2020 Annual Report Enduring Culture, Extraordinary People
Baird is a privately held, employee-owned financial services firm. Founded in 1919, we’ve built a strong platform of five complementary businesses, which helps to diversify and balance our revenues through all types of market conditions.
More than two-thirds of Baird associates are shareholders in the firm. Ownership is broadly distributed across all levels of Baird.
2019 business unit results have been restated to include Hilliard Lyons revenue from April 1, 2019.
Baird net revenues*
*Financial results do not reflect the consolidation of certain private equity partnerships.
Private Wealth Management
Throughout the pandemic and the market volatility over the past year, Baird’s Private Wealth Management (PWM) team stayed focused on responding to the needs of our clients. Our clients needed advice and support more than ever during this difficult year, and thanks to Baird’s extraordinary people and our enduring culture, we were able to meet that challenge head-on.
Within days of lockdowns being extended all over the country, more than 2,500 PWM associates shifted to working from home. But one thing did not change: Our Financial Advisors made sure they were available and receptive to our clients’ needs. This focus on service is just one way we help prove our value and build trust with our clients.
Our Team: Extraordinary People
In the first full year after completing our integration of Hilliard Lyons in the fourth quarter of 2019, our PWM business includes approximately 1,300 Financial Advisors serving clients from more than 160 offices in 33 states. They are highly accomplished professionals, averaging 20 years of industry experience.
Each of our Financial Advisor teams has access to experts across Baird so they can bring the precise combination of expertise, resources and planning tools to each unique client situation. During 2020, we also added several new tax, estate and financial planning professionals to our Wealth Solutions Group, who partner with our Financial Advisor teams to customize a wealth management plan for each client’s specific needs.
Hilliard Lyons Trust (HLT) is now fully integrated into Baird as of October 2019. HLT not only provides us with new asset management tools but broadens our ability to provide trust and estate planning solutions to clients over multiple generations – helping ensure our clients’ families are taken care of throughout their life journey.
In addition, our Financial Advisors and Client Specialists continue to have access to new digital tools, such as 360 Wealth & Planning, which allows our clients to view their net worth and all their financial accounts in a single location and provides real-time access to their latest financial plan within Baird Online. By maintaining our focus on thoughtful planning conversations, timely advice, and the latest tools and research, our Financial Advisors have been able to not just maintain but deepen and improve client relationships.
Strategas, a Baird Company
A critical resource for PWM and an important recent addition to the Baird family is Strategas, a macroeconomic forecasting firm that has long been a trusted expert on Wall Street. Strategas provides market strategy and perspective tailored to help our clients better understand what is happening in the world today and how it can impact portfolios and plans in the future. Their premier market, macroeconomic, and government policy insights complement the planning and investment strategy work that we offer to you as our wealth management clients.
Our Heritage: Enduring Culture
Baird has long prided itself on a firmwide culture that has landed us on Fortune 100 Best Places to Work For® list the past 18 years. Our expertise, teamwork and client-centered approach have always helped us weather storms like the ones we saw in 2020. In a year of turmoil, our long-term vision and conservative approach served our clients’ financial situation well.
Despite the social distancing landscape, our Financial Advisors went to great lengths to stay in regular communication with our clients. Whether that was through virtual meetings or creating a safe environment with small teams working out of thoroughly disinfected offices, our clients always had a safe and open channel to connect.
Many of our Financial Advisors went above and beyond for our clients in this unusual environment. This included such things as sending groceries and care packages to our elderly clients who weren't able to leave their houses. One branch even hosted a drive-thru food truck for their clients and put together care packages for essential workers. These events were in keeping with Baird’s heritage and culture, which entails doing everything we can for the long-term security of our clients’ futures.
In addition to the pandemic, America also faced civil unrest over the course of the year, which weighed heavily on all of us. Confronting the persistence of racism, inequality and injustice, we at Baird continued to prioritize fostering an environment where every individual truly matters. We pride ourselves on being present – to lean on, to be patient with, and to stay positive for one another. Baird is critically focused on listening to and addressing the concerns of our associates of color as well as the particular needs of our clients who are members of minority communities.
Thank you to all of our clients for our partnership and your continued trust.
