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N e w s l e t t e r

RBett e rt h e

Investor Activism

What are Activists Looking For?

Understanding Your Exposure to Changes in Portfolio Management Opportunities for Fund Focused Outreach

Firm Snapshot -

William Blair & Company, LLC

Fund Snapshot -

Fidelity Small Cap Stock Fund

Metro Area Investment Community Focus -

Kansas City, MO

CONTENTS: Volume 7, Issue 1January 2014

N e w s l e t t e r

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Copyright ® 2014 Ipreo Holdings LLC. All rights reserved. Articles are published without any responsibility for any loss resulting from any action or decision by any person as a result of any information contained herein.

Investor Activism: What are Activists Looking For?

Shareholder activism can take many forms, but generally refers to times when an investor uses an equity stake in a company to put pressure on the management. These pressures are meant to convince management of making a change that ranges from financial policy changes, or non-financial ventures such as adopting environmentally friendly policies or changing corporate governance. Dealing with activism has always been an important component of IR, but has recently risen to the spotlight and now occupies the forefront of many IROs’ concerns. Additionally, the number of activist campaigns against companies has dramatically increased in the past few years. It is only natural to wonder, how has activism changed over the years, and what characteristics of companies are activists finding more attractive?

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Historically, activists take equity positions in companies in order to “unlock shareholder value,” which is traditionally done through management changes such as replacing CEOs or board members, or “financial engineering” methods including share buybacks, changes in dividend policy, or selling off underperforming divisions. These campaigns have traditionally targeted companies that are undervalued (low P/E, etc.), underperforming (multiple quarters of missed guidance), or going through major change (crisis, restructuring, etc.).

ValueAct’s recent activist campaign against Microsoft is an example; Microsoft had missed fiscal Q4 earnings and saw decreases in valuation throughout early 2013, and subsequently became a target of ValueAct. The activist’s campaign primarily centered on redistributing foreign cash reserves to shareholders and restructuring core businesses (open Windows to iPad, create new options for search business and Xbox, etc.). Microsoft eventually reached an agreement following periods of pressure from the activist and offered ValueAct a seat on its board. However, it is important to note that while it is true that many target companies like Microsoft have large, sometimes increasing cash positions year-by-year, they also have decreasing cash as a percentage of total assets year-by-year.

Figure 1: Number of North American Activist Campaigns since 2000

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Misconception #1: Activists tend to target companies with large cash positions to either reinvest into the company or distribute to shareholders.

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Source: S&P Capital IQ, Ipreo Research Source: S&P Capital IQ, Ipreo Research

Straight cash positions seems to indicate that target companies with higher cash positions tend to get targeted by activists, but in reality, the average cash as a percentage of total assets of target companies is actually decreasing. While the case of Apple and Microsoft are exceptions to this rule, cash is not as important of a factor of attracting activists as previously believed.

An example of a management change campaign in recent news is Carl Icahn’s bid to takeover Dell. As the PC market continued to suffer, Dell founder Michael Dell proposed a solution of a company buy-out in order to transition Dell into the mobile space and according to ISS, “transfer the risk of the deteriorating PC business and the company’s ongoing business transformation to the buyout group.” Icahn did not support Dell’s transformation strategy, believing that a buyout would keep stockholders from sharing the gains from a potential turnaround, and planned to replace Dell’s board in order to implement a recapitalization plan that would keep the stock public. Icahn ended his takeover bid following a court decision involving the status of unvoted shares.

However, the markets have recently seen a shift in activist behavior in that activists are no longer going after just “distressed” companies. In February 2013, David Einhorn of Greenlight Capital started to pressure Apple to redistribute its large reserves of cash. Apple yielded to Einhorn’s pressure with both a stock buyback program as well as an increase in in its quarterly dividend by 15%. More recently, Carl Icahn announced his interest on Twitter to discuss a larger buyback with Apple CEO Tim Cook. While Apple did see a large drop in stock performance throughout the first half of 2013, the company is still widely seen as a well-performing company that saw its first profit decline in a decade, hardly a company in “distress.”

