Westwood Holdings Group Profile
Westwood Holdings Group, Inc., through its subsidiaries, manages investment assets and provide services for its clients. The company’s subsidiaries include Westwood Management Corp. (Westwood Management); Westwood Trust; and Westwood International Advisors Inc. (Westwood International).
Segments
The company operates in two segments, Advisory and Trust.
Advisory segment
This segment’s business includes Westwood Management and Westwood International.
Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments, and foundations. Westwood Management also provides advisory services to individuals and the Westwood Funds, as well as subadvisory services to other mutual funds and pooled investment vehicles.
Westwood International provides investment advisory services to large institutions and pooled investment vehicles, as well as subadvisory services to the National Bank Westwood Funds, which are mutual funds offered by National Bank of Canada. Westwood International also provides investment advisory services to an Ireland-domiciled Undertakings for Collective Investment in Transferable Securities fund.
Investment Strategies
The company offers a range of investment strategies allowing the company to serve various client types and investment objectives. The principal investment strategies managed by Westwood Management are as follows:
LargeCap Value: Investments in equity securities of approximately 40-60 well-seasoned companies with market capitalizations approximately $7.5 billion.
Dividend Growth: Investments in equity securities of approximately 30-50 companies with market capitalizations approximately $1 billion.
SMidCap Plus+: Investments in equity securities of approximately 45-65 companies with market capitalizations at purchase of between $2 billion and $15 billion.
SMidCap Value: Investments in equity securities of approximately 50-65 companies with market capitalizations at purchase of between $500 million and $8 billion.
SmallCap Value: Investments in equity securities of approximately 50-70 companies with market capitalizations at purchase of between $100 million and $2 billion.
AllCap Value: Investments in equity securities of approximately 50-80 well-seasoned companies. The portfolio comprises the company’s investment professionals’ ideas among companies with market capitalizations approximately $100 million.
Balanced: Investments in a combination of equity and fixed income securities, designed to provide both growth opportunities and income, while also emphasizing asset preservation in ‘down’ markets.
Income Opportunity: Investments in dividend-paying common stocks, preferred stocks, convertible securities, master limited partnerships, royalty trusts, REITs, and selected debt instruments.
Master Limited Partnership Infrastructure Renewal (MLPs): Investments include MLPs (including limited partnerships and general partnerships) and other securities. Within these types of securities, the portfolio focuses on partnerships that exhibit higher distribution yields, stable and predictable cash flows, low correlations to other asset classes, and growth potential.
Investment Grade Fixed Income: Investments in intermediate term corporate and government bonds. The company intends to add value to client portfolios through yield curve positioning and investing in debt instruments with improving credit quality potential.
Westwood International offers global and emerging markets equity investment strategies. The principal investment strategies managed by Westwood International 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 and have market capitalizations approximately $500 million.
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 approximately $1.5 billion.
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.
Global Equity: This strategy invests in the common stocks of 65-85 companies located throughout the world, with market capitalizations approximately $1 billion.
Global Dividend: This strategy invests in the common stocks of 65-90 companies around the world, with an emphasis on sustainability and growth of dividends.
Advisory and Subadvisory Agreements
Westwood Management and Westwood International manage client accounts under investment advisory and subadvisory agreements. Pursuant to these agreements, the company provides overall investment management services, including directing investments in conformity with client-established investment objectives and restrictions. Westwood Management and Westwood International are parties to subadvisory agreements with other investment advisors under which they perform similar services as they do under advisory agreements.
Westwood Management provides investment advisory services to the Westwood Funds family of mutual funds, which includes the Westwood Income Opportunity Fund, the Westwood SMidCap Fund, the Westwood LargeCap Value Fund, the Westwood SmallCap Value Fund, the Westwood Dividend Growth Fund, the Westwood SMidCap Plus+ Fund, the Westwood Short Duration High Yield Fund, the Westwood Emerging Markets Fund, the Westwood Global Equity Fund, and the Westwood Global Dividend Fund. The Westwood Short Duration High Yield Fund is subadvised by SKY Harbor Capital Management, LLC, a registered investment adviser based in Greenwich, Connecticut.