Baird Advisors, our fixed income asset management business, delivered another strong year across its suite of products in 2020. In a year that was filled with challenges, our risk controlled, all-weather approach to investing, which has helped guide our clients through every major market event over the past 20 years, continued to serve them well. As always, we took the long view, focusing on competitive, long-term performance that supports our clients’ investment goals. We believe that investors own bonds, especially in a low rate environment, to dampen volatility and normalize overall portfolio returns, not to create excitement. That approach was especially important in a tumultuous 2020. Three of our funds – the Aggregate Bond Fund, Short-Term Bond Fund and Ultra Short Bond Fund – earned prestigious Gold ratings from Morningstar. The team’s consistent focus on long term competitive performance and strong client relationships resulted in a record year of growth for Baird Advisors, which had more than $112 billion in assets under management at the end of 2020. Baird Advisors’ approach to fixed income investing is nationally recognized, with the team members’ expertise frequently being cited in both industry and national media, including Barron's and The Wall Street Journal.
Our team consists of 66 highly experienced professionals, including a group of senior portfolio managers who have invested together for more than 35 years. Several of these managers formed the original Baird Advisors team, which celebrated its 20th anniversary in 2020, as did three of our funds: Core Plus, Aggregate Bond and Intermediate Bond. Mary Ellen Stanek, Chief Investment Officer of Baird Advisors, was nominated for the 2020 Morningstar Outstanding Portfolio Manager Award and was named one of Barron’s 100 Most Influential Women in U.S. Finance. We are grateful for the longevity of our core group and remain focused on keeping our clients’ interests foremost and investing in our team as our business continues to grow.
We continue to support the growth of our business and deepen our capabilities for our clients by developing the next generation of leaders, including adding several new team members in 2020. The continuity of our team reinforces the building of our long-term client relationships, many of which go multiple decades and have an average of 12 years overall. Sadly, we lost a founding member of Baird Advisors with the passing of Gary Elfe, our Research Director Emeritus. Gary’s presence will be missed, but his wisdom, dedication and impact on all of us will live on.
No.1 FUND FAMILY
Source: “Fund Family 150” by Michael Laske, published as of March 2021. ©2021 Morningstar Research Services LLC. All Rights Reserved. Based on a rank of Due Diligence Scorecard asset-weighted scores for firms compared in report.
Marking their fifth anniversary in 2020, our municipal fund strategies have already become leaders among their peer groups. Total assets in our municipal products reached $6 billion at year-end. Our Short-Term Municipal Bond Fund was named 2021 Refinitiv Lipper best short municipal debt fund, the second year in a row it received this honor.
CLIENTS TELL US
We invest in bonds for stability, income and liquidity, not for excitement – we look to you to be our sleep insurance.
THE BAIRD DIFFERENCE
“We ascribe our consistency to the hard work and dedication of our team, who have devoted themselves to serving our clients day in and day out for more than 20 years, across many different environments."Mary Ellen Stanek
Chief Investment Officer, Baird Advisors President of Baird Funds
Baird Equity Asset Management
Our Equity Asset Management teams manage strategies and mutual funds for individual and institutional investors. Each of the business' four teams is staffed with experienced investors possessing a deep expertise in targeted areas of the equity markets. All share the objective of delivering strong performance and exceptional service to our clients. Our time-tested investment philosophies and processes, with their focus on consistency and purity of style, aim to deliver high-conviction active management. Our assets under management have increased over 250% during the past five years.
In the Past Five Years
The Specialized Asset Management (SAM) team, which manages customized portfolios for high-net-worth clients on behalf of Baird Financial Advisors, had a terrific 2020 and has seen assets under management triple over the past three years reaching $2.6 billion in 2020. Our Growth team's MidCap Fund continues to have strong long-term performance and celebrated its 20th year in 2020; the fund was recognized as one of Morningstar’s “Thrilling 36” out of 8,000 funds. The team’s newest offering, the Small/Mid Cap Growth Fund, will reach three years in 2021 and has achieved strong peer relative performance and consistent asset growth resulting in placement on a prominent third-party recommended list.
Chautauqua Capital Management, our international and global team, notched strong peer-relative performance in 2020, which led to another year of consistent growth in assets. Chautauqua’s funds will achieve their five-year milestone in April 2021. In a year with continued headwinds for value investing, our Value team maintained strong client retention.
Throughout the challenges of 2020, we remained focused on our decades-long priority: our clients. What we are most proud of at the end of this year is that our teams delivered strong, competitive results over this challenging period, providing stability and peace of mind for our clients.