Figure 2: Total Cash Position ($M) Figure 3: Target Companies’Cash as a Percentage of Total Assets

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Misconception #2: Following the examples of Microsoft and Apple, many believe that Activists tend to target companies that do not issue or issue very low dividends in order to provide greater consistent revenue for shareholders.

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Rather than attacking companies that are not paying dividends or pay low dividends, targets companies have increasingly been dividend payers. Other than in 2009 and 2010, dividend payers have consisted of about 20% or more of companies that have been targeted, almost 30% in 2013. Of these dividend payers, the average dividend yield is about 1.8%, just slightly below the market average. While activists can certainly target companies with the pressure to initiate or raise dividends, this does not tend to be a factor that attracts activists to a campaign.

Misconception #3: Along with dividends, many believe that activists are also targeting companies that do not have a buyback program in order to unlock shareholder value.

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Figure 4: % of Target Companies that Issue a Dividend

Figure 5: Target Companies Share Buyback Expense ($)

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Companies targeted by activists have increasingly already been buying back shares.

JANA’s recent involvement with Agriumis another example how activists are no longer going after distressed companies.While it is true that activists traditionally seek companies that are underperforming,the average 12-month excess return oftarget companies, although negative, areapproaching 0% in recent years, indicatingthat both underperforming and well-performing companies are equally targeted.Despite Agrium’s reduction in valuation multiples, the company had seen a 4-year increase in price performance of almost 300% as of February 2013 prior to Agrium’s victory. Even with the large returns that Agrium has provided to its long-term shareholders, JANAhoped to win board seats with the ultimate intention of spinning off the company’s retail business, believing that it would further unlock shareholder value. Apple and Agrium are just two examples where mature companies that have been outperforming and beating earnings expectations can still be the targets of activist campaigns.

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As mentioned, activist campaigns have historically focused on management changes and “financial engineering” to unlock shareholder value. However, several investors have recently taken on a more long-term interest in companies to the extent of remaking the entire business, changing the customer base, and providing new strategic directions.

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Figure 6: Excess Return (12-Month) of Target Companies (%)

Figure 7: AGU 4-Year Price Performance

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The most obvious case of this has been the case of Pershing Square Capital’s Bill Ackman with J.C. Penney. While on the board, Ackman made many changes to J.C. Penney’s business, notably bringing in Ron Johnson as CEO in order to alter the retailer’s business and consumer base, which ultimately ended with Johnson leaving the company in April and Ackman leaving the board in August. This new trend is a particular bold move, as many industry experts question whether an investment manager has the expertise and experience to successfully guide a company’s operations. Regardless, issuers should be aware that this trend may become increasingly common in the long-term even if such campaigns have not been successful in the past.

Oftentimes, when activists seek to make strategic operational changes (or even to finance polices such as dividends or buybacks), they will push the target companies to issue debt to finance such changes. Theoretically, it makes sense to assume that under-levered companies a popular target for activists. However, low levels of debt may not be as important a factor in selecting companies as many had previously thought.

Misconception #4: Activists target under-levered companies, in the hopes of using leverage to create benefits for equity holders.

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Source: S&P Capital IQ, Ipreo Research Source: S&P Capital IQ, Ipreo Research

While activists can certainly pressure companies to increase their debt issuance, debt is not a major factor in attracting activists. In fact, targets are higher-levered now than at any point in the last 5 years. Simply maintaining mid-leverage AA/A/BBB balance sheet does not mean activists won’t see opportunity.

Overall, it appears as if many of the traditional features that attract activists, such as high cash position, low dividend, low debt, and lack of buyback, are not characteristics of target companies in the past 5 years. In fact, it even appears that the target companies have already been taking the same actions that activists would normally pressure companies to do. One possible explanation is that as activist campaigns have become more frequent in the past five years, companies have begun to start implementing these financial changes so that they can avert an activist’s attention. As the data shows, however, implementing these policies does not mean that activists won’t see opportunities; in fact, companies that already underperform or miss earnings that quickly implement policies that affect cash, debt, dividend, buybacks, etc. might actually grab the attention of activists even more. As a result of many evolving changes within the activist environment, activist investors are increasingly taking deep, long-term positions that are looking for changes beyond simple board representation or a higher dividend. Throughout 2012 and 2013, we are seeing increased activist involvement in companies’ long-term strategy and

Figure 8: Median Debt/Capital Figure 9: Median LT Debt/EBITDA ratio of Target Companies

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business operations. As a result of this evolution within the activist space, the market is also seeing increasingly sensitive reactions to activist behavior, especially as target companies have increasingly been those who already issue dividends and debt, and buy back shares.

