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Westwood Holdings Group Inc   (WHG)
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    Sector  Financial    Industry Investment Services
   Industry Investment Services
   Sector  Financial
 



 

What are Westwood Holdings Group Inc's Business Segments?



Advisory
Our advisory business is comprised of Westwood Management and Westwood International and encompasses three distinct investment teams – the U.S. Value Team, the Global Convertible Securities Team, and the Global and Emerging Markets Equity Team.
Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments and foundations. Institutional separate account minimums vary by investment strategy and generally range from $5 million to $25 million. Westwood Management also provides advisory services to individuals, the Westwood Funds® and UCITS funds, as well as subadvisory services to other mutual funds and pooled investment vehicles. Westwood Management’s investment strategies are managed by the U.S. Value Team, based in Dallas, Texas, and by the Global Convertible Securities Team, based in Boston, Massachusetts. Our investment professionals average fifteen years of investment experience. We believe team continuity and years of experience are among the critical elements required for successfully managing investments.


Westwood International, based in Toronto, Canada, provides investment advisory services to large institutions, pooled investment vehicles and UCITS funds, as well as subadvisory services to the National Bank Westwood Funds, which are mutual funds offered by National Bank of Canada. Institutional separate account minimums vary by investment strategy and generally range from $10 million to $25 million. Westwood International's investment strategies are managed by the Global and Emerging Markets Equity Team. Westwood International has entered into a Memorandum of Understanding (“MOU”) with Westwood Management pursuant to which Westwood International is considered a “participating affiliate” of Westwood Management as that term is used in relief granted by the staff of the SEC allowing U.S. registered investment advisers to use portfolio management or research resources of advisory affiliates subject to the supervision of a registered adviser. Pursuant to the MOU, Westwood International professionals provide advisory and subadvisory services to certain Westwood Funds®, pooled investment vehicles and large U.S. institutions under the supervision of Westwood Management.

Investment Strategies
We offer a broad range of investment strategies, which allows us to serve a variety of client types with different investment objectives. We currently manage five investment strategies each with over $1 billion in assets under management, including our Income Opportunity, LargeCap Value, SMidCap Value, Emerging Markets and Emerging Markets Plus strategies.

U.S. Value Team
The U.S. Value team employs a value-oriented approach. The common thread that permeates the team's strategies is a disciplined approach to controlling risk and preserving client assets whenever possible. The team seeks to invest in companies with high levels of free cash flow, improving returns on equity and strengthening balance sheets that are well positioned for growth but whose value is not fully recognized in the marketplace. Through investments in companies that exhibit these characteristics, we seek to generate consistently superior performance relative to our industry peers and relevant benchmark indices. This investment approach is intended to preserve capital during unfavorable periods and provide superior real returns over the long term. We believe that we have established a track record of delivering competitive risk-adjusted returns for our clients. The principal investment strategies currently managed by the U.S. Value Team are as follows:

LargeCap Value: Investments in equity securities of approximately 40-60 seasoned companies with market capitalizations at purchase generally over $7.5 billion. This portfolio is invested in companies where we expect that future profitability, driven by operational improvements, will exceed expectations reflected in current share prices.
Concentrated LargeCap Value: Investment in equity securities of approximately 15-30 companies with market capitalizations at purchase generally over $5 billion. This portfolio is invested in companies where we expect that future profitability, driven by operational improvements, will exceed expectations reflected in current share prices.
SMidCap Plus+: Investments in equity securities of approximately 45-65 companies with market capitalizations at purchase between $2 billion and $15 billion. Similar to our other value-oriented investment strategies, we seek to discover operational improvements driving earnings growth within small to mid-sized companies that can be purchased at reasonable prices.


SMidCap Value: Investments in equity securities of approximately 50-70 companies with market capitalizations at purchase between $500 million and $8 billion. Similar to our other value-oriented investment strategies, we seek to discover operational improvements driving earnings growth within small to mid-size companies that can be purchased at reasonable prices. This strategy reached its asset capacity in 2010 and is now closed to new investors.
SmallCap Value: Investments in equity securities of approximately 50-70 companies with market capitalizations at purchase between $100 million and $2 billion. Similar to our other value-oriented investment strategies, we seek to invest in high quality companies whose earnings growth is driven by operational improvements not yet fully recognized by the market.