© 2021 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Fixed Income Capital Markets
Sales & Trading
Our Sales & Trading team focused foremost on supporting our clients throughout the turbulence of 2020. In response to the global pandemic, we transitioned our business to a work-from-home model early in the year with no disruption to our client relationships. Despite the year’s unique challenges, we remain committed to the fixed income business and delivering expertise in a full range of fixed income securities to our clients.
We took a strategic approach to building out our team in 2020, welcoming nine professionals to our platform. These additions reflect our focus on hiring professionals with not only exceptional fixed income credentials, but a strong alignment with Baird’s cultural values – namely client focus and teamwork. Our team now includes more than 135 sales, trading and analytics professionals who serve clients from 24 offices across the U.S. We also continued to deepen our capabilities in key areas of the fixed income market. Our sales team expanded its coverage of banks, while our trading team enhanced its capabilities in loan trading.
Despite 2020’s challenges, our focus on providing value-added insights, exceptional service and differentiated trading execution resonated with our clients. We achieved our best-ever year for revenues, and our team traded an average $23.7 billion per month – an increase of 21% over 2019.
Baird’s Public Finance team delivers underwriting, advisory, consultant and placement agent services to clients across the public, private and nonprofit sectors. Clients turned to Baird for support throughout 2020’s continued low interest rate environment, as many sought to refinance existing bond issues and access lower costs of capital. The team’s commitment to delivering innovative, tailored solutions drove strong activity. Baird was the No. 1 municipal underwriter in the U.S. for the 12th consecutive year, based on number of issues.1 We also ranked among the top five municipal advisors nationwide, also based on the number of issues.2
Our team of 80 professionals serves clients from 20 offices in 13 states. This structure enables us to deliver the benefits of national presence and regionalized, sector-driven expertise. We made several additions to our platform in 2020, including senior bankers based in San Antonio and Houston, Texas. These additions underscore our long-time commitment to serving municipal issuers and public schools across Texas. Over the past five years, we’ve welcomed 20 professionals and established four offices in the state.
1Based on number of issues from 2009 to 2020, according to Ipreo MuniAnalytics.
2According to Ipreo MuniAnalytics as of December 31, 2020.
Equity Capital Markets
Global Investment Banking
Baird Global Investment Banking provides advisory and financing services to clients across the globe. The global pandemic disrupted deal flow across our industry, particularly mergers and acquisitions, and transformed how we partner with our clients. While our business faced strong headwinds in early 2020, we supported our clients with deal flow throughout the year. Our team executed several highly targeted, highly tailored transactions for clients that sought to capitalize on opportunities that emerged in the unique environment.
We also leveraged a full suite of virtual touchpoints to support our clients when in-person meetings were not possible. In addition to arranging online meetings, conference calls and webinars, we executed several virtual conferences. These sector-oriented events provided our clients with continued access to Baird’s experts and industry relationships, including virtual 1-1 meetings with company leaders and institutional investors.
These efforts culminated in our strong performance during a very challenging year. We completed 189 advisory and financing deals, including increases in buy-side M&A and equity financing transactions, and logged a record backlog of client engagements heading into 2021.
Expertise for All Markets
Our team of more than 400 bankers and support professionals collaborates across geographies and areas of expertise to serve our clients. Despite 2020’s market dislocation and challenging conditions, we enhanced and deepened our sector coverage in our industries, geographies and product areas of focus. For example, we enhanced our global healthcare platform by welcoming senior bankers in North America and Europe. Additionally, we appointed two co-heads of North American M&A to lead the expansion of our capabilities in the geography.
These strategic additions complement our existing platform, which includes five core industry groups that cover dozens of subverticals. We will continue to invest in the talent, technology, resources and systems needed to support the growth of our business and further enhance the execution we deliver to our clients.
Driving our Culture
Our team takes a unique approach to investment banking, operating as one global team on a single profit-and-loss statement. This structure, which is very distinct in our industry, fosters a truly unique culture at Baird – one that values integrity, teamwork, innovation and client focus. We maintained this culture through the global pandemic despite our business-wide shift to remote work and remain focused on being the employer of choice in investment banking. In service of that goal, we will continue to support our team as they advance in their careers and continue to foster an inclusive environment that values our team’s diversity of backgrounds, perspectives and skill sets.