Ipreo has also noticed many issuers that have become increasingly concerned whenever an activist name buys a small position or shows up on a meeting list; ultimately, issuers must remember that some of the more high-turnover activist investors may be taking a position as a fast money move for capital gains, or may be taking a meeting simply for research purposes, perhaps as a channel check for other investments.

Needless to say, issuers should always adapt their strategies in dealing with activists whenever they do take an interest in the stock. Companies that have been struggling or in early growth stages should still always prepare for activist involvement. Ultimately, especially for mature companies, whenever an activist is seen taking a position and requesting multiple meetings (usually on a deeper level, perhaps even requesting meetings with top management), the best way to identify the risk of an activist campaign is to analyze their history, identify the characteristics of the companies they usually target, see what they traditionally do (13D and proxy battles vs. letters to management), and thereby formulate a plan to deal with the activist specifically.

Author: David ShiDavid is an analyst with Ipreo’s Corporate Analytics Group.

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Unforeseen market events can take an investor relations team by surprise. Whether it is a market macro occurrence that is impacting a large universe of stocks or something more firm specific, investor relations needs to figure out the right approach for timely outreach.

One such event that tends to occur fairly frequently is a portfolio management change. Mostly due to a fund’s under performance or a manager switching firms, the change can have substantial impacts on the issuers held in the portfolio. Knowing about such a change can be very valuable for the IR team, while understanding the potential impact can aid in preparing strategic outreach. The obvious risk is that an existing position in the portfolio will be reconsidered and could even be sold. However, there is also something to be said for the opportunity such an event presents. The new manager, as well as potentially the manager that left, will have access to capital that could be used to purchase your stock.

While a fund’s management may change for various reasons, some generalizations can be made around the impact. A paper presented by the Center of Finance and Banking from the Justus-Liebig –University examined the affect a management change has on a fund’s performance. The authors conclude that underperforming funds, which are experiencing a management change and net asset outflows, perform by about 2.4 percentage points better in the following year to underperforming funds that do not experience those two effects. It seems that new management is able to refocus the portfolio and look at existing positions from a new perspective. This is likely due to the fact that management is starting with a new P&L and finds it easier to sell underperforming positions. In a market where active managers are under heavy scrutiny for net-to-fees returns, management changes are even more likely to occur.

Sample DescriptionIn order to avoid data misspecification, Ipreo only considered events that occurred at most 3 years back. This allowed the sample to include observations under similar market conditions and resulted in the analysis of only relevant data (87 exclusive observations were considered for the sample). Excluded were also any multi-managed funds as decisions about those portfolios tend to fall between many fund advisors. Similarly, funds that did not experience a significant change (only a portion of co-managers left) were not included.

Increased ActivityTrading activity will generally increase around the time of a management change. This is not surprising as new management will most likely look to re-assess the portfolio’s composition and strategy before moving forward. This is especially noticeable if the change occurred due to the fund’s weak performance.

On average, portfolios that underwent a management change experienced an increase in turnover by about 14.7 percentage points (turnover increased from 50% to about 64.7%) in the subsequent quarter to the change. This means that typically funds which churned their positions, on average, every two years will now do it every year and a half. Turnover is affected even more so when looking at the data in a tighter time frame, increasing by about 17.1 percentage points in the subsequent month to the management change. This indicates that most of the trading activity is occurring right after new management takes charge. After about 3 quarters, however, turnover tends to get back to its historical average before the change occurred. The figure below displays how turnover increase tapers at longer time frames.

Understanding Your Exposure to Changes in Portfolio Management- Opportunities for Fund Focused Outreach

Wolfgang Bessler, David Blake, Peter Lukoff, Ian Tonks, Why does Mutual Fund Performance not Persist? The Impace and Interaction of Funf Flows and Manager Changes (Justus-Liebig-University, 2010),2.