AllCap Value: Investments in equity securities of approximately 50-80 seasoned companies. The portfolio generally comprises our investment professionals’ best ideas for companies with market capitalizations at purchase above $100 million. Similar to our other value-oriented investment strategies, we seek to invest in companies across a broad range of market capitalizations where we expect that future profitability, driven by operational improvements, will be higher than expectations currently reflected in share prices.


Concentrated AllCap Value: Investments in equity securities of approximately 15-30 companies with market capitalization at purchase generally over $100 million. We seek to invest in companies where we expect that future profitability, driven by operational improvements, will be higher than expectations currently reflected in share prices.


Income Opportunity: Investments in dividend-paying common stocks, preferred stocks, convertible securities, master limited partnerships, royalty trusts, REITs and selected debt instruments. This portfolio’s strategy focuses on companies with strong and improving cash flows able to support sustainable or rising income streams. This strategy is targeted towards investors seeking current income, a competitive total return and low volatility via dividend-paying or interest-bearing securities.
Worldwide Income Opportunity: Investments in a diversified group of global income-producing companies that may include market capitalizations of any size, global preferred equity, global convertible preferred, global fixed income, global REITs, Royalty Trusts, MLPs and cash. This portfolio's strategy focuses on companies with strong and improving cash flow sufficient to support sustainable or rising income streams.


Master Limited Partnership Infrastructure Renewal (“MLPs”): Investments include MLPs (including limited partnerships and general partnerships) and other securities, focusing on partnerships that exhibit higher distribution yields, stable and predictable cash flows, low correlations to other asset classes, and growth potential.

Global Convertible Securities Team
The Global Convertible Securities Team manages both long-only and liquid alternative global convertible securities strategies employing a disciplined investment process and rigorous risk management. The team's investment philosophy is based on the following beliefs:

the asymmetric return profile of balanced convertible bonds can provide superior risk-adjusted returns over medium- to long-term time horizons;

convertible securities markets are inefficient and opportunities exist to benefit from pricing anomalies;

a global focus provides more robust opportunities and a clearer picture of the broad convertibles universe; and

proprietary fundamental research is the best way to identify solid companies with attractive risk-adjusted return profiles.
The team draws on the proprietary fundamental research of all three of Westwood's investment teams in order to identify securities with an attractive risk-adjusted return profile. The principal investment strategies currently managed by the Global Convertible Securities Team are as follows:
Strategic Global Convertibles: This strategy seeks to provide equity-like returns with lower volatility by investing in a balanced portfolio of 60-90 worldwide convertible securities.


Market Neutral Income: This liquid alternative strategy seeks to produce positive absolute returns over a full market cycle with low volatility by combining a yield-focused portfolio that invests in high quality, short duration convertible securities with a hedged portfolio utilizing convertible arbitrage and other hedging strategies.

Global and Emerging Markets Equity Team
The Global and Emerging Markets Equity Team emphasizes Economic Value Added (EVA) in its investment process and seeks to identify mispriced businesses that can generate sustainable earnings growth. The team offers global and emerging markets equity investment strategies. The principal investment strategies currently managed by the Global and Emerging Markets Equity Team are as follows:
Emerging Markets: This strategy invests in the common stocks of 70-90 companies that are located or have primary operations in emerging markets with market capitalizations above $500 million. The portfolio is invested in companies that we believe represents sound businesses that are mispriced and can generate sustainable earnings growth.

Emerging Markets Plus: This strategy invests in the common stocks of 50-70 companies that are located or have primary operations in emerging markets and have market capitalizations above $1.5 billion. The portfolio is invested in companies that we believe represent sound businesses that are mispriced and can generate sustainable earnings growth.

