting The Pieces TogetherFor Our Clients

We understand that for us to stay relevant and address the evolving needs of our clients, we must continually reinvest in our business. We strive to make improvements each year across the firm; our firm’s growth and profitability position us well to make these investments. Here are five capabilities to which we committed significant resources in 2014.

1. Global Equity

In 2014, after careful planning and deliberation, we began the process of expanding our team to build a truly global equity investment platform. We are doing this for two primary reasons. First, to deepen our equity research: Understanding companies in today’s globalized world increasingly requires a view from outside the U.S. Second, to respond to client demand: Institutional and private clients are increasingly seeking global strategies, as opposed to searching for separate managers for U.S., developed international and emerging markets.

The first step in the process was hiring Portfolio Manager Mick Dillon in October. An Australian by birth, Mick joined Brown Advisory from HSBC, where he was co-head of Asian equities based in Hong Kong. Mick relocated to our London office, where he will add to our existing equity research team with several key hires in 2015. “Our new global strategies will follow the same investment philosophy as Brown Advisory’s U.S. equity strategies—concentrated portfolios based on fundamental, bottom-up research,” says Mick. “We are taking great pains to make sure that we maintain one integrated global research team, so that these new analysts benefit all of our equity strategies.”

AREAS OF REINVESTMENT IN 2014

Mick Dillon, CFAGlobal Equity Portfolio Manager


2. Fixed Income

After 30 years of falling interest rates, fixed income investing in the future will be particularly challenging. With the Federal Reserve expected to raise interest rates over the coming years, bonds may not be able to provide the combination of stability, liquidity and income that clients need in their portfolios. At Brown Advisory, we are anticipating this challenge by expanding our capabilities so that we have more flexibility in managing fixed income portfolios.

In 2014, we hired Credit Analyst Rob McWilliam, formerly of the U.S. Treasury. We welcomed Rob Snyder to work with Tom Graff, head of fixed income, and co-manage our unconstrained bond strategy, the Strategic Bond Fund. Rob Snyder says, “In this fund, we have the flexibility to be very different from our benchmark, by hedging interest rate risk using derivatives and other tools, and by concentrating our portfolio in high-conviction credit positions.” We will grow our fixed income team further in 2015, adding resources in high yield, municipals and structured securities, all with the aim of finding value for clients.

3. Direct Private Investments

Many of our private clients built their own businesses and thus appreciate the rewards that come from growing and investing in private enterprises. That is why in March 2014 we hired Brian Dettmann to help us launch our Direct Private Investments program, which invests in middle-market private companies, an area that we think offers attractive opportunities. Brian says, “Applying our knowledge of the public markets to private companies should help us make better investments overall.” The program differs from traditional private equity funds, which typically have a 10-year fund life, because it gives us the flexibility to optimize the holding period of our investments.

AREAS OF REINVESTMENT IN 2014


Brian DettmannCo-Head of Private Equity

Rob SnyderStrategic Bond Portfolio Manager

Rob McWilliamFixed Income Credit Analyst

4. Infrastructure

We welcomed two senior professionals to our team to help build the human and technical infrastructure to support our client-facing colleagues better. First, in August 2014, Christine Baranowski joined us from USAA in Texas to lead our human resources efforts. “As a firm, our greatest challenge is to select the right people and to surround them with programs that encourage the behaviors that reflect our culture,” says Christine. She has already made an impact, streamlining our employee performance review process and emphasizing meaningful dialogue between managers and employees rather than quantitative ratings.

Second, at the end of the year, Chief Technology Officer Brian Cobb decided to join us from Capital One, where he managed enterprise technology support across all of the firm’s businesses. “In order to best serve our clients, we need to stay ahead of the curve by innovating and leveraging emerging technologies,” says Brian. “A firm of Brown Advisory’s size can be very nimble technologically, and we can use that as a strategic advantage.” To that point, Brian has already amassed a priority list of more than 30 projects. Galileo, a project to build our client-service platform, is one of our top priorities. (See pg. 27 for more detail.)

5. Alternative Investments Advisory

Another example of the power of listening to clients is our CDK|Brown Advisory business in New York. Founded in 2002, CDK started out as a funds-of-hedge-funds business. We began investing client assets in CDK funds in 2006, and in 2013 the CDK business joined Brown Advisory. Over the past few years, CDK|Brown Advisory has expanded from the funds-of-hedge-funds business to offering open-architecture alternative investments and select long-only funds from the most sought-after managers. The team has built an impressive advisory business, helping private clients and institutions manage balanced portfolios. “As we talked to clients about our funds of funds, it became clear that what some clients really need is holistic portfolio advice,” says Portfolio Manager Jordan Wruble. In 2014, the group also hired three team members in research and client service.

Brian CobbChief Technology Officer

Jordan Wruble CDK|Brown Advisory Portfolio Manager

Christine BaranowskiChief Human Resources Officer


Your team can help you upload these papers to your My Documents section

See all of your investments—at Brown Advisory or elsewhere—in a single consolidated view

Ask your client team to aggregate all of your outside accounts on TouchPoint

Monitor the Transactions pages for unauthorized activity

Securely store and access wills, trust agreements and other tax documents from anywhere in the world

Protect yourself from identity fraud and data breaches

INVESTING IN INNOVATIONInvestors have very different information needs today from 10 or 20 years ago. We demand access to our account information—immediately, transparently, securely and on whatever mobile device we happen to be holding.

In 2011, the recognition of those changing needs inspired us to launch a project to build a world-class client web portal, a site that we named TouchPoint. At the time, the TouchPoint project represented the highest-budgeted technology project Brown Advisory had ever undertaken.

TouchPoint went live in late 2012, and in the two-plus years since, we have deployed 17 releases of the site, all of them directly informed by client feedback. In 2014, we introduced our institutional and international private clients to TouchPoint. Users of the site are enthusiastic and have embraced many of the site’s features, as noted in the box below. (If you have not yet accessed TouchPoint, please contact your client team for login information or go to https://touchpoint.brownadvisory.com and click “Take a Tour.”)

Gain a clearer understanding of your long-term investments in private equity, hedge funds and other asset classes

See Portfolio Manager commentary and performance attribution (institutional investors only)

Access the new Strategy Commentaries tab, and go to My Portfolio/Performance/Attribution

Visit the Private Equity pages to see your committed capital and adjusted fair value

TOP WAYS CLIENTS USE TOUCHPOINT


You Can Use TouchPoint To… How To Do It

INVESTING IN SUSTAINABILITY

Sustainable investing means many different things to different clients. For some it means directing their capital toward the creation of a healthier and safer society. For others it means ensuring that their values are reflected in their investment portfolios. And for still others it means identifying specific environmental, social or governance (ESG) risks and opportunities that can help drive long-term portfolio returns. For us, sustainable investing is a core value of our firm, and our commitment to it covers these nuances.

We signed the U.N. Principles for Responsible Investment in April 2014, and through that organization we will report our progress in the coming years on our efforts to further integrate ESG research into our investment decisions. We think that in five or 10 years, ESG research will be widely recognized as a standard investment consideration by all investment managers, as essential a part of security analysis as scrutinizing a company’s financial statements.

Dune ThornePortfolio Manager and Head of Boston Office

David Powell, CFACo-Portfolio ManagerLarge-Cap Sustainable Growth

Karina Funk, CFACo-Portfolio ManagerLarge-Cap Sustainable Growth


Sustainable Investing to Reflect Client Values

We can help you reflect specific issues, values or beliefs in your portfolio, in whatever form you wish that to take. Our professionals are well versed in helping our clients clearly articulate their sustainability goals and requirements, and then putting in place a comprehensive plan to achieve those goals—whether that includes philanthropic strategies or “impact” investments that offer measurable financial and societal returns.

Sustainable Investing to Drive Performance

Our Large-Cap Sustainable Growth strategy is predicated on finding companies with “environmental business advantages” (EBA) that can drive outsized investment results. The portfolio managers use a robust analytical process to assess sustainability from an opportunity and risk perspective, and to identify companies whose EBA is driving greater revenues, lower costs and enhanced franchise values.


BALANCED PORTFOLIOS

Chris Bartlett, Head of Private Client, and Jack Cavanaugh, Chief Operating Officer of Private Client

A TAILORED APPROACH

The needs of each of our clients are different, and one of our most important tasks is to understand and appreciate those differences. Only then are we in a position to customize appropriately our investment advice to each client’s circumstances and objectives.

Each private client requires a tailored set of specific investment portfolios, trusts, philanthropic structures and client services. Each foundation, endowment and nonprofit organization needs a customized portfolio to address its particular needs.

As we come to know a family or a nonprofit institution through our disciplined discovery process, we discuss internally what we need to deliver to that client, and who on our team would be most capable of serving them. We handpick the team that best suits each client, no matter where those professionals may sit.

Intense focus on identifying client needs, emphasis on collaboration, a culture of shared ownership and accountability—they all come together in our process for making sure that the right people are working on behalf of each of our clients.