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In certain cases, funds will actually experience a permanent change in their portfolio turnover. When the ‘VALIC Company I-Value Fund’ experienced a change of management in January 2011, its turnover increased significantly in the subsequent quarter (going from 108% to 172%). After a few additional quarters of elevated trading activity, management lowered the fund’s turnover to about 38% which essentially changed the fund’s investment horizon.

Another notable observation is an increase in portfolio turnover during the months prior to the management change for funds that announce the event in advance. This is driven by capital outflows as investors, informed about the change early on, are skeptical of what new management will bring to the table. On average about 24% of funds announced the change ahead of time, usually giving a few months notice.

Fluctuations in Net AssetsNet asset flows have a direct effect on positions in the portfolio. If the fund does not have enough cash on the sidelines, it will be forced to sell its holdings in order to satisfy redemptions. On average, net outflows over the 4 months after a management change represented about 11.6% of the total net assets the fund reported before the change. The figure below shows a decrease in equity assets under management based on different time frames.

Continued on next page...

Figure 1: Increase in Turnover Per Time Frame

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Source: Ipreo When a number of key members of the emerging market team at AGF Investments left the firm, the Touchstone Emerging Markets Equity Fund was left with just one manager. Investors took notice to the story as the fund began to experience outflows for the first time in a few years. Information about the change occurring in May 2012 was distributed in April of that year. The fund experienced significant net outflows in the months of April through August, seeing its net assets decrease by a total of about 24%.

After several managers’ contracts expired with TCW at the end of calendar year 2012, two analysts were promoted to co-portfolio managers of the TCW Small Cap Growth Fund. The news was made public in November 2012 and, not coincidently, that same month the fund started to experience significant outflows. Between November 2012 and February 2013 alone, the fund saw its net assets diminish by almost 60%. The fund currently manages only about $225M, which is a fraction of its previous $1B in equity under management. With such high outflows, capital needed to be raised by selling holdings, increasing the portfolio’s turnover from 83% to about 123% in just one quarter.

Cutting Losses As we discussed in previous BetterIR issues, there is a great benefit in understanding an investor’s portfolio construction. Each investor has a preference when it comes to how much of their portfolio is sitting in unrealized gains and losses. When it comes to a management change, there is a clear relationship with shifts in portfolio construction.

Figure 2: Decrease in Equity Assets Per Time Frame

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Generally, it appears that new management will decrease its exposure to unprofitable trades rather than profitable ones, cutting its portfolio allocation to positions with an unrealized loss by about 7.5% on average. When Marsico Global Fund experienced a management change in October 2011, the fund’s new management liquidated positions that were at a greater loss than 10% and significantly decreased its exposure to trades that were sitting on any loss at all. This shifted the portfolio’s construction to hold only 7% of assets in positions that were not making a profit versus the previous 49%. The figure below shows the fund’s change in portfolio construction based on profit/loss bands. While market conditions will affect this allocation, it is easy to identify actual net selling activity within the portfolio. As the fund decreased its exposure to loosing trades, winning position naturally became a larger portion of the overall equity allocation.

Figure 3: Changes to Profit/Loss Bands (Marsico Global Fund)

< -25% -25% to -10% -10% to 0% 0% to 10% 10% to 25% 25% to 50% 50% to 100% >100%-8.76% -27.19% -6.30% 0.76% 15.86% -2.40% 9.09% 18.93%

Source: Ipreo

Relevant PerspectiveWhat does this all mean to an IR team? Generally, a conclusion can be made that it is always beneficial for the team to reach out to managers involved in the change.

Firstly, an effort should be made to connect with new management in order to make sure that the stock’s investment story is not being questioned. A manager that has a good understanding of the fundamental story could be less likely to sell the stock over other positions when raising capital. New management may also look favorably towards ideas that old management discarded, and that could mean position initiations.Secondly, reaching out to managers that are leaving the fund is also important, especially if they were responsible for accumulating a stake in stock in the past. Any future access to capital can translate into support for the stock down the road.