Emerging Markets SMid: This strategy invests in the common stocks of 70-90 small- and mid-cap companies that are located or have primary operations in emerging markets and have market capitalizations between $150 million and $9 billion. The portfolio is invested in companies that we believe are sound businesses that are mispriced and can generate sustainable earnings growth.

Global Equity: This strategy invests in the common stocks of 65-85 companies located throughout the world, with market capitalizations above $1 billion. Similar to our Emerging Markets strategy, the portfolio invests in companies that we believe are sound businesses that are mispriced and can generate sustainable earnings growth.
Global Dividend: This strategy invests in the common stocks of 65-90 well-established companies around the world, with an emphasis on sustainability and growth of dividends. It seeks to invest in strong franchises that we believe are mispriced, with good liquidity, the ability to generate sustainable economic profits and potentially pay dividends.

Our ability to grow assets under management is primarily dependent on our ability to generate competitive investment performance, our success in building strong relationships with investment consulting firms and other financial intermediaries, as well as our ability to develop new client relationships while nurturing existing relationships. We continually seek to expand assets under management by growing our existing investment strategies, as well as identifying and developing new ones. We intend to grow our investment strategies internally but may also consider acquiring new investment strategies from third parties, as discussed under “Growth Strategy” below.


Westwood Management and Westwood International manage client accounts under investment advisory and subadvisory agreements. Typical for the asset management industry, these agreements are usually terminable upon short notice and provide for compensation based on the market value of client assets under management. Westwood’s advisory fees are paid quarterly in advance based on assets under management on the last day of the preceding quarter, quarterly in arrears based on assets under management on the last day of the previous quarter, or are based on a daily or monthly analysis of assets under management for the stated period. A few clients have contractual performance-based fee arrangements, which generate additional revenues if we outperform a specified index over a specific period of time. Revenue for performance-based fees is recorded at the end of the measurement period. Revenue from advance payments is deferred and recognized over the period that services are performed. Pursuant to these agreements, Westwood provides overall investment management services, including directing investments in conformity with client-established investment objectives and restrictions. Unless otherwise directed in writing by clients, Westwood has the authority to vote all proxies with respect to securities in client portfolios.


Westwood Management and Westwood International are parties to subadvisory agreements with other investment advisors under which they perform similar services under advisory agreements. Our subadvisory fees are generally computed based upon the average daily assets under management and are payable on a monthly basis.

Trust
Through the combined efforts of the Dallas, Omaha and Houston offices of Westwood Trust, we provide fiduciary and investment services to high net worth individuals and families, non-profit endowments and foundations, public and private retirement plans and individual retirement accounts ("IRAs"). Westwood Trust is chartered and regulated by the Texas Department of Banking. Fees charged by Westwood Trust are separately negotiated with each client and are typically based on assets under management. Clients generally have at least $1 million in investable assets.

Fiduciary Services
Westwood Trust’s fiduciary services include but are not limited to: financial planning, wealth transfer planning, customizable trust services, trust administration and estate settlement. Westwood Trust also provides custodial services, tax reporting, accounting of trust income and principal, beneficiary and retiree distributions and safekeeping of assets.


Investment Services
Westwood Trust utilizes a consultative approach in developing a client’s portfolio asset allocation. Our approach involves examining the client’s financial situation, including their current portfolio of investments, and advising the client on ways to reduce risk, enhance investment returns and strengthen their financial position based on each client’s unique objectives and constraints. Westwood Trust seeks to define and improve risk/return profiles of client investment portfolios by offering a comprehensive investment solution or enhancing clients’ existing investment strategies. Westwood Trust manages separate portfolios of equity and fixed income securities for certain agency and trust clients. Equity portfolios are generally patterned after the institutional strategies offered by Westwood Management or developed by the internal investment team in our Houston Woodway office. Fixed income portfolios consist of targeted laddered portfolios of primarily high quality municipal securities.
Westwood Trust also sponsors several common trust funds in which client assets are commingled to achieve economies of scale. Westwood Trust’s common trust funds fall within two basic categories: personal trusts and employee benefit trusts. Westwood Trust sponsors common trust funds for most of the investment strategies managed by Westwood Management and Westwood International. Westwood Trust has also engaged SKY Harbor Capital Management, LLC, William Blair & Company, LLC and Brandywine Global Investment Management, LLC, all registered investment advisors, to subadvise our High Yield Bond, Domestic Growth Equity and International Fixed Income common trust funds, respectively.