Winner of the 2015 Best Private Wealth Manager (Over $5 Billion) from Private Asset Management

Brien WhitePortfolio Manager and Head of Carolinas Office

Trey Tune Private Client Portfolio Manager

Stuart DorsettStrategic Advisor


Building Capabilities

Brown Advisory builds offices based on the character and talents of people, not on market studies. The story of how we built our presence in the Carolinas is perhaps the best example.

In 2010, the firm was introduced to Brien White, a thoughtful private client portfolio manager in Chapel Hill, N.C., who was eager to help build the firm’s business. It was quickly apparent that he was both a talented investor and a cultural fit who could help Brown Advisory with our mission to serve clients in the Carolinas. Brien says, “The original plan was for us to move to D.C., but before I knew it I was picking carpet colors” for a new office in Chapel Hill. CEO Mike Hankin advised him to stay focused on what clients would need “five years out” and to find the people and resources to meet those needs. “From day one, we reached across offices and around the firm to find the particular expertise our clients need,” says Brien.

In 2014, two new partners joined our Carolinas team: Portfolio Manager Trey Tune and Strategic Advisor Stuart Dorsett. Trey joined us from Brown Brothers Harriman, where he managed private client portfolios, and Stuart spent 29 years building a successful law practice in North Carolina. “Trey and Stuart bring tremendous knowledge to the firm,” says Brien. “The terrific part about our structure is that clients around the U.S. and the world will benefit from the insights Trey and Stuart offer.”

ONE TEAM, MANY OPPORTUNITIES

One of the puzzle pieces that is most important to helping clients is equipping our advisers with the freedom, the support and the resources to find whatever manager or investment opportunity best fits the client’s objectives. Frankly, we struggle with the investment industry’s attempt to label this effort with all-encompassing terms such as “open architec-ture” or “best of breed.” We have been an open architecture firm since our inception. Of course, it was known only as doing what is common sense—finding the best managers that fit our clients’ needs. In our early days, no one knew it by any single term such as open architecture. Over the years, we have built a team to support our interest in building cus-tomized portfolios. Today, our Open Architecture and Asset Allocation (OAAA) team is led by Head of Investments Paul Chew and Director of External Manager Research Sid Ahl.


BALANCED PORTFOLIOS: PERFORMANCE

Foreground: Peter Whitney, OAAA Associate Analyst,

Taylor Graff, CFA, OAAA Research Analyst, and James Stierhoff, OAAA Associate Analyst

The OAAA team’s name offers a clear signal about both its members’ job responsibilities and our investment philosophy when it comes to portfolio construction. Many investment firms view asset allocation and manager selection as separate, but we believe that the two endeavors are inextricably linked. After all, uncovering investment opportunities is only helpful to clients if we also identify the specific manager to exploit each opportunity. Therefore, we turn to a single team of investment experts within the firm to provide asset allocation guidance based on the specific opportunities they see and to help us identify investment managers around the world that best capitalize on those opportunities. The OAAA team meets at least quarterly with the 50 managers with which we invest and researches at least 150 more managers for possible future investment.

“Over the last five years, our taxable balanced portfolios have beaten the blended benchmark by more than a full percentage point a year.”

In 2014, a retired entrepreneur in his 70s decided to consolidate his investment accounts and chose Brown Advisory to oversee his $40 million portfolio. The man had “come from nothing,” in his own words,

and founded an advertising agency in North Carolina in his 30s that he had grown over the next three decades into one of the region’s most successful. When he was in his late 60s, he sold the business, establishing trusts to take care of his three adult children and growing number of grandchildren, and making a sizable donation to the environmental cause he supported. “When he came to us, his portfolio looked nothing like what you’d expect for a man in his 70s,” says Portfolio Manager Stephanie McCormick. He still had $20 million in a concentrated stock position from the sale of his business, he held $10 million in private equity investments he had accumulated along the way, and he had just $10 million, or a quarter of his portfolio, in liquid stocks and bonds.

Stephanie and the rest of the Brown Advisory team analyzed his holdings. “Our first instinct was to try to free up more liquidity for him, but he did not want to do that,” says Stephanie. “He told us that he had already taken care of his family and the nonprofits he supported, and he thought of his concentrated stock and private equity as his money to take risk with.” While some advisors might simply ignore the illiquid portion of the portfolio over which they had no influence, Stephanie and team built a diversified liquid allocation for the $10 million that balanced stability and higher returns across the client’s entire portfolio. “Clients are all different, so you have to build each portfolio from scratch, addressing each client’s needs,” says Stephanie.

Note: Identifiable details of these case studies have been modified to maintain the privacy of the clients profiled.

Stephanie McCormickPrivate Client

Portfolio Manager


CASE STUDY: Suiting a Risk Taker

By Paul Chew, CFA Head of Investments

ASSET ALLOCATION: Interesting TimesThe business of asset allocation is always a challenge, but that was particularly true in 2014 as U.S. stocks and bonds continued their upward march together. Normally, a sustained rising stock market is the result of an improving economy, which pushes interest rates higher. So, usually, as stocks get more expensive, allocators can shift assets out of those riskier assets into somewhat safer—and higher yielding—bonds.

pointed to mounting challenges for Europe and Japan. Furthermore, the threat of a breakup of the European monetary union would be extremely negative for euro-denominated assets. Nevertheless, valuations were actually similar between U.S. and non-U.S. stocks, making U.S. equities far more favorable, given brighter economic prospects there. Since then, U.S. stocks outperformed international stocks 14.7% to 3.9% per year (S&P 500 vs. MSCI EAFE index).

3. Employ hedged U.S. strategies in place of long-only stock and bond strategies (June 30, 2012, to present). After several years of strong equity performance following the financial crisis, valuations in the stock market were less compelling than they had been. At the same time, 10-year Treasury yields broke through the 1.50% barrier, reducing the upside potential in bonds. Working with our CDK|Brown Advisory partners, we made two shifts in client portfolios. First, we moved some assets out of stocks and bonds and into our Hedged Equity strategy. That strategy has returned 11.1% a year since then, equaling the return of a 50/50 mix of long-only stocks and bonds (S&P 500 Index and Barclays Aggregate Index). Second, we moved additional assets out of long-only bonds and into hedged fixed income. That move has not yet proven additive to client returns, as our Hedged Fixed

Income has averaged just 1.1% a year, trailing the 2.2% of the Barclays Aggregate Bond Index.

4. Tilt U.S. stock portfolios toward value stocks and away from growth stocks (April 30, 2013, to present). We emphasized value over growth for two reasons. First, we thought there was unrecognized business growth within the value segment. Second, we felt that financial-services stocks represented a significant opportunity, particularly in a rising interest-rate environment. That move hurt performance a bit, as value stocks returned just 18.0% a year while growth stocks notched a 19.6% gain (using the Russell 1000® index).

5. Employ hedged emerging market stock strategy in place of long-only emerging market stock strategies (June 30, 2013, to present). In a hedging move similar to U.S. stocks and bonds, we relaunched our Hedged Emerging Markets Managers strategy in mid-2013. The objective was to help take some volatility out of the asset class in order to help clients stay fully invested over a market cycle. It worked, returning 3.4% a year, vs. 3.5% a year for the MSCI Emerging Markets Index, but with only half the volatility.

While not every tilt we make goes our way, it is gratifying that our efforts help our clients overall.

However, none of this was the case in 2014. The U.S. economy improved considerably by most measures, and the S&P 500 Index rose 13.7% for the year—while the 10-year U.S. Treasury bond yield fell from 3.03% at the end of 2013 to 2.17% a year later. So as stocks became more expensive over the year, bonds—the obvious alternative to stocks—did too. Fortunately, our Open Architecture and Asset Allocation team was able to help. Since September 2010, our asset allocation positioning has added 1.3% a year to client returns.

In 2014, we held five asset allocation tilts in client portfolios.

1. Favor U.S. stocks over U.S. bonds (Feb. 28, 2009, to present). During the global financial crisis, we were not alone in trying to take advantage of attractive equity valuations by shifting part of our U.S. allocations out of bonds and into stocks. Through the end of 2014, U.S. stocks have returned 21.8% a year (S&P 500 Index), while bonds gained 5.1% a year (Barclays Aggregate Bond Index).

2. Emphasize U.S. stocks over international equities (April 7, 2011, to present). As the euro crisis started to unfold, we felt that there was significantly greater risk in non-U.S. stocks than in U.S. stocks. This was due to the combination of excessive sovereign debt overseas as well as economic indicators that


MANAGER SELECTION:Capital IdeasThe year 2014 was an exciting one for our team, with the equity and hedge fund managers we recommended outperforming their benchmarks by 4 percentage points, on average. Looking across the approximately 50 external managers that we employ in client portfolios, we see that the excess returns generated by the winners we chose far surpassed the shortfalls of the poorer performers we selected.