Author: Szymon Piecuch

Szymon is an Analyst with Ipreo’s Corporate Analytics Group.

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BetterIR - Firm Snapshot

Targeting Profile: William Blair & Company was founded in 1935 by William McCormick Blair. The firm is headquartered in Chicago with offices located around the world, including Tokyo, London, and Zurich. Today, John Ettelson is the president and CEO of the firm, which he joined in 1999. William Blair & Company manages equity and fixed-income portfolios for institutions and individuals, as well as mutual funds. The institution has approximately $54.6B in equity assets under management and is owned by the brokerage and investment banking firm of the same name. The firm holds more than 2,000 stocks firm-wide and has a portfolio turnover rate of 63%.

William Blair & Company is a growth-oriented investor that invests in global equities of all market capitalizations, with its largest holdings in mid-to mega-cap stocks (90%). The firm invests 47% of its equity assets in North America, 25% in Europe, and 20% in Asia. A large portion of the firm’s overall portfolio is in U.S. equity assets (over 1,200 holdings); however it does hold around 750 growth stocks from Europe, Asia, and emerging economies. The largest portion of the institution’s portfolio is dedicated to financials and its largest holding is Sumitomo Mitsui Financial Group ($543M), which is domiciled in Japan. In 3Q 2013, William Blair decreased its position in Sumitomo Mitsui slightly, by ~$2M.

The firm’s portfolio is 44% U.S. issuers; its top 10 holdings consist of seven foreign-domiciled companies. In 3Q 2013, William Blair’s most significant increases were in the consumer services and consumer goods sectors, +$285M and +$287M, respectively. The William Blair International Growth Fund is the institution’s largest fund under management ($4B), with a plurality of the fund’s assets (over 30%) dedicated to the financial sector. In the third quarter the fund increased its holdings in financials by $97M.

How to Approach:William Blair offers a wide range of investment strategies to customers, but is best known for success in growth strategies. For its growth portfolios the institution looks for stocks with consistently high rates of earnings growth. The firm may meet with management, suppliers, and customers. Recently, the firm has increased its investing in all sectors except basic materials (-$110M). The institution has a large, diverse portfolio with top holdings in financials (19%), consumer services (17%), and technology (16%). The diversity of William Blair’s portfolio presents several opportunities for issuers from many sectors.

How Not to Approach: The firm’s non-U.S. stocks have above average earnings growth and maintain consistent market dominance. William Blair will sell a stock if its position weight triples or becomes greater than 4% of the overall portfolio. The stock its also sold if its fundamentals deteriorate.

Portfolio Fundamentals:• Forward P/E: 20.8x• 5 Yr Proj. Growth Rate: 14.8%• Dividend Yield: 1.4%• Price/Book: 5.0x

Targeted Firm: William Blair & Company, LLC

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Portfolio Managers: Lionel Harris

Targeting Profile:

The Fidelity Small Cap Stock Fund is a $2.5B fund that has been a core component of the small/mid-cap group at Fidelity Management & Research Company since its inception in March of 1998. Currently, the fund is invested in both foreign and U.S. based equities, with a heavy weight towards small- and mid-caps, 31% and 67% respectively. The fund’s current manager, Lionel Harris, tends to keep it fully invested, as cash usually makes up less than 5% of total assets. The heavy weighting towards mid-cap stocks is a result of the fund’s previous manager’s strategy of letting his winners run, which briefly led to a re-categorization of this fund into the Morningstar mid-blend group. Harris aims to deliver a more consistent small-cap-oriented strategy, and his continued resiliency towards compliance with this goal has resulted in the fund being moved back into the small-blend category.

The fund’s manager, Harris, tends to employ a growth-at-a-reasonable price strategy when investing. The fund seeks both “growth” and “value” oriented investments, as it employs its main strategy of seeking undervalued securities for long-term capital appreciation. Harris began managing the fund in late 2011 and largely imported his higher-quality GARP approach, which he successfully used for his previous Fidelity Small Cap Growth Fund (FCPGX), in an attempt to more align with the fund’s goal of long-term capital growth.