Westwood Trust also develops asset allocation models for certain clients utilizing mutual funds managed by Westwood Management and Westwood International, as well as from certain other mutual fund families.

Enhanced Balanced® Portfolios
Westwood Trust is a strong proponent of asset class diversification and offers its clients the ability to diversify among many different asset classes. Westwood Trust Enhanced Balanced® portfolios combine these asset classes into a customizable portfolio for clients seeking to maximize return for a given level of risk. Periodic adjustments are made to asset class weightings in Enhanced Balanced® portfolios based on historical returns, risk and correlation data and our current capital markets outlook.

Distribution Channels
We market our services through several distribution channels to optimize the reach of our investment advisory and trust services. These channels enable us to leverage distribution infrastructures and capabilities of other financial services firms and intermediaries while focusing on our core competency of developing and managing investment strategies.

Institutional
In our institutional channel, we market our investment strategies through institutional investment consultants, financial intermediaries, managed accounts programs and directly to institutional investors. Institutional investment consultants serve as gatekeepers to the majority of corporate retirement plans, public retirement plans, endowments and foundations, which represent Westwood’s primary institutional target markets. Consultants provide guidance to their clients in setting asset allocation strategies, as well as creating investment policies. Consultants also make recommendations for investment firms they believe can best meet their client’s investment objectives. We have established strong relationships with many global, national and regional investment consulting firms, which collectively have contributed to our being considered and hired by their clients. Continuing to enhance existing consulting firm relationships, as well as forging new relationships, increases the awareness of our services in both the consultant community and within their institutional client base.


Marketing our investment strategies to financial intermediaries, via subadvisory relationships, allows us to extend the reach of our investment advisory services to clients of other investment companies with broad, established distribution capabilities. In subadvisory arrangements, our client is generally the investment company through which our services are offered to investors, typically via mutual fund offerings. The investment company that sponsors the mutual fund is responsible for appropriate marketing, distribution and operational and accounting activities.

Managed accounts are similar in some respects to subadvisory relationships in that a third-party financial institution, such as a brokerage firm or turnkey asset management program provider, handles distribution to the end client. The end client in a managed account is typically a high net worth individual or small institution. In these arrangements, the third-party financial institution is responsible to the end client for client service, operations and accounting.
We also market our investment strategies directly to pension funds, endowments, foundations and other institutional investors.

Mutual Funds
In our mutual funds channel, we market our registered mutual funds, the Westwood Funds®, to institutional investment consultants, financial intermediaries, registered investment advisors, select broker-dealers and fund supermarkets. By leveraging our existing relationships with institutional investment consulting firms we are able to participate when their defined contribution and other retirement plan clients require a mutual fund vehicle. We also seek relationships with financial intermediaries that manage discretionary fund models in order to have our funds placed in such models. Our wholesaling group markets our funds directly to registered investment advisors, select broker-dealers and mutual fund supermarkets.

Private Wealth
In our private wealth channel, we generate awareness of our trust fiduciary and investment services through investment consultants, centers of influence, community involvement and targeted direct marketing to high net worth individuals, families and small to medium-sized institutions. A significant portion of our new asset growth has been generated by referrals from existing clients.

   

Westwood Holdings Group Inc Tax Rate Companies within the Investment Services Industry


Business Segments Q3
Revenues
(in millions $)
Q3
Income
(in millions $)
(Sep 30 2023)
%
(Profit Margin)
Total 21.88 4.38 20 %

Growth rates by Segment Q3
Y/Y Revenue
%
(Sep 30 2023)
Q/Q Revenue
%
Q3
Y/Y Income
%
(Sep 30 2023)
Q/Q Income
%
Total 40.23 % -0.3 % - 50.91 %

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