Private EquityOur Private Equity Partners (PEP) program first launched in 2012 and is designed to create a more effective approach to private equity investing. By altering the typical over-diversified fund-of-funds model, we focus on a small but balanced number of high-quality underlying managers. As of the end of 2014, PEP I is marked at a 15.4% net internal rate of return (IRR) and 1.2x return on invested capital (ROIC), while PEP II (2013) has a 9.1% net IRR and 1.1x ROIC. Other highlights from the private equity platform in 2014 include a successful outcome in Silver Lake Partners III, which benefited from its notable investment in Alibaba, after the Chinese company completed the largest global initial public offering in history. On the new investment side, Glynn Emerging Opportunities Fund II participated in exciting, high-growth venture-backed companies Palantir, Dropbox and Redfin.—Jacob Hodes, Co-Head of Private Equity

an uncharacteristically poor year for one of our managers, Claren Road Credit Opportunities, which posted its first ever negative year of performance. Despite the difficult year, we remain as convinced as ever that our clients need a complement to traditional fixed income in such a low interest-rate environment. It is not time to give up on shorting bonds with yields at these levels.

Mutual funds. Our two largest open-architecture equity mutual fund investments are Wellington Strategic European Equity and Somerset Emerging Markets. Each outperformed its benchmark (MSCI Europe Index and MSCI Emerging Markets Index, respectively) by more than 1.0%, albeit in overseas markets that failed to keep pace with the U.S.

Long-only managers. Our largest long-only partnership investments showed impressive performance, with Silchester outperforming its benchmark (MSCI EAFE Index) by 3.5 percentage points. Viking Long Fund returned 15.8%, outperforming its global equity benchmark (MSCI World Index Local Currency) by 6.0 percentage points, and Tiger Global Long Opportunities rose 15.4%, outperforming the MSCI All Country World Index by 10.4 percentage points.

Hedge fund managers. Our hedge fund investments showed solid results, with quite strong performance from our Hedged Equity and Hedged Emerging Markets portfolios. The 9.6% return in Hedged Equity represented 7.3 percentage points of outperformance vs. our peers, according to the HFRI Equity Hedge Index. This was fueled in large part by the astounding year of Bill Ackman, whose Pershing Square hedge fund returned over 35% net to investors. Hedged Emerging Markets posted its second straight positive year (up 2.2%) despite negative performance for emerging markets equities. On the other hand, our Hedged Fixed Income strategy fell 3.0% in 2014, suffering from a surprising rally in fixed income, a lack of volatility in markets which limits trading opportunities, and


New managers. We gained access to four exceptional asset managers during the year. Lansdowne Developed Markets Long Only is a global equity fund managed out of London from a firm with which we have invested for over 10 years. ValueAct is an activist equity manager based out of San Francisco that has generated returns of 17% a year since its inception in November 2000, well above the S&P 500 Index’s 5% annual return. Macquarie Asia New Stars is a small-cap Asian equity manager based in Hong Kong for which we created a Brown Advisory mutual fund to give our taxable U.S. clients access. Finally, Viking Global Opportunities is a hybrid hedge fund/private equity fund strategy from a New York-based manager with which we have invested for years.

By Sid Ahl, CFA Director of External Manager

Research

“One of the challenges in advising clients is figuring

out how best to engage each family member on the

important topics. For example, some women prefer to

learn about financial issues in a trusted group setting,

so we have created our ‘A Women’s View’ educational

workshop series. Younger adults often engage better on

the social mission of a family’s portfolio, so that can be a

great way to pull them in. The trick is simply to figure out

how to make our team as useful to a family as possible.”

— Sandi Moffet, Strategic Advisor

MAKING SOUND DECISIONS

It is hard to ignore how complicated our lives have become. Many families wrestle with a long list of complex issues—some directly related to investments, others less so—that greatly affect their futures. Some of these issues—retirement, marriages, business succession and the disruptions that life springs on all of us—are emotionally charged, and navigating them successfully may ultimately matter more to families than their investment returns.

To help our private clients meet these important challenges, we seek to be proactive and offer creative and sensible strategic advice on a wide variety of topics. We aim to be the first call our clients make when they need to ask someone, “What do you think I should do?”

We rely heavily on our Strategic Advisory Group in the pursuit of this objective. This group of experienced professionals has distinctive skills in tax, trust and estate law, accounting and other areas, developed through successful careers advising clients. The group is charged with two primary missions. First, strategic advisors serve as active members of the client teams supporting complicated client relationships. Second, they serve as an educational resource for all clients and client teams at Brown Advisory.

BALANCED PORTFOLIOS: ADVICE

John DevineStrategic Advisor


Y ou might think of them as the consummate Washington, D.C., power couple. Both in their 60s, he is a successful technology executive and she is a noted author. Together they are accomplished,

intelligent, driven…and busy. With three adult children in their late 20s and an infant grandchild, they came to Brown Advisory looking for portfolio management, cash flow planning and advice on transferring wealth to the next generations.

Strategic Advisor John Devine, who joined the firm in the beginning of 2014, and the rest of the Brown Advisory client team met with the couple several times to listen to their goals and concerns. The team formed a comprehensive plan that covered asset allocation, liquidity concerns, exposure to private equity, wealth transfer, financial education of the adult children, philanthropy and regular family meetings.

One particular investment issue was managing the venture capital and private equity exposure that the husband had accumulated over the years. The client team tapped the firm’s private equity experts to analyze the husband’s private equity funds and calculated the cash flow needed for upcoming capital calls. The firm’s Open Architecture and Asset Allocation team then helped develop a customized asset allocation to incorporate the couple’s concerns and generate the cash flow needed for the private equity investments. The team also reviewed the family’s current life insurance as well as property and casualty insurance, and was able to find significant savings in both areas. Finally, John developed a customized “next gen” education plan, drawing on the insights of fellow strategic advisors. “One thing that is very different at Brown Advisory is the quality of the people and the intellectual capital on the client teams,” says John. “Here, the senior professionals serve clients instead of just managing people,” he continues. “As fellow shareholders of the firm, we are all motivated to pitch in to help each other serve clients at the highest level.”


CASE STUDY: The Power of Partnership

“At Brown Advisory, service is not a ‘feature’ that we offer; it is the

foundation of our relationship with clients. Our firm’s philosophy is

rooted in putting clients first and serving their long-term interests, and

that ethos permeates the firm’s professionals. At many firms in our

industry, the average tenure of client service professionals might be two

or three years. At Brown Advisory, that average is around eight years.

That’s how we build long-term relationships that matter for clients.”

—Michael Aldrich, Head of Private Client Service

BALANCED PORTFOLIOS: SERVICE

A CULTURE OF CLIENT SERVICE

We expect every Brown Advisory professional to do whatever he or she can to help our clients. In the long run, we will only be successful as an enterprise if our clients are well served. The instinct to assist a client in need is part of our DNA, and we see it in action every day—traveling to meet clients in their homes, late nights in the office preparing customized client reports and countless simple gestures of consideration.

Galileo: Our Toolkit To Deliver The World’s Best Client Service

We understand that our firm must support our colleagues’ client-first mentality with the technology and infrastructure they need to provide world-class client service. That philosophy led us in 2014 to launch a project we call “Galileo.” We chose the name because just as the great Italian physicist asserted that the planets revolve around the sun, we recognize that our clients are the center of our solar system. In short, Galileo will bring together the most advanced client relationship managment software and client-service tools available—as well as custom development—so that our professionals can do extraordinary things for clients, all of the time.

Thoughtful Events

To help our clients understand better the issues surrounding investment decisions, we regularly host events to explore the ideas that are shaping the world. In 2014, we were pleased to share ideas with clients at more than 27 events around the U.S. and abroad. Most significantly, we hosted our fourth biennial flagship conference, “Navigating Our World” (NOW). NOW 2014 brought more than 450 clients and friends of the firm, as well as 36 notable speakers, to the Reagan Building in Washington, D.C., to discuss the invest-ment impact of the latest trends in technology, resources and the quest for peace and prosperity. In November, Brown Advisory also hosted our first TED event, a TEDx Salon in Wilmington, Del., entitled “Investing for the Future.”


SECURITY MATTERS

With the rise in the number and sophistication of cyber attacks and privacy breaches, many investors are now as concerned with the security of their personal financial information as they are with the safety of their assets. We agree; we view information security as one of the most critical issues we face on behalf of our clients.

At Brown Advisory, our mission is to help make a material and positive difference in the lives of our clients, and we realize that our goal is predicated on the security of our clients’ personal information. We have all seen how much financial damage can be done when private information is stolen after hackers compromise clients’ personal computers or mobile devices.

We try to do everything we can to protect clients against online threats. In 2014, we invested heavily in layers of security around TouchPoint and the rest of our firm’s network. We also expanded our use of Docusign to make it easier and more secure for clients to sign documents electronically. Finally, we formed a partnership with LifeLock, a leading identity-protection solution, that gives Brown Advisory clients discounted access to LifeLock’s services. Every client’s situation is different and may require different security precautions. What is most important is that our clients all have some security plan in place.


BALANCED PORTFOLIOS: SERVICE

Eddie Bradley, Portfolio Analyst, and Eben Finney, Portfolio Manager

Something wasn’t right. Back in February 2014, Kathryn McManus, a private client relationship advisor, received an email that was ostensibly from her client in Virginia, but she suspected right away that the

email was fraudulent. The message—from the client’s Gmail account—requested a transfer out of the client’s account to a bank in California. Kathryn followed company protocol, first asking the email sender to call her to confirm the transaction, alerting the rest of the client team to distrust email from that client’s account and then calling the client’s cell and home numbers, although she didn’t get through.