Trust segment
This segment, through Westwood Trust, provides trust services and participation in Westwood Trust sponsored common trust funds to institutions and high net worth individuals and families generally having approximately $2 million in investable assets. Westwood Trust provides back office services to clients, including tax reporting, distribution of income to beneficiaries, preparation of account statements and attending to the special needs of particular trusts, and also serves as trustee for tax and estate-planning purposes and for special needs trusts. Westwood Trust is chartered and regulated by the Texas Department of Banking.
Westwood Trust primarily provides services for employee benefit trusts and personal trusts. Employee benefit trusts include retirement plans of businesses to benefit their employees, including defined contribution plans, pensions and profit sharing plans. Westwood Trust might also be appointed as a trustee and might provide administrative support for these plans, as well as investment advisory and custodial services. Personal trusts are developed to achieve different objectives and Westwood Trust acts as trustee to such trusts and assists them in developing tax-efficient trust portfolios.
Services
Westwood Trust undertakes a fiduciary responsibility with regard to the management of each client’s assets and utilizes a consultative asset allocation approach. This approach involves the company’s examining the client’s financial situation, including the client’s portfolio of investments, and advising the client on ways to improve investment returns and strengthen its financial position. Westwood Trust also provides custodial, safekeeping, and accounting services.
Common Trust Funds
Westwood Trust sponsors various 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, such as personal trusts and employee benefit trusts. Westwood Trust sponsors common trust funds for majority of the investment strategies managed by Westwood Management. Westwood Trust also engages third-party subadvisors for some common trust funds, such as the company’s Domestic Growth Equity, High Yield Bond and International Fixed Income common trust funds.
Enhanced Balanced Portfolios
Westwood Trust is a proponent of asset class diversification and offers its clients the ability to diversify among 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 the company’s capital markets outlook.
Distribution Channels
The company markets its services through various distribution channels to expand the reach of its investment advisory services.
Institutional Investment Consultants: Investment consulting firms serve as gatekeepers to the majority of corporate retirement plans, public retirement plans, endowments, and foundations, which represent the company’s primary institutional target markets.
Subadvisory Relationships: The company’s subadvisory relationships allow the company to extend the reach of its investment advisory services to clients of other investment companies with established distribution capabilities. In subadvisory arrangements, its client is the investment company through which the company’s services are offered to investors, through mutual fund offerings.
Managed Accounts: 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 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.
Growth Strategy
The company’s growth strategy is to generate growth from new and existing clients and consultant relationships; attract and retain key employees; improve assets in its existing investment strategies; foster continued growth of the Westwood Trust platform; foster expanded distribution through mutual funds; pursue strategic corporate development opportunities; pursue opportunities internationally through targeted sales and relationships with international distributors and institutional investors; continue to strengthen its brand name; develop or acquire new investment strategies; and expand the company’s distribution focus to target the U.S. plan sponsors directly.
Regulation
The company’s business is subject to regulation at both federal and state levels by the Securities and Exchange Commission (SEC) and other regulatory bodies. Westwood Management is registered with the SEC under the Investment Advisers Act of 1940 and under the laws of various states. As a registered investment adviser, Westwood Management is regulated and subject to examination by the SEC.
Westwood Management also acts as adviser to the Westwood Funds, a family of mutual funds registered with the SEC under the Investment Company Act of 1940. As an adviser to a registered investment company, Westwood Management must comply with the Investment Company Act and related regulations. Under the rules and regulations of the SEC promulgated pursuant to the federal securities laws, the company is subject to periodic SEC examinations. The company must also comply with anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001, as subsequently amended and reauthorized. The company is in substantial compliance with the requirements of the regulations under the Investment Advisers Act, the Investment Company Act, and the USA PATRIOT Act.
Westwood Trust is subject to the Texas Finance Code (the ‘Finance Code’), the rules and regulations promulgated under the Finance Code and supervision by the Texas Department of Banking. Westwood International is registered with both the Ontario Securities Commission and the Autorité des marchés financiers in Québec. The company is subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and to the related regulations, insofar as it is a ‘fiduciary’ under ERISA with respect to some clients.
History
Westwood Holdings Group, Inc. was founded in 1983.