Recent buying and selling activity for the fund has been oriented in its three most heavily weighted sectors: Financials (20% of portfolio), Technology (18% of portfolio) and Industrials (17% of portfolio). In 3Q13 the fund made a large purchase in the industrials and technology sectors, initiating a $24.6M position in Regal Beloit Corporation (Industrials) and an $18.2M position in Aruba Networks (Technology). The fund was a heavy seller in its most weighted sector (Financials) this past quarter, completely exiting its $23M position in Cullen/Frost Bankers and decreasing its UMB Financial Corp. position by $21M.

How to Approach:True to Fidelity Management & Research Company’s overall investment strategy, the Fidelity Small Cap Stock Fund maintains a largely diverse investment strategy across all market sectors with just a slightly heavier weighting towards

BetterIR - Fund Snapshot

the financials, technology, industrials and consumer services (16% of portfolio) industries. Currently, the fund’s highest micro-industry concentration lies in the Banks sector (7% of portfolio) and the Real Estate Investment Trusts sector (5% of portfolio), as investments continue to be diversified across many different sectors. As mentioned, Harris continues to employ his previously successful GARP-oriented investment strategy on this small-cap fund with only one modification to the process. Harris modified his small-cap investment strategy to lower the required earnings growth rate for his stock purchases in order to meet this fund’s broader mandate. Otherwise, he looks for similar features when investing: companies growing faster than peers with durable cash flow, multiple paths to success, and strong management teams. While Harris has repositioned the fund into smaller-cap companies, he has also added a growth tilt strategy to the portfolio holdings, roughly 40% of the portfolio is classified within the Morningstar growth style, while the typical small-blend peer only has a 31% allocation. Companies well positioned for growth in their respective industry would have an advantageous position in securing a meeting.

How Not to Approach: The fund does not invest in any market caps larger than a mid cap size; in the last quarter, it increased positions in just two companies with market caps over $5b, with the average market cap of purchased securities around $2b. Micro caps make up only 1% of the portfolio and the rest of its weightings are in small-and mid-cap securities. Harris generally keeps the fund’s sector weightings within 500 basis points of the Russell 2000 Index’s allocation. Harris likes to see multiple product opportunities for growth in his investments. Companies with limited product offerings and growth opportunities would likely be screened for initial meetings regardless of cap size.

Portfolio Fundamentals: • Forward P/E: 10.9x• Dividend Yield: 4.3%• Payout Ratio: 46%• 5 Yr. Proj. Growth Rate: 7.2%• PEG: 2.0x• Price/Sales: 1.7x

Targeted Fund: Fidelity Small Cap Stock Fund

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Metro Area Targeting Focus- Kansas City, MO

Kansas City MOMoney Center Statistics Summary Notes

Reported Equity Assets ($B): $226.5

Number of Institutions: 34World Rank: 18/183

Top Sector Weighting: TechnologyTechnology Weighting: 18.0%

Top Region Weighting: North AmericaNorth America Weighting: 80.8%

Home Country Weighting: 79.2%

Total Net Buying ($B): $28.2Total Net Selling ($B): -$21.1Total Net Activity ($B): $7.0