What happened next was shocking. She received a phone call from someone trying to impersonate the client, saying through a static-filled connection “This is [NAME OF CLIENT] and I authorize the transfer.” She responded that she didn’t believe the caller to be who he claimed to be and she hung up the phone—only to have the potential thief call her 20 times in rapid succession. Not long after, once she succeeded in getting on the phone with the real client, that call was interrupted when the client got a call from…the hacker. “We were very concerned that the criminal may have been trying to record the client’s voice,” says Kathryn. Once they got off the phone, Kathryn and the client agreed to a plan and sprang into action, calling the police and the FBI, halting all transactions in all accounts for several days, changing the client’s Gmail password, changing the account numbers of all 20 investment accounts at Brown Advisory and elsewhere, signing up the client for LifeLock, and instituting an oral code word to be used for future transactions. “At Brown Advisory we have strict processes to protect our clients from attacks that are much more sophisticated than this one,” says Kathryn, “but knowing our clients in the first place helps a great deal.” The client agrees, saying, “Following regular security processes is of the highest importance, even when those processes seem like obstacles to getting things done.”


Kathryn McManusPrivate Client

Relationship Advisor


CASE STUDY: Personal Protection

THE POWER OF A TEAM

The engine of Brown Advisory’s portfolios is our large and growing research and portfolio management team. In 2014, we added seven professionals to the 63-person investment team, across equities, fixed income, hedge funds, private equity and more.

95% of the equity assets that Brown Advisory manages are in strategies that have outperformed their benchmarks since inception.

30 2014 Brown Advisory Annual Report ||| Putting The Pieces Together

SINGLE STRATEGIES

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TRADING

Lansdowne Developed-Market Long Only

Total Return Uses intermediate-term, high-quality fixed income securities to maximize total return for clients by flexibly anticipating changing market conditions and interest-rate environments.

Emerging Markets Small-Cap

Selects emerging markets managers with deep expertise and proven track records of uncovering smaller companies with high-quality business models that present the possibility of compelling long-term growth.

Viking Global Opportunities

Replicates the long-equity positions of Viking Global Investors’ global long/short equity hedge fund, Viking Global Equities.

Takes a fundamental approach to mega-cap investing, agnostic to style or sector, exclusively in developed markets; managed by Lansdowne Partners, one of the industry’s longest-standing, most-respected global equity hedge fund managers.

Multi-Strategy

Glynn Emerging Opportunities

A highly concentrated portfolio of public and private investments in leading technology companies.

U.S. Flexible Equity UCITS Fund

Provides non-U.S. clients with the opportunity to invest in Brown Advisory’s Flexible Equity strategy, which has outperformed the S&P 500 Index with less risk over the long term.

Presents our global asset allocation framework in this blended strategy of high-active-share equity managers and alpha- oriented fixed income managers, all of whom are chosen for their particular expertise in their respective asset class.

NEW STRATEGIES LAUNCHED IN 2014

ValueAct CapitalConcentrates significant ownership stakes in a limited number of companies and works constructively with portfolio companies’ leadership to implement value-creating strategies.


INTERNALLY MANAGED STRATEGIES

EXTERNALLY MANAGED STRATEGIES

EQUITY STRATEGIES:Getting It RightAs long-term investors, we focus more on returns over a full market cycle than on calendar-year numbers. From that perspective, the long-term results of Brown Advisory’s equity strategies are encouraging, with six of seven beating their benchmarks gross of fees since inception. That said, the year 2014 was a difficult one for most of Brown Advisory’s equity strategies. Five of our seven internally managed stock strategies trailed their benchmarks last year, while our Flexible Equity and Small-Cap Fundamental Value strategies enjoyed returns above their benchmarks.

diligence. We constantly go back and measure the effectiveness of these actions. Did our original investment thesis and underlying assumptions play out? Are we con-fident that the lagging stocks we hold are temporarily out of favor, or did we get something wrong?

Measure the management. Ultimately, all portfolio-manage-ment decisions come down to just three: buy; sell; and size positions (meaning, decide how large an in-vestment to make in a company). We analyze how each of these three decisions affects the performance of our strategies. Does a certain man-ager tend to buy a stock too soon? Or sell too soon? Understanding the tendencies of our portfolio managers puts us in a much better position to help them succeed.

Demand honest conversation and collaboration. Our research process depends on the collabo-ration of our equity analysts and portfolio managers. For that to work, everyone involved needs to be accountable for speaking up and being brutally honest with each other—and we all need to be open

to having our view challenged by others. There is no room for real or implied hierarchy on an invest-ment team. We view each other as long-term partners in a business, and every person’s perspective can lead to better decisions. Our goal is to get to the truth, and nothing uncovers the truth quicker than the open exchange of informed ideas.

Trust the team. If we know that we have taken the above steps, then it is time for us to remember that the investment business is a humbling one—and occasion-ally there will be difficult times, especially since we manage rela-tively concentrated portfolios. In fact, that concentration has been integral to our successful long-term track records. The reality is, our equity research team has never been stronger than it is today. As long as we are making incremental improvements to our process and as long as we trust each other, we have every confidence that we will deliver the results that our clients demand.

Our portfolio managers are inde-pendent, fundamental, bottom-up investors, so there is a different narrative behind each strategy’s performance. As a team, we are laser-focused on identifying the critical factors that will make us better investors, year in, year out, as opposed to relying on short-term performance to gauge our progression. Here are the aspects of our process that we monitor to make sure we are continuously improving.

Analyze the analysis. Try as we might, we cannot control the outcomes of our investment decisions. What we can control is the process of our decision-mak-ing. While occasional periods of underperformance are inevitable in our business, we are confident that good decision-making, supported by process, puts our clients in a position to succeed over time.

For each stock they cover, our analysts spend a tremendous amount of time putting together financial models, talking with company management and performing other forms of due


By Tim Hathaway, CFADirector of Equity Research

FIXED INCOME:Ahead of the CurveThe U.S. economy accelerated during 2014 by nearly any economic metric, and in most categories, the improvement was beyond what fore-casters were expecting. Yet interest rates fell substantially, with the 10-year Treasury dropping nearly a full percentage point for the year, from 3.03% to 2.17%. In short, the economy surprised to the upside while interest rates surprised to the downside. That is not how it is supposed to work, but we managed to perform well.

positioning was a major driver of solid performance for the year. Our Core Fixed Income strategy gained 6.17% gross of fees in 2014 vs. 5.97% for the Barclays Aggregate Bond Index.

Overweighting muni bonds. An-other driver of performance across many strategies was our emphasis on municipal bonds. Entering 2014, muni bonds looked quite inexpensive, thanks to steep muni fund outflows in the second half of 2013. We thought the sell-off was overdone and bought munis, including more credit-oriented issues. That helped returns, as fund flows reversed and munis rallied. Our National Municipal strategy returned 5.74%, outperforming the 4.66% return for the Barclays Municipal Bond 1-10 Year Index.

Missing mortgages. Perhaps the biggest detractor from perfor-mance across strategies was our underweight in mortgage-backed securities. In December 2013, the Fed—which is the dominant buyer of MBS—started to “taper” its purchases. Entering 2014, we thought the Fed’s other guidance

of rising interest rates would keep banks, the other natural buyer of MBS, from jumping in. Instead, banks bought aggressively, driving MBS spreads to all-time lows. That positioning hurt the returns of our Institutional Intermediate Fixed Income strategy, which returned 4.02% in 2014, 0.10 percentage points below the return of the Barclays Intermediate Aggregate Bond Index.

Looking ahead. Going forward, we believe getting the macroeco-nomic environment right may no longer be the key to generating performance. Rather, we see finding idiosyncratic opportunities as much more important in 2015 and beyond. We are at a point in the cycle where the bond market should become more discerning about good risks vs. bad risks. Thanks to our recent hires, we have expanded our capabilities in high-yield and derivatives, which we believe puts us in an excellent position to capitalize on such individual bond opportunities.

Anticipating the flattening. A quick look at why rates fell during 2014 is telling. While the stronger economy served to cement the market’s view that the Fed would be hiking rates in 2015, foreign demand for U.S. bonds more than offset the Fed effect. This could be seen in how the shape of the yield curve changed during the year. Yields for bonds maturing in three years or less rose, as investors fled the parts of the curve where Fed tightening would hurt the worst. On the other hand, bonds matur-ing in 10 years and longer fell in yield substantially. This is where foreign demand was strongest.

Once we saw signs the Fed was growing more confident about the economy, we shifted exposures away from the three- to seven-year part of the yield curve and in-creased exposure longer than 10 years. We were confident that a tightening Fed would put pressure on short- and intermediate-term bonds, but also knew that falling rates in Europe and Japan would only serve to increase foreign demand for U.S. bonds. This

By Tom Graff, CFA Head of Fixed Income



look brilliant or idiotic for a while depending on their participation in unsustainable price movements.

