Morningstar Magazine - June/July 2018 - 94

Investors

A Focus On Essentials
Backed by Baird, Chautauqua sticks
to what it does best.

UNDISCOVERED MANAGER

Laura Lallos

In every issue, Undiscovered Manager profiles
a noteworthy strategy that hasn't yet been
rated by Morningstar Research Services' manager
research group.
Chautauqua Capital Management's roots go
deeper than its 2009 founding.
When Brian Beitner started the firm, it
was "inauspicious timing, but a unique opportunity." He'd already launched his own
international- and global-stock strategies several
years earlier at former employer TCW Group,
where he'd partnered with noted growth investor
Glen Bickerstaff, who'd come over from
Transamerica Investment Management. Amid the
upheaval of the financial crisis, TCW allowed
Beitner to take the strategies' records and set
up shop on his own. "I knew getting new business
would be slow in that environment," Beitner
remembers,"but I needed time to attend to such
matters as registering with the SEC anyway."
Beitner had been commuting from Boulder,
Colo., to TCW's Los Angeles headquarters and was
happy to remain in place with his new boutique.
The location, he says, is an advantage for a
young investment management firm, as Boulder's
quality of life attracts applicants to Chautauqua:
"We don't have to advertise. They find us."
That said, Beitner has also taken advantage of old
ties when building the investment team. He'd
known Michael Mow, who joined Chautauqua in
its first year, since they were members of
the same CFA study group in the 1980s. Mow was

Morningstar June/July 2018

at TCW when Beitner and Bickerstaff joined
in 1998, and they kept in touch. "When
Michael was considering retiring and moving
to Colorado," Beitner says, "I said, 'Colorado, yes.
Retiring, no.'"
Haicheng Li, who joined in 2016, is the most
recent addition to the team. However, Beitner had
hired her at TCW 14 years earlier, first as an
intern, then as a healthcare analyst. Meanwhile,
David Lubchenco, who first came to Chautauqua
in 2012 and then returned in 2016 after a
stint at Marsico Capital Management, had his own
ties to Transamerica, where he was involved with
a strategy similar to Chautauqua's.
A Broader Platform

The firm remained independent for its first
seven years, but Beitner found running a business
an unwelcome distraction from time spent on
investment research.
That's where Milwaukee-based financial-services
firm Baird comes in. In early 2016, Chautauqua
was acquired by the employee-owned company,
which has earned a Positive rating on
the Parent Pillar component of the Morningstar
Analyst Rating owing to its investment
culture, manager retention, and low fees, among
other strengths.
"Baird distinguished itself as a superior culture and
a good fit," Beitner says. "Each of us became
enamored with them, and they have exceeded
our expectations."
Baird Advisors, which runs the company's
fixed-income strategies, has long been
well-regarded. Three of its funds earn Morningstar
Analyst Ratings of Silver, and the fixed-income

team was nominated for Morningstar's
Fixed-Income Manager of the Year award for 2016.
(Baird Core Plus Bond BCOIX was featured
in the magazine's April/May 2015 issue, and Mary
Ellen Stanek, Baird Advisors CIO, in the
April/May 2017 issue.)
The Chautauqua acquisition added international
expertise to Baird's growing equity assetmanagement division. In turn, Chautauqua was
able to hand over its middle- and back-office
operations to Baird, which manages legal, human
resources, payroll, and the like. Baird also
broadened Chautauqua's reach by introducing
mutual fund versions of the strategies:
Chautauqua International Growth CCWIX and
Chautauqua Global Growth CCGIX.
The arrangement allows Beitner to focus, unhindered, on what he does best: "Baird has wholly
supported our autonomy over what goes in
the portfolio and who's on the investment team."
Teamwork

What goes into the portfolios is very much a
group effort from the team. While Beitner claims
"final accountability for every name" as lead
manager, he emphasizes that "every member of
the team could take over the helm if necessary."
That's a change Beitner has made since
his TCW days. "I was guilty of perpetuating the
analyst model at TCW. That is flawed
because the analyst is encouraged to persuade
portfolio managers to buy a stock-
and, therefore, accentuate the positive and
underemphasize negatives."
At Chautauqua, all six members of the team
are engaged in the process from idea
generation through portfolio monitoring. It helps
that all six were molded within the same
philosophy. While Daniel Boston and Jesse Flores
don't share the same roots as the other four
team members, their talents were fostered
right at Chautauqua. "Dan and Jesse came from
other firms but quickly adapted," Beitner
says. "Both had an ideal amount of experience;
they were skilled in financial accounting
and modeling but hadn't been indoctrinated
in a different approach."

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