In a year defined by the global pandemic and historic market volatility, Baird continued to serve as a trusted, effective equities partner to our clients. Our focus on long-term relationships drove our strong performance in a challenging year. We shifted our entire business to a distributed work model in early 2020, maintaining continuity and quality of service for our clients through the year’s peak volatility levels.
Throughout 2020, we maintained our commitment to investing in our talent and deepening our long-time focus on inclusion & diversity. We view these efforts as an essential complement to our equities capabilities and crucial to creating the best possible outcomes for our associates and our clients.
Baird was also honored in Greenwich Associates’ annual survey of institutional investors and fund managers, ranking No. 1 for overall quality in sales, corporate access and research in addition to several other top rankings. Meanwhile, our Equity Research team covered more than 725 stocks at year-end. Their industry-renowned insights are complemented by macroeconomic research from Strategas, a Baird company, which was recognized by Institutional Investor as the top macroeconomic research firm on Wall Street for the fourth consecutive year.
Our Sales and Trading teams maintained our singular focus on providing high intensity service and actionable insights to our clients. Amid the volatility, we saw record trading volumes from our clients while continuing to invest in our overall team and capabilities.
Our Global Corporate Access offering and Global Industrial Conference celebrated their 50th anniversaries in 2020. Our institutional conference series successfully pivoted to a virtual format and achieved record attendance, as well as a No. 1 ranking for most useful conferences and seminars in Greenwich Associates’ survey.1
1Greenwich Associates’ 2020 surveys of North American Equity Investors. Surveys conducted with 91 small-cap and mid-cap fund managers and 228 U.S. buyside trading desks that use electronic trading, respectively. Rankings for qualitative metrics based on leading research firms in surveys.
Baird’s Principal Investments group includes three investment strategies:
The group’s sole externally marketed offering makes direct investments through proprietary funds in emerging and lower middle-market companies.
BAIRD PRINCIPAL GROUP
Makes minority co-investments in middle-market private companies as a complement to Baird Capital’s investment strategies.
Makes equity investments in third-party financial services entities that complement Baird’s capabilities and strategic third-party fund limited partner investments.
Since 1989, Baird Capital has raised and invested capital in high-potential companies through a series of private equity and venture capital partnerships. Baird is a meaningful investor in the Baird Capital funds, whose other investors include third-party institutions, high-net-worth clients and qualified Baird associates. Since inception, Baird Capital and related legacy entities have raised and managed approximately $3.8 billion and made more than 320 investments.
We work as one global platform, partnering across the globe to support our portfolio. In addition to financial capital, we provide our portfolio companies with resources like operating advisors and human capital capabilities to support their growth. We manage two investment platforms - Global Private Equity and U.S. Venture Capital.
Throughout 2020, we focused on supporting our portfolio companies and the prudent deployment of capital. We deployed $158 million in 11 new investments and made 13 follow-on investments totaling $24 million. Additionally, we generated $113 million in realizations, primarily from the exit of four investments.
Global Private Equity
With a focus on the global technology services and industrial solutions sectors, our Global Private Equity platform invests in lower middle-market companies across the U.S., U.K. and Asia. This unique approach affords us flexibility in where we deploy capital and enables us to provide investors with global diversification. The team completed four new investments and one add-on acquisition during 2020, deploying $125 million. Several of our portfolio companies posted strong growth through the pandemic and we positioned two for exit. In early 2021, we exited Prescient Healthcare Group and Collingwood Lighting, Ltd., generating over $100 million and over $60 million in proceeds, respectively. To date, we’ve exited three investments and returned over 75% of paid-in capital to investors in Baird Capital Global Fund I.
U.S. Venture Capital
Our Venture Capital platform invests in mid-stage companies in the U.S. healthcare and technology & services sectors. We focus on companies in underserved geographies, with a particular interest in the mid-country. In 2020, we completed fund raising for Baird Venture Partners V with a total of $215 million in committed capital, exceeding our target and the size of our previous venture capital funds. We deployed $57 million in seven new and 10 follow-on investments - our largest-ever annual deployment.
Baird’s commitment to integrity and outstanding performance begins at the top. The continuity of our leadership team is a key strength in building our expertise and enhancing client relationships.
The Baird Way is the responsibility that comes from understanding our business is about improving lives and futures for our clients, for each other and in the communities we share.
Baird's enduring culture and extraordinary people helped us through one of the most challenging years in the firm's existence.