By understanding that periodic underperformance occurs with even the best of managers—and think of anything less than seven years as short term—you can potentially avoid the high costs of changing managers in search of the next hot hand. Such shifts often occur with the worst possible timing. If you really get to know your manager’s approach and tendencies, you’ll be better prepared for the inevitable periods of short-term underperformance that occur on the way to good long-term results. Similarly, you can build your long-term asset allocation in such a way as to stay invested across the inevitable market drops.

Lastly, I think it is important to stay reasonable in your expectations. We are optimistic about the long-term outlook for equities of good companies purchased at reasonable prices and our ability to find them. However, as we near six years since the market bottomed in early 2009, we do not expect the S&P 500’s future returns to match its 24% annual rate since the trough. Instead, we expect annualized returns of between 7% and 9%, based on the 7% long-term average earnings growth for the S&P 500 and its current dividend yield of 2%. Reason: Today’s starting conditions are much different from 2009, and valuations are markedly higher, so banking on 20%-plus levels of returns again is likely a recipe for disappointment.

This past July, I celebrated 20 years of managing the Flexible Equity strategy. I describe this role as having two main aspects—generating above-average investment returns and keeping clients happy. You can find plenty of commentary written on the subject of performance, but I think the latter topic of client relationships deserves greater attention. That starts with a mutual understanding on the vagaries of performance.

My observation is that the most successful investors understand that even the most skilled portfolio managers underperform from time to time. All managers have natural biases in their investment selections, and if these biases perform particularly poorly or well in the markets, the manager’s relative performance is affected, sometimes greatly. That has certainly been the case with Flexible Equity—we trailed our benchmark by 12 percentage points gross of fees in 1999 and also in 2007. Despite those tough times, though, we have managed to beat the S&P 500 Index by 2.5 percentage points a year over the past 20 years.

The truth is, sometimes important holdings just lag the market, often after a big run. At other times, investors become very narrowly focused, either piling into or avoiding a certain area of the market. Price movements in the favored and less favored areas can be quite dramatic in short periods and detached from long-term economic realities. Managers can

Commitment Over the Years Yields ResultsBy Hutch Vernon, CFAFlexible Equity Portfolio Manager

As a portfolio manager, I know that periods of underperformance such as the last two years are both trying and humbling. While the absolute performance of the Large-Cap Growth equity strategy that we manage has been strong recently—what investor wouldn’t generally be satisfied with a two-year annualized total return of 18.1% gross of fees?—what is of prime importance to many institutional investors is performance relative to our chosen benchmark. When you lag your target return, it’s natural to feel regret and concern.

Such emotions are not only uncomfortable, they are dangerous. Emotion is the greatest impediment to effective investing. It is precisely during times like these that we must rely on our process and our discipline to take the emotion out of our investment choices. It is also helpful to focus on process rather than the outcome; good long-term performance outcomes derive from sound processes.

In some respects, the last couple of years remind me of the dotcom bubble in 1998 and 1999, which was a very difficult period for us, far worse than the last few years. In the late 1990s, we just could not make sense of the valuations of many of the best-known technology stocks. At the time, other investors seemed to be saying, “I know this stuff is expensive, but I can get out in time…” We thought that was a fool’s game and so we didn’t participate. We badly underperformed the Russell 1000® Growth Index,

trailing our benchmark by more than 13 percentage points a year in 1998 and 1999. Eventually those of us focused on fundamentals were proven right, and we were fortunate to make up the lost ground—and more—by 2001.

Today, for instance, higher-yielding stocks are in ever-increasing demand, even in the growth indexes. In the last 20 years, I don’t think that I’ve ever been asked the yield on our portfolio—until recently. I am not saying that dividend-paying stocks today are in a bubble. Instead, I am saying that if we started buying stocks like REITS and utilities, we would violate our process and growth investment thesis—right when we need it most. Our conclusion: Chasing what is in vogue for immediate gratification is a very dangerous proposition in the investment arena. We prefer to invest in high-quality, fast-growing businesses and let the power of compounding work for us.

A Steady HandBy Ken Stuzin, CFALarge-Cap Growth Portfolio Manager

“ In the last 20 years, I don’t think that I’ve ever been asked the yield on our portfolio—until recently.”


Putting The Pieces Together

For Our Shareholders

Maintaining a healthy rate of growth and a strong balance sheet contributes significantly to our ability to serve clients effectively. Financial success helps us attract and retain the best investment and client service professionals, and financial stability assures clients of the continuity of the firm for future generations.

Revenues and Client AssetsIn short, we met our major financial goals in 2014. We continued to reinvest in the firm to provide resources to serve our clients better, including a broader range of investment capabilities and new technology to enhance our services. We again made good progress in diversifying our business by region, by client type and by asset class. Finally, we further strengthened our firm’s balance sheet and remain very comfortable with Brown Advisory’s financial position. Specifically, in 2014, we ended the year with total client assets of $51.7 billion, up 10.3%, and we generated all-time-high revenues of $220.6 million, up 23.6% from 2013, and an average annual increase of 20% over the past decade.

Our Equity OwnershipOne of the differentiating aspects of Brown Advisory is that we award equity to every em-ployee of the firm. We have found that giving everyone an initial ownership stake in the firm promotes a shared sense of teamwork, while awarding equity as part of year-end compensation for top-performing employees increases everyone’s focus on clients’ long-term success. Further, we award the equity to employees in such a way as to spread the firm’s equity fairly broadly. In fact, today, no one person owns more than 4% of the shares, which allows a number of profes-sionals to build meaningful equity stakes as the firm grows. A broad and balanced distribution of equity should also help the firm manage a seamless transition when our senior leaders retire. History is filled with examples of investment firms that did not survive the financial crunch resulting from a senior member with significant equity deciding to redeem his or her shares. To serve clients over the long term, we must ensure the firm’s stability and continuity.


“A key differentiator of Brown Advisory is our independence. We

are privately owned and focused on investment management, as

opposed to being part of a larger organization. Our independence

is assisted by experienced outside directors who provide insight

into the needs of our clients, as well as investment opportunities

around the world. These directors along with a select group of

outside shareholders provide a valuable network that has proven

over and over again to be a rich source of ideas and advice for

our investment advisers and analysts.”

- Dave Churchill, Chief Operating Officer and Chief Financial Officer

Gaining the perspectives of accomplished, knowledgeable people outside our firm is invaluable in keeping Brown Advisory at the forefront of our industry. We sat down with Bob Flanagan, Executive Vice President at Clark Enterprises in Bethesda, Md., a long-time investor who joined Brown Advisory’s board on May 1, 2014.

Q: How did you get into the investment business?

A: After graduating from Georgetown University on scholarship, I was hired by Arthur Andersen & Co. in their audit division. When I was 25, and by then a CPA, Edward Bennett Williams, the prominent D.C. trial attorney, hired me to help organize and oversee his businesses, which included the Washington Redskins, Baltimore Orioles and the Jefferson Hotel in D.C. He was a larger-than-life character who managed a vibrant career in law, business, sports and philanthropic ventures. I was privileged to be included in the last seven years of his life.

Q: How did you arrive at Clark?

A: After Mr. Williams’ death in 1988, I was hired byClark Enterprises, a successful commercial realestate and construction firm, to diversify theirscope of investments. I’ve been with Clark sincethen. As managing director of CNF Investments, aClark affiliate, my team and I invest in venturecapital and private equity markets including oiland gas, life sciences, technology and financial services companies.

Q: Why the focus on private equity?

A: Private equity is an asset diversification project within Clark Enterprises. Our portfolio was skewed

toward real estate and construction. Private equity has provided a vehicle to expand our portfolio into new and dynamic venues.

Q: What is the focus of Brown Advisory’s board of directors?

A: With $52 billion in client assets, Brown Advisory is far from a venture-backed startup, so the board spends more time evaluating business risks as well as new business opportunities. The main areas of risk on which we focus include such matters as top management and board succession planning, cybersecurity threats, and ensuring that the firm’s asset allocations and portfolio management are hitting our performance targets.

Q: You are chairman at the Federal City Council. What has been your most satisfying involvement in that organization?

A: The Federal City Council is a 61-year-old organization dedicated to the improvement of the District of Columbia. Along with former Mayor Anthony Williams, we have recently revitalized the institution with a vibrant agenda that includes the Anacostia River enhancement, revitalization of Union Station and dramatic enhancement to the public education arena.

Outside View


OUR BOARDS

OF DIRECTORS

Brown Advisory Incorporated Our group parent company that oversees all affairs of the firm

WILLIAM C. BAKER* ■ President and CEO, Chesapeake Bay

Foundation

HOWARD E. COX, JR. ■ Advisory Partner, Greylock

JOHN O. DOWNING ■ Former General Partner, Goldman

Sachs

ROBERT F. FLANAGAN ■ Executive Vice President, Clark

Enterprises

BENJAMIN H. GRISWOLD, IV* ■ Former Chairman, Alex. Brown & Sons

Incorporated

MICHAEL D. HANKIN* ■ President and CEO, Brown Advisory

DONALD B. HEBB, JR. ■ Founder and Chairman, ABS Capital

Partners

EARL L. LINEHAN* ■ President, Woodbrook Capital Inc.

JOHN A. LUETKEMEYER, JR.* ■ Chairman, Continental Realty Corp.

GLENN R. MARTIN* ■ President, Clay County Port Inc.