Most Recent Sector Net Activity (%) Sector Allocation

Most Recent Regional Net Activity (%) Geographic Allocation

Basic Materials

3.6% Consumer

Goods 11.9%

Consumer Services 14.8%

Energy 13.2% Financials

15.1%

Healthcare 10.6%

Industrials 10.7%

Technology 18.0%

Utilities 2.0%

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Japan 3.2%

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0.3%

Latin America 0.6%

On the border of Kansas and Missouri lies Kansas City, a smaller Midwestern metro often overshadowed by those just slightly north. This particular metro ranks 18th globally and 9th nationally in equity assets under management. Only 34 total institutions occupy the area, but these institutions account for a total of $226.5B in equity assets under management. The two largest institutional investors in the area, American Century Investment Management, Inc. ($86.8B EAUM) and Waddell & Reed Investment Management Company ($70.9B EAUM), have made Kansas City relevant on a global market scale. Positive consumer and investor sentiment continues to push Technology companies’ valuations, garnering the attention of investors across the globe. Kansas City is no stranger to this trend, allocating the largest portion of their institutional investments to this sector. Each of the area’s two largest institutional investors manage portfolios that are weighted most heavily in the technology sector. Waddell & Reed was the metro’s largest net Technology buyer this past quarter, with an aggregated $857M increase in the sector that included a $392M initiated position in Microsoft and a $363M increase to hold a $1.4B stake in Cisco. Advances in energy technology are reducing America’s dependency on foreign oil, and opening the door for renewed faith in the domestic energy market. Kansas City’s top institutional investors took notice of this trend and significantly increased their respective energy positions this past quarter, resulting in the largest industry net buy for the metro. Tortoise Capital Advisors, LLC was an even larger net buyer than American Century this past quarter, increasing their energy sector position by $590M. Other smaller institutions in Kansas City, including, Scout Investments, Inc. Security Investors, LLC, and BKD Wealth Advisors, LLC, were also significant net buyers in both the Energy and Technology sectors. Energy and Technology companies could benefit from meeting with both large and small firms in Kansas City.

On the border of Kansas and Missouri lies Kansas City, a smaller Midwestern metro often overshadowed by those just

slightly north. This particular metro ranks 18th globally and 9th nationally in equity assets under management. Only 34

total institutions occupy the area, but these institutions account for a total of $226.5B in equity assets under management.

The two largest institutional investors in the area, American Century Investment Management, Inc. ($86.8B EAUM) and

Waddell & Reed Investment Management Company ($70.9B EAUM), have made Kansas City relevant on a global market

scale.

Positive consumer and investor sentiment continues to push Technology companies’ valuations, garnering the attention

of investors across the globe. Kansas City is no stranger to this trend, allocating the largest portion of their institutional

investments to this sector. Each of the area’s two largest institutional investors manage portfolios that are weighted most

heavily in the technology sector. Waddell & Reed was the metro’s largest net Technology buyer this past quarter, with an

aggregated $857M increase in the sector that included a $392M initiated position in Microsoft and a $363M increase to

hold a $1.4B stake in Cisco.

Advances in energy technology are reducing America’s dependency on foreign oil, and opening the door for renewed faith in the domestic energy market. Kansas City’s top institutional

investors took notice of this trend and significantly increased their respective energy positions this past quarter, resulting in the largest industry net buy for the metro. Tortoise Capital

Advisors, LLC was an even larger net buyer than American Century this past quarter, increasing their energy sector position by $590M. Other smaller institutions in Kansas City, including,

Scout Investments, Inc. Security Investors, LLC, and BKD Wealth Advisors, LLC, were also significant net buyers in both the Energy and Technology sectors. Energy and Technology companies

could benefit from meeting with both large and small firms in Kansas City.

Money Center StatisticsSummary NotesKansas City MOMoney Center Statistics Summary Notes









Basic Materials

3.6% Consumer

Goods 11.9%



15.1%

Healthcare 10.6%

Industrials 10.7%

Technology 18.0%

Utilities 2.0%

0.5%

5.5%

-3.1%

6.8%

0.5%

3.7%

0.9%

3.7% 4.0%

-4%

-2%

0%

2%

4%

6%

8%


8.2% 1.5%

-14.6%

54.2%

15.3%

27.5%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%


Europe 10.4%

North America 80.8%

Asia/Pac. Ex. Japan

4.7%

Japan 3.2%

Middle East/Africa

0.3%

Latin America 0.6%


Sector AllocationMost Recent Sector Net Activity (%)

Kansas City MOMoney Center Statistics Summary Notes









Basic Materials

3.6% Consumer

Goods 11.9%



15.1%

Healthcare 10.6%

Industrials 10.7%

Technology 18.0%

Utilities 2.0%

0.5%

5.5%

-3.1%

6.8%

0.5%

3.7%

0.9%

3.7% 4.0%

-4%

-2%

0%

2%

4%

6%

8%


8.2% 1.5%

-14.6%

54.2%

15.3%

27.5%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%


Europe 10.4%

North America 80.8%

Asia/Pac. Ex. Japan

4.7%

Japan 3.2%

Middle East/Africa

0.3%

Latin America 0.6%


Geographic AllocationMost Recent Regional Net Activity (%)

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