Morningstar - Q2 2021 - 65
These measures have helped keep the fund's risk
in line with more diversified peers. Its 5-star
Morningstar Rating reflects high returns relative to
its category over the past three and five years,
with only average risk.
Wirecard WCAGY was a rare misfire last year,
as evidence of accounting fraud led the team to
decrease and finally sell the position. The
damage was limited, as Haywood notes, yet he
also says, " For us to print a number north
of 40% in 2020 and then still have a Wirecard
is a reminder of the importance of humility
in this process. "
Avadel Pharmaceuticals AVDL is a more
typical example of a company that no longer
meets the team's standards: Its thesis changed.
The company had a unique delivery mechanism
that it licensed to drug developers. When
it pivoted to developing drugs in-house, Brown
Capital sold the stock.
Kabir Goyal, managing director and senior portfolio manager
at Brown Capital Management.
" We are not investing in companies that have
binary outcomes, " explains Goyal. " If a
company has a drug in phase 1 that makes it all
the way, the stock will be 10 times higher.
But if it doesn't work, you end up with zero.
That's not our style. "
The firm is dedicated to protecting its style and
expects to soft close the fund at $4 billion.
In this case, too, the fund will follow in the steps
of its better-known sibling, which closed to
new investors in 2013. Chen cites that commitment
as one reason he felt confident investing here.
Another plus, says Chen, is that Brown Capital
is an employee-owned firm: " Their livelihoods
depend on the performance they generate. "
Thomas notes the employee stock ownership plan,
put in place in 2016, as part of his positive
assessment of the firm.
Brown says he started the plan to protect
the firm's legacy by retaining its talented teams.
" It's a culture that's working, " he says,
" and since 2016, I would say humming. " K
Maurice Haywood, managing director and senior portfolio
manager at Brown Capital Management.
Laura Lallos is managing editor of Morningstar magazine.
Photography by Matt Roth and Irwin Wong.
morningstar.com/lp/magazine
65
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Morningstar - Q2 2021
Table of Contents for the Digital Edition of Morningstar - Q2 2021
Contents
Morningstar - Q2 2021 - Cover1
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