EDWARD J. MATHIAS ■ Managing Director and Board Member,

The Carlyle Group

WALTER D. PINKARD, JR.* ■ Chairman Emeritus-Americas, DTZ

GORDON F. RAINEY, JR.* ■ Chairman Emeritus, Hunton &

Williams

TRUMAN T. SEMANS* ■ Vice Chairman, Brown Investment

Advisory & Trust Company

MARY M. “MEG” VANDEWEGHE* ■ Former Senior Vice President of

Finance, Lockheed Martin

Brown Advisory Trust Company of Delaware, LLC

Our Delaware limited-purpose trust company, which affords our clients the benefits of Delaware-domiciled trusts


RICHARD E. LEVINE ■ Partner, DLA Piper

BLAINE T. PHILLIPS, JR. ■ Senior Vice President and Mid-Atlantic

Director, The Conservation Fund

ANN C. ROSE ■ President of the Board, Mt. Cuba Center

DAVID P. ROSELLE ■ Former President, University of

Kentucky and University of Delaware

Brown Advisory Funds, PLC

Our Ireland-domiciled UCITS funds, which allow our investment strategies to be distributed to investors around the world

DAVID M. CHURCHILL ■ Chief Operating Officer, Chief Financial

Officer, Brown Advisory

CLINTON R. DALY ■ Head of Business Development, Brown

Advisory

PIERCE B. DUNN ■ Director, Vice Chair, Chair of

Governance Committee, J.J. Haines Corporation


PAUL MCNAUGHTON ■ Founding Chairman, Irish Funds

Industry Association

PAUL MONTGOMERY ■ Founder and Former Managing Director,

Montgomery Govett

GORDON F. RAINEY, JR.* ■ Chairman Emeritus, Hunton & Williams

CHARLES E. NOELL

■ Co-Founder, JMI Equity

Brown Advisory Limited

Our London-based investment business, dually registered with the UK FCA and US SEC

DAVID M. CHURCHILL ■ Chief Operating Officer, Chief Financial


LOGIE C.L. FITZWILLIAMS ■ Head of International Business, Brown

Advisory


PETER G. C. MALLINSON ■ Former General Partner, Goldman

Sachs

Brown Advisory Mutual Funds

Our U.S. mutual fund family

JOSEPH R. HARDIMAN ■ Former President and CEO, NASDAQ


HENRY H. HOPKINS ■ Former Chief Legal Counsel and Director,

T. Rowe Price

KYLE P. LEGG ■ Former President and CEO, Legg Mason

Capital Management, Inc.

THOMAS F. O’NEIL III ■ Founder and President, The Saranac

Group LLC

NEAL F. TRIPLETT ■ President, DUMAC LLC (Duke University’s

Investment Office)

CDK Capital (Bermuda) Ltd.

Our offshore hedge funds of funds, featuring open-architecture investment selections

DAVID M. CHURCHILL† ■ Chief Operating Officer, Chief Financial


DAWN C. GRIFFITHS† ■ Head of Conyers Dill & Pearman Bermuda

Funds Group

BRETT D. ROGERS† ■ General Counsel, Brown Advisory

DEREK STAPLEY† ■ Former Chair of Ernst & Young’s Global

Hedge Fund Steering Committee

* Also a director of Brown Investment Advisory & Trust Company

† Also a director of CDK Investments Ltd.



For Our Colleagues


Building a Successful Career at Brown Advisory We want talented people at all stages of their careers—from entry-level associates just out of school, to mid-career and more senior professionals—to find Brown Advisory to be an exciting and rewarding place to work. This commitment is critical if we are to succeed on behalf of our clients.

Providing an environment in which each individual can reach his or her greatest potential is just as important. We are ever mindful of our shared responsibilities to clients and colleagues alike.

What sets Brown Advisory apart? Being a private firm that puts clients first. A shared ownership structure where every colleague owns equity. An investment organization that supports independent thought and creativity. A culture that values teamwork, mentorship and community involvement.

Compensation ■ Equity awards ■ 50% 401(k) employer match (up to IRS limit)

■ 100% educational reimbursement (for strong academic performance)

■ Employee referral rewards ■ Basic life and AD&D insurance ■ Group long-term disability ■ Short-term disability insurance ■ Travel accident coverage

Well-Being ■ Wellness program and incentives ■ Employee assistance program ■ Onsite fitness centers (some locations) ■ Subsidized offsite gym memberships

Health ■ Medical benefits ■ Health savings accounts ■ Health reimbursement arrangement ■ Dental benefits ■ Vision benefits ■ Health advocacy services

Career ■ Mentoring program ■ Technical skills training ■ Professional skills training ■ Leadership skills training ■ Support with nonprofit involvement ■ Cultural rotation program ■ “Above and Beyond” and “Employee of the Year” recognition

EMPLOYEE OF

THE YEAR

We are thrilled to announce that Darin Lang, an analyst with our

Information Technology team who joined Brown Advisory in 2002,

is the 2014 Employee of the Year and winner of the Hopkins Cup,

which is named after the firm’s first president and CEO, David

Hopkins. Darin received the most nominations from his peers, who

included the following quotations in their nominations for him:

■ “He digs into a project and doesn’t quit until he produces results.”

■ “He loves this place and he loves inventing.”

■ “His willingness to help others learn is unmatched.”

■ “He is a major part of what makes this place tick.”

■ “He is the ‘unsung hero’ of our firm.”

■ “He is consistently helpful, resourceful and fun to work with.”

■ “Darin is beyond humble.”

Above and Beyond

A client-first mentality is central to employment at Brown Advisory. We recognize members of our team who best demonstrate this mindset by bestowing “Above and Beyond” awards. Here are the seven employees who earned the award in 2014:

■ Top Row: Bennett Carroll, Associate Institutional Portfolio Analyst, and Doug Williams, TPD Relationship and Sales Coordinator

■ Middle Row: Nikhil Deusana, Senior Operations Associate, and Sara Dixon, Benefits and Wellness Advisor

■ Bottom Row: Kristin Keeney, Private Client Relationship Administrator, and Nina Millman, Private Equity Advisor

■ Inset: Josh Morehouse, Technical Help Desk Manager

A Moment of Recognition

At Brown Advisory, hard work, expanding expertise and a focus on clients are expected of everyone. To be recognized for promotion, an employee must also demonstrate leadership within his or her team, the firm and the community at large. Congratulations to the five new partners and 11 new principals of the firm.

Partner

■ Topher Fearey (joined in 2009)

■ Karina Funk (2007) ■ George Grayson (2003) ■ Shannon Pierce (2003) ■ Sam Shah (2012)

Principal

■ Terri Balaran (2009) ■ Kristen Brooks (2011) ■ Greg Caron (2012) ■ Dana Cooksey (2009) ■ David Kahen (2013) ■ Jackie Kipke (2003)

■ Shawn Mooney (2010) ■ Kevin O’Keefe (2012) ■ Erika Pagel (2012) ■ Simon Paterson (2011) ■ Zack Shankman (2012)


Player DevelopmentWe recognize that we need to do more than rely on our managers and group heads to help coach our less experienced colleagues. In 2012, we instituted a mentoring program that pairs up less experienced employees with senior professionals in the firm. In 2014, 153 employees in total participated in the program, and the vast majority—mentors and mentees alike—report that the experience was educational and fulfilling.

Pushing Each Other

Alice Paik, head of the Strategic Advisory Group, and Madison Carr, institutional business associate, have worked together in the firm’s mentoring program since 2013. “This was my first job out of college, so one of the questions that I had was whether if you were in your 20s, you had better chances for advancement by jumping between firms,” says Madison. “I was afraid that not having outside experience would limit people’s perceptions of me.”

Alice seized on that issue right away. “I suggested to Madison that the best way for us to examine that question was to tap my network and ask other professionals within and outside the firm,” says Alice. Fast forward a year, and now Madison says she has a better sense of the path ahead—and she is enrolled in the MBA program at the Carey School of Business at The Johns Hopkins University. The two women are looking forward to continuing their relationship in the years ahead. “We are focusing on goals outside our careers—personal, family and community involvement, too,” says Madison. “This year, we are going to really push each other to accomplish specific objectives across our lives,” says Alice. “We’ll keep each other honest…right?” “Right,” responds Madison.

Alice Paik, Head of Strategic Advisory Group, and Madison Carr, Institutional Business Associate


“I was having lunch with Head of Business Development

Clinton Daly one day and we talked mostly about the

firm’s culture. During that conversation, I found myself

thinking about how important it is that our culture stays

strong across all of our offices. I challenged myself to

come up with an idea that would encourage that. After

a lot of thinking and discussion with my colleagues,

we came up with what we call the Cultural Rotation

Program, which formalizes regular travel, interaction and

mentoring among all of the offices. Nearly 200 people

committed to participate in the program, a sure sign of

how seriously we take preserving our firm’s culture.“

- James Stierhoff, OAAA Associate Analyst


Investing in Education and WellnessThe firm pays 100% for any higher education or professional training (so long as the employee succeeds academically). In addition, the firm promotes healthy lifestyles in our colleagues, hosting an annual wellness fair and providing free flu shots and Fitbits for employees. Also new this year: expanded health care options that cater to the full spectrum of employees, from retirement-eligible employees to single, recent college graduates.

