Baird Equity Asset Management Specialized Asset Management Why the - - PowerPoint PPT Presentation

Baird Equity Asset Management

Specialized Asset Management

Portfolio Manager:

• J. Randall McLaughlin, CFA, Managing Director

Baird Equity Asset Management 777 E. Wisconsin Avenue Milwaukee, WI 53202

Why the Market is Ignoring the News

Prepared for: The Ogard Boh Group

October 4, 2017

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Specialized Asset Management

Philosophy What We Believe… Who We Are

An experienced team focused on building multi-asset investment portfolios for Baird's high-net-worth clients. Our easy to understand solutions are customizable, tax efficient and designed to weather tough markets. We believe in establishing clear investment objectives, promoting a long- term perspective, and encouraging realistic risk and return expectations. A disciplined approach to asset allocation is critical to meeting client

• bjectives. We emphasize high quality investments across asset classes.
• Clients come first and integrity is irreplaceable.
• Teamwork fosters prudent investment decisions.
• Experience and focus drive quality results.

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Direct Access to Tenured Professionals

Randy McLaughlin, CFA SAM Portfolio Manager Brenda Hutchinson, CFA SAM Portfolio Manager Max Mann, CFA, CMT SAM Portfolio Manager

• 25 Years of Experience
• 25 Years with Baird
• BA – Economics

(University of Colorado)

• 28 Years of Experience
• 28 Years with Baird
• BAA – Finance

(University of Wisconsin – Milwaukee)

• 9 Years of Experience
• 9 Years with Baird
• BA – Economics

(Northwestern University)

Team Highlights

• All Team Members Have Equity Ownership
• Average Years of Experience: 20 yrs
• Deep Sector Expertise
• Average Years with Baird: 13 years
• Supported By An Experienced Investment Team

BAI RD RESOURCE PARTNERS Our investment team is supported by:

• Research – Equity and Credit (130+

Professionals)

• Legal and Compliance (60+ )
• I nformation Technology (170+ )
• Human Resources (50+ )
• Finance (60+ )

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Research Driven

Wide breadth of resources and market research driven investment decisions

• Senior portfolio managers contribute to research driven process
• Access to leading Wall Street equity research
• Access to Baird equity and credit analysts

Investment Conferences: Wall Street and industry conferences Cornerstone Macro: Economic and market strategy Renaissance Macro: Technical analysis Evercore ISI: Economic and market strategy Morningstar Direct: Company and fund analytics Market Trend Investors Inc: Market and sector analysis Bloomberg/ Factset: Security analysis, company research

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Client Focus

Asset Allocation – Asset Class Components

W e com bine asset classes w ith our core equity portfolio to help reduce portfolio risk and increase the potential for consistency of returns. Core Equity Portfolio Drivers

• Profitability
• Revenue Growth
• Industry
• Management
• Expectations

Benefits of Com plem entary Asset Classes

• Combines low correlated asset classes to help smooth

returns

• Participation in asset class in favor
• Helps enhance the ability to attain financial goals

CORE Mid Small Int’l Specialty Fixed Income

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Macro news continues to dominate the headlines

Source: DaveGranlund.com

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S&P 500: Strong performance despite Macro “headwinds”

Source: FactSet

1,800.00 1,900.00 2,000.00 2,100.00 2,200.00 2,300.00 2,400.00 2,500.00 2,600.00 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 S&P 500

Recession Fears and Oil Price Collapse BREXIT Collapse & Recovery Trump elected President Tensions with North Korea

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Why is the market not paying attention to the headlines?

Source: FactSet

1,800.00 1,900.00 2,000.00 2,100.00 2,200.00 2,300.00 2,400.00 2,500.00 2,600.00 47.00 49.00 51.00 53.00 55.00 57.00 59.00 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 ISM Manufacturing Index (3mma) S&P 500

Recession Fears and Oil Price Collapse BREXIT Collapse & Recovery Trump elected President Tensions with North Korea

Hint: Economic data has improved!

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Solid Economic Footing

U.S Employment is Strong

Source: Bloomberg Data as of: 8/ 31/ 17

• 850
• 650
• 450
• 250
• 50

150 350 550 Monthly Nonfarm Payroll ( Thousands of Jobs) 2 4 6 8 10 12 Unem ploym ent Rate % ( U-3 ) 6 8 10 12 14 16 18 Underem ploym ent Rate % ( U-6 ) 56 58 60 62 64 66 68 Labor Force Participation Rate %

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U.S. Consumer Feeling More Confident

Source: B.Rich/ Hedgeye

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20 40 60 80 100 120 140 160 1974 1979 1984 1989 1994 1999 2004 2009 2014 Consum er Confidence

Consumer and Small Business Confidence Strong

1 Small Business Optimism as of 7/ 31/ 17 (Next Release: 9/ 12/ 17) Source: Bloomberg Data as of: 8/ 31/ 17

75 80 85 90 95 100 105 110 1974 1979 1984 1989 1994 1999 2004 2009 2014 Sm all Business Optim ism 1

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Lower, Longer

Slow But Steady Growth

Source: Bloomberg, US Bureau of Economic Analysis, Commerce Department Data as of: 8/ 31/ 17

1 0 6 Mos. 4 .9 % 1 2 0 Mos. 3 .6 % 100 110 120 130 140 150 160 15 30 45 60 75 90 105 120 135 Real GDP ( Prior Trough = 1 0 0 ) Months Since Prior Trough

Length and Average Grow th Rate of Expansion

1954-1957 1958-1960 1961-1969 1970-1973 1975-1981 1982-1990 1991-2000 2001-2007 2009-Present 9 8 Mos., 2 .1 % ( Less than half of the Historical Average Grow th Rate) 9 2 Mos. 4 .3 % Post W W I I Avg. Expansion Length: 61 Months Growth Rate: 4.7%

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U.S. Growth Looks Strong vs. Other Developed Countries

Source: Bloomberg Data as of: 6/ 30/ 17

90 92 94 96 98 100 102 104 106 108 110 112 114 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1 2 / 3 1 / 0 7 = 1 0 0

Com parison of Global Business Cycles Real GDP

US UK Eurozone Japan

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Synchronized Global Growth

Better Growth Globally Across Developed and Emerging Economies

Note: 2017 is a forecast based off first and second quarter data for most countries. Source: Organization for Economic Cooperation and Development, The Wall Street Journal Data as of: 6/ 30/ 17

5 10 15 20 25 30 35 40 45 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Est. Num ber of Countries

Econom ies Grow ing / Contracting

Accelerating Growth Slowing Growth Contraction

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S&P Earnings Expectations are Strong

Source: Evercore

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Why do earnings matter? They drive the market!

Source: FactSet

1,800.00 1,900.00 2,000.00 2,100.00 2,200.00 2,300.00 2,400.00 2,500.00 2,600.00 124.00 126.00 128.00 130.00 132.00 134.00 136.00 138.00 140.00 142.00 S&P 500 - Earnings - NTM (1m lag) S&P 500 - Price

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SAM believes some companies are better than others

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Q&A

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U.S. Treasury Yields Look Attractive to Global Investors

Strong Base Level of Demand for U.S. Bonds

Source: Bloomberg Data as of: 8/ 31/ 17

• 1%

0% 1% 2% 3% 4% Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17

1 0 Yr. Global Yields

U.S. Germany Japan Switzerland

2 .1 2 % 0 .3 6 % 0 .0 1 %

• 0 .1 4 %