Strategist & Overall Manager of the Year: WestEnd Advisors

Ned Durden

Title: Chief Investment Strategist

Years with firm: 15

Years in financial services: 24

Investment/asset class focus: Forward-looking, high-conviction multi-asset solutions

Firm name: WestEnd Advisors

Firm headquarters: Charlotte, North Carolina

Year firm founded: 2004 (when purchased by partners from PowellJohnson)

Number of employees: 24 employees, including seven partners

AUA as of May 31, 2021: $15 billion

It’s nearly impossible to prepare for a black swan event like the market sell-off in March 2020 when the coronavirus pandemic slammed global stock markets and froze U.S. bond markets until the Federal Reserve intervened.

But WestEnd Advisors was ready for the turmoil. The boutique investment firm was defensively positioned, more heavily weighted with health care, utilities and consumer staple stocks, and had no exposure to sectors such as energy, industrial materials and financials.

“Our concern entering 2020 and seeing the economic data indicating moderate growth was that the market seemed to be pricing in a reacceleration of economic growth,” says Ned Durden, the chief investment strategist. “If growth didn’t reaccelerate … we could be experiencing a difficult time for returns. And then the pandemic hit. Most economically sensitive sectors were hit the hardest. Anticipating weaker growth allowed us to protect investors on the downside in the rapid drawdown.”

After the dramatic sell-off, WestEnd Advisors added economically sensitive sectors to portfolios, such as financials and industrials, adjustments that “proved to be well-timed and added to returns,” according to Envestnet.

The macroeconomic analysis, which drives the firm’s sector-focused equity and fixed-income allocation decisions, sets it apart from its peers, according to Envestnet, which awarded the firm two top prizes in this year’s Asset Manager and Strategist Awards: for the strategist category and for the overall winner. WestEnd Advisors beat out nearly 150 firms in the strategist category and declared the award winner for the overall prize.

The firm offers three major strategies: U.S. Sector, Global Equity, which marries U.S. sector with international allocations, and Global Balanced, which adds U.S. fixed-income allocations to the Global Equity strategy, plus two other strategies: Global Conservative and Large-Cap Core Equity.

All five are high-conviction strategies, and all but Large-Cap Core Equity are built with ETFs — rather than individual securities — from Vanguard, BlackRock and State Street. “ETFs from the big three can give us the exposure we need,” Durden says.

Four of the five strategies handily beat their benchmarks in 2020, with gains ranging from 27% to 56% above the performance of those benchmarks. The firm’s Global Conservative topped its benchmark by a little more than 9%.

WestEnd Advisors’ investment process starts with an overview of the macroeconomy, using over 200 economic data points for the U.S. and around the world. The firm uses the economic data it collects to develop outlooks 12 to 18 months in the future. “If you get too close in, around six months, a lot [of the potential move] is priced in,” Durden says.

For the U.S. market, the firm invests in up to six of the S&P 500’s 11 sectors at any one time; the strategy will end up owning all 11 sectors over a full economic cycle.

For the international portion of its strategies, WestEnd Advisors uses the economic data to overweight or underweight major regions such as developed Europe and emerging Asia.

Average strategy turnover is about 30% a year, and the drivers of those changes are the economic shifts, according to Durden. He describes the firm’s turnover strategy as “between set-it-and-forget-it and short-term tactical.” The objective for all this: to maintain timely portfolios for advisors and their clients, he says. Low turnover also makes these strategies tax-efficient.

For the Global Balanced Portfolio, which has outpaced its benchmark in nearly 87% of rolling three-year periods since its inception in January 2005, risk-modeling analytics suggest that the outperformance appears to reflect the “dynamic asset allocation decisions” that reinforce “the team’s purported skill set, “ according to Envestnet.

The investment team has five generalist members: three portfolio managers, including Durden, and two analysts.

The success of WestEnd Advisors’ strategies has led to strong asset growth, which has nearly tripled in the past four years, according to Envestnet. —Bernice Napach