Gateway: Tapping the Network Effect

From our founding, we have been fortunate to be able to tap the considerable network of our senior advisors to serve clients better. As we have grown over the years, it has become more and more difficult for all of our colleagues to have that network at their disposal. That’s why, in 2013, we instituted the Gateway Program which uses private, secure, social-media-like tools for employees to pose anonymous and confidential client-related questions for the entire firm to help answer. Examples range from straightforward requests to connect our research analysts to industry experts to more exotic requests, such as the one from a client who asked if we had any contacts in the solar panel industry in Angola. As our firm grows, so too will our ability to tap our network for the benefit of clients.

Summer Analyst ProgramOne source of high-quality entry-level candidates is Brown Advisory’s Summer Analyst program, which is now under the leadership of Associate Portfolio Manager Blake Sheehan, Portfolio Analyst Billy Mathews and Associate Portfolio Manager Matt Gray. Thanks to these three young professionals, in 2014, 17 promising undergraduates from top universities joined us for 10 weeks and took on meaningful assignments across all of Brown Advisory offices. These projects included quantitative analysis of our private equity funds, analyzing financial filings of 75 publicly traded banks for floating-rate exposure, and using Spanish-language skills to translate documents related to Puerto Rican bonds. These young men and women bring tremendous energy and intellectual firepower to the firm. In fact, in 2014, we hired five former summer analysts.


Brett Rogers, General Counsel

Billy Mathews, Portfolio Analyst,Olachi Opara, Portfolio Analyst, andBlake Sheehan, Associate Portfolio Manager


For Our Communities

A Philosophy of ServiceAs a firm and as a collection of individuals, we believe that we have a responsibility to give back to the communities in which we work and live. Not only does this benefit our communities, but it also makes each of us a better-rounded citizen and professional. We think that serving others through nonprofit organizations is a natural complement to our culture of serving clients.

For those reasons, we aspire for Brown Advisory to be counted among the corporate and individual leaders of our communities. We actively encourage our professionals to become involved in nonprofit organizations that match their interests, whether that involvement means serving on boards or otherwise donating money or time. Dozens of times each year, our professionals host “Lunch and Learn” sessions in which their colleagues get to learn about—and support—the missions of a variety of nonprofits.

We take the idea of giving back so seriously that we include community involvement in our criteria for promotion to Principal and Partner.


“For years, our senior advisors have informally helped

match Brown Advisory professionals with nonprofits that

are looking for board members or other volunteers. In

2014, we put more process around that, using the Mentor

Program and the Gateway Program to leverage the firm’s

network and make matches. We have also partnered with

outside organizations for board training for some of our

younger professionals. It is incredibly rewarding to me when

people outside of the firm recognize the contributions that

we make in the community at all levels and seek to have our

professionals join their boards.”

- Charlie Constable, Head of U.S. Sales and Service

Abundant Life Church

ACT for Alexandria (Alexandria Community Trust)

Alpha Foundation of Howard County

ALS Association–Massachusetts Chapter

Alzheimer’s Association. Greater Baltimore Chapter

American Diabetes Association

American Enterprise Institute, Washington, D.C.

American Heart Association

American Juvenile Arthritis Organization

American Prairie Foundation

American Red Cross

Andover Junior Football League, Inc.

Appalachian Trail Conservancy

The Arc Baltimore

Archdiocese of Baltimore

Associated Catholic Charities of Baltimore

The Associated Jewish Community Federation of Baltimore

Athletes Serving Athletes

The Atlantic Council

Back on My Feet

Baltimore Animal Rescue and Care Shelter, Inc. (BARCS)

Baltimore CFA Society

Baltimore Chamber Orchestra

Baltimore Chesapeake Bay Outward Bound School

Baltimore City Yacht Association

Baltimore Clayworks

Baltimore Community Foundation

Baltimore County Farm Bureau

Baltimore Development Corporation (BDC)

Baltimore Educational Scholarship Trust (B.E.S.T.)

Baltimore Efficiency and Economy Foundation

Baltimore Hearing and Speech Agency

Baltimore Humane Society

Baltimore Rock Opera Society

Baltimore School for the Arts

The Baltimore Shakespeare Factory

The Baltimore Station

Baltimore Symphony Orchestra

Baltimore Tree Trust

Baltimore Waterfront Partnership and Management Authority

Believe in Tomorrow Children’s Foundation

Bethel Korean Presbyterian Church

Big Brothers Big Sisters

Blue Hill Heritage Trust

B’More Clubhouse

Box of Hope

Boy Scouts of America

Boys Hope Girls Hope

Brandywine Chapter of Ducks Unlimited

Brown University Library

The Brunswick School

The Bryn Mawr School

Business Volunteers Maryland

The Cafritz Foundation–Washington, D.C.

Calvert School

Cancer Research UK

Carmelite Sisters of Baltimore

The Caroline Center

CASA of Baltimore County, Inc.

Catholic Family Foundation

CenterStage

CFA Society Baltimore

Charlotte Junior Soccer

Charlotte Latin School

Charm City Youth Lacrosse League, Inc.

Chesapeake Bay Foundation

The Chesapeake Conservancy

Chesapeake Shakespeare Company

The Children’s Chorus of Carroll County

Children’s Hospital of Philadelphia Founders Society

The Children’s Peace Center

Children’s Scholarship Fund of Baltimore

Chinese International School Foundation

Chizuk Amuno Congregation

Christian Farmers Outreach, Inc.

Church of the Nativity

Church of the Resurrection

Civic Works

Civil War Trust

Clark Winchcole Foundation

CollegeTracks

Columbia Country Club

The Commit Foundation

The Community Foundation for Montgomery County

The Community Foundation of the National Capital Region

The Concord Coalition

Conference of Major Superiors of Men

The Conservation Fund

The Consortium of Catholic Academies

Cool Kids Campaign

The Corporation for the Relief of Widows

Council for Children’s Rights

Cristo Rey Jesuit High School

The Crossroads School

Cycle for Survival

Cystic Fibrosis Foundation

Dartmouth College

Daughters of Charity

Davidson College

DC Prep

deCordova Museum & Sculpture Park

Delaware Wild Lands

Denison University

Dollar a Day

Don Bosco Cristo Rey High School

Duke University

Durham Academy

Easter Seals/UCP Horizons Foundation

Edgar B. Rouse Foundation

The Ellington Fund, Duke Ellington School of the Arts in Washington, D.C.

Emerging Leaders United of UWCM

Emmanuel Church

Enoch Pratt Free Library

The Episcopal High School at Alexandria

Esperanza Center

Evergreen House Foundation

Fair Chance

Family & Children’s Services of Central Maryland

The Family Tree

Fellowship of Christian Athletes

First Fruits Farm, Inc.

The First Tee Baltimore

Fort Ticonderoga

Fourth Presbyterian Church

FreeState Legal Project

Friends of Clifton Mansion

Friends of Patterson Park

Friends School of Baltimore

Garrison Forest School

Greater Baltimore Medical Center (GBMC)

GBMC Healthcare

GBMC Oncology Support Services

GBMC Parents Advisory Council

George Washington University–School of Business

Georgetown Preparatory School

Georgetown Real Estate Alumni Association

Georgetown University

Get Outside And Learn Something (GOALS)

Gettysburg College

Gilman School

Goose Creek Association

Goucher College

Grace Fellowship Church

Grand National Waterfowl AssociationGreater Baltimore Committee

Greater Baltimore Oyster Partnership

Green Mount Cemetery

Harford Day School

The Health Foundation

Healthy Schools Campaign

Helping Up Mission

The Henry van Straubenzee Memorial Fund

High School Home Health Care

Higher Achievement

Hockey Fights MS

Holabird Academy

Holy Trinity Brompton Church, London

HOPE Worldwide

Horizons Greater WashingtonHosanna House

The Hotchkiss School

House of Ruth Maryland

Howard County Autism Society

Human Rights Campaign

Immaculate Heart of Mary Parish

The Institute for Christian & Jewish Studies

Institute of Notre Dame Fathers Club

International Care Ministries

International Churches of Christ

International Women’s Forum

International Youth Foundation

Invest in Girls

Irvine Nature Center

Jacksonville Volunteer Fire Company

James Renwick Alliance/Renwick Museum/Smithsonian

Jemicy School

Jesuit Province Maryland

Jewish Community Investment Fund, Baltimore

Jhpiego

Jobs Housing & Recovery Baltimore

Joffrey Ballet

The John Carroll School

Johns Hopkins Bayview Medical Center

Johns Hopkins Carey Business School

Johns Hopkins Heart Institute ARVD Program

Johns Hopkins Medicine

Johns Hopkins Project RESTORE, Department of Neurology

The Johns Hopkins University

Johns Hopkins University–Applied Physics Lab

Johns Hopkins University–A Woman’s Journey

A core part of our firm’s culture is the commitment to give back, either by serving as a board member or donating significant money and time.

COMMUNITY

LEADERSHIP


Johns Hopkins University–Fundraiser for the Anne Smedinghoff Memorial Fund

Junior Achievement of Central MD

Juvenile Diabetes Foundation

Kasina Youth Foundation

Kenan-Flagler Business School at UNC Chapel Hill

Kernan Hospital Endowment Fund

KidSave

KIPP Baltimore

Lab Rescue of the LRCP, Inc.

Ladew Topiary Gardens

The Lambeth Trust

Land Preservation Trust, Inc.

The Landon School

Lawrenceville School

Layalina Productions

LET’S GO Boys and Girls

Liberty Elementary School Rec & Tech Center

Lincoln Nursery School

Living Classrooms Foundation

The Living Legacy Foundation

Lockhart Vaughn Foundation

Longwood Gardens

Loyola University

The Ludgrove School Foundation

Lutherville-Timonium Recreation Council (LTRC)

The Madeira School

Maine Coast Heritage Trust

The March of Dimes

Mario St. George Boiardi Foundation

Martha’s Meals

The Maryland Historical Society

Maryland Humanities Council

Maryland State Beekeepers Association

Maryland State Golf Association

The Maryland Zoological Society

MarylandCAN

Massachusetts Technology Transfer Center

McDonogh School

Medstar Health

Medstar Union Memorial Hospital

Memorial Sloan Kettering Cancer Center

Mercy Health Systems

Mercy Medical Center

Methodist Home for Children

Michigan State University Alumni Association

Milton Academy

Montgomery Botanical Center

Montgomery County Historical Preservation Society

Morehead-Cain Campaign Leadership Committee of the University of North Carolina

Mosby Heritage Area Association

Mother Seton Academy

Mount Vernon Place Conservancy

Mount Washington Pediatric Hospital

Mountain Gorilla Veterinary Project

Mt. Olivet United Methodist Church

Municipal Bond Club of Baltimore

Music of the Baroque

Nathan Hummel Memorial Fund–St. Louis, MO

National Aquarium

National Audubon Society

National Multiple Sclerosis Society

National Rehabilitation Hospital

National Sporting Library & Museum

The Nature Conservancy

Nemours/Alfred I. duPont Hospital for Children

New Philanthropy Capital

NextGen

North Carolina Bar Association

North Carolina Community Foundation

North Harford Road Community Association

Notre Dame of Maryland University

Notre Dame Preparatory School

Oatlands of the National Trust for Historic Preservation

One Love Foundation

Open Space Council for the State of Delaware

Our Daily Bread

The Oyster Gardening Program for the Healthy Harbor Initiative

PACT: Helping Children with Special Needs (Affiliate of the Kennedy Kreiger Institute)Palazzo at Park CenterPancreatic Cancer Action NetworkParents and Children Together, Inc.Parks & People Partnership for Animal Welfare (PAW)Passano FoundationPathfinders

Paul’s Place, Inc.

Pennsylvania National Horse Show Foundation

Pets on Wheels–Central Maryland

Pickersgill Retirement Community

Piedmont Environmental Council

The Pingry School

Planned Parenthood League of Massachusetts (PPLM)

The Potomac School

Preservation Maryland

Princeton University

Pro Bono Resource Center of Maryland

Professional Association of Investment Communications Resources (PAICR)Providence Volunteer Fire CompanyThe Queen’s Club, LondonRauch FoundationThe Ravens Roost

Recycled Love

Robert Garrett Fund for Pediatric SurgeryRoca Inc.Roland Park Civic LeagueRoland Park Community FoundationRoland Park Country SchoolRonald McDonald House CharitiesSakonnet Preservation AssociationSave the Children UKSEED School of MarylandService Corporation of Westover Hills Sibley Memorial Hospital FoundationSinai HospitalSisters’ Academy of Baltimore

Social Enterprise Alliance

South Baltimore Learning

Spaulding Rehabilitation Hospital

SPCA

Special Olympics

St. Agnes Hospital

St. Casimir Catholic Church

St. David’s Episcopal Church

St. Elizabeth School

St. Francis Xavier

St. Giles Christian Mission

St. Ignatius Loyola Academy

St. James Academy

St. John’s Church (Westminster, MD)

St. John’s Church Western Run

St. Joseph’s University

St. Jude Children’s Hospital

St. Mark Catholic Church

St. Martins-in-the-Field Episcopal Church

St. Mary’s Arlington

St. Mary’s Seminary & University

St. Michael’s School and Nursery

St. Patrick’s Episcopal Day School

St. Paul’s Lutheran Church (Glen Burnie)

St. Paul’s Place

St. Paul’s School for Girls

St. Thomas Episcopal Church

St. Thomas More Catholic Church

Stand Tall and Reach for the S.T.A.R.S., Inc.

Stella Maris Hospice

Stephen M. Long Memorial Foundation

Stroud Water Research Center

Suburban Orthodox Congregation

Suffield Academy

The Supreme Court Historical Society

The Taft School

Teach for America, DC Region

The Tennis and Rackets Association

Thomas Wilson Fund for the Children of Baltimore City

Thoroughbred Retirement Foundation

Thread

TLC Lacrosse

Towson University Foundation

Trust for the National Mall

Tudor Place

Tufts University

The Ulman Cancer Fund

Union Memorial Hospital

The U.S. Lacrosse Foundation, Inc.

United Way

University of Baltimore Foundation

University of Baltimore Merrick School of Business Dean’s Business Advisory Council

University of Maryland Foundation

University of Maryland Francis King Carey School of Law Alumni Board

University of Maryland Medical Center

University of Maryland Rehabilitation & Orthopaedic Institute

University of Miami

University of New Hampshire

University of Pennsylvania

University of Richmond

University of Virginia

University of Virginia Alumni Association

University of Virginia Jefferson Scholars Foundation

Urban Land Institute

Valley Planning

Vassar College

Village Learning Place

Virginia Morris Kincaid Foundation

Virginia Tech

Virginia Tech Alumni Board

Virginia Tech M.A.R.E. Center

W.P. Carey Foundation

Walter McCammon Educational Trust

Walters Art Museum

Washington and Lee University

Washington College

Washington Jesuit Academy

Washington Wine Academy

Waterfront Partnership of Baltimore

Watershed Stewards Academy

Wellington College

Wesleyan University

Western Reserve Academy

Westminster Rescue Mission, Inc.

The Wexner Foundation

Wide Angle Youth Media

William Wilberforce Trust

WINNERS Lacrosse

Women’s Hospital Foundation

Woodbourne Center/Nexus Family of Treatment Programs in Baltimore City

Woodrow Wilson Presidential Library

Woolee Baptist Church

World Relief

Wounded Warrior Project

WYPR

Yellow Ribbons United

York County Parks Charitable Foundation

Young Mariners National Foundation

Young Partners in Excellence


Putting The Pieces TogetherFor Tomorrow


At our 2015 planning offsite, we invoked the metaphor of Sputnik, the first satellite sent into space, which was launched by the Soviet Union in 1957. Sputnik was a wake-up call for America. At a time when so many things were going well for the country—the Boeing 707 ignited the jet age, the U.S.’s first nuclear power plant was built in Pennsylvania, and the first mechanical heart was used in surgery—the Soviets delivered a jolt to the U.S.’s sense of complacency.

Sputnik is an important lesson: Just when we think that everything is going well, something can arise—often something unpredictable—that shows us that our concep-tion of the future is mistaken, that our advantages have evaporated, that much work remains to be done.

This thinking applies to Brown Advisory as well. We must not allow ourselves to become complacent and take for granted our ability to help clients. Instead, we must plan and execute vigorously to make sure that we do not wake up one day to a Sputnik moment.

We have a clear sense of our priorities going forward. We know that we must look at new and different investment tools from top managers to help clients meet their objectives. We must launch new strategies in whatever structures our clients desire, including separate accounts, mutual funds and UCITS funds. We must increase our reinvestment in our firm’s technology to help our professionals provide the highest level of client service. We must strengthen our bench of leaders and increase our team’s diversity, which fosters the rich exchange of creative ideas that allows our colleagues to solve problems for clients. Finally, we must further embrace the wonderful challenges and opportu-nities that new generations of clients and colleagues are bringing to our industry.

If we do these things, we think that we have the best chance of staying relevant to clients. As Sputnik reminds us, this is no time for complacency.

Michael Hankin, President and CEO,Anne Bartlett, Private Client Relationship Advisor, andClinton Daly, Head of Business Development

WASHINGTON, D.C.5404 Wisconsin Avenue, Suite 1000Chevy Chase, MD 20815

Alice PaikHead of Strategic Advisory Group (240) [email protected]

BALTIMORE901 S. Bond Street, Suite 400 Baltimore, MD 21231

Chris BartlettHead of Private Client(443) [email protected]

BOSTON99 High Street, 10th FloorBoston, MA 02110

Dune ThornePortfolio Manager(617) [email protected]

WILMINGTON1201 North Market Street, Suite 1407Wilmington, DE 19801

Porter SchuttPortfolio Manager (302) [email protected]

CHAPEL HILL1295 Environ WayChapel Hill, NC 27517

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PUTTING THE PIECES TOGETHER...more than ever by the challenge of putting together the pieces in the...

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