Westwood Holdings Group, Inc. Market Research Report

Background

Westwood Holdings Group, Inc. (NYSE: WHG) is a Dallas-based investment management firm offering a range of services through its subsidiaries: Westwood Management Corp., Westwood Advisors, LLC, Salient Advisors, LP, and Westwood Trust. The company provides investment advisory and trust services to institutional investors, mutual funds, and high-net-worth individuals. As of June 30, 2024, Westwood reported assets under management (AUM) of $15.8 billion and assets under advisement (AUA) of $1.0 billion, totaling $16.8 billion.

Key Strategic Focus

Westwood's strategic focus includes:

Investment Strategies: The firm offers a variety of investment strategies, including LargeCap Value, AllCap Value, Dividend Select, High Income, Credit Opportunities, Real Estate Income, MLP SMA, MLP High Conviction, and MLP & Energy Infrastructure. Notably, several of these strategies have outperformed their primary benchmarks.

Exchange-Traded Funds (ETFs): In the second quarter of 2024, Westwood launched two actively managed ETFs: the Westwood Salient Enhanced Midstream Income Fund (NYSE: MDST) and the Westwood Salient Enhanced Energy Income Fund (NASDAQ: WEEI). As of June 30, 2024, MDST and WEEI had net assets of $43 million and $13 million, respectively, with annualized distribution rates of 10.7% and 11.4%.

Managed Investment Solutions (MIS): The company is investing in its MIS offering, with a planned launch in the third quarter of 2024. This initiative aims to provide customized index solutions to a wide range of clients.

Financials and Funding

Revenues: For the second quarter of 2024, Westwood reported revenues of $22.7 million, consistent with the first quarter and up from $21.9 million in the same period of 2023.

Comprehensive Income: The company reported a comprehensive loss of $2.2 million in Q2 2024, compared to income of $2.3 million in Q1 2024 and $2.9 million in Q2 2023. This loss included a $3.8 million after-tax charge due to an increase in the fair value of contingent consideration related to the 2022 Salient acquisition.

Economic Earnings: Non-GAAP Economic Loss was $0.5 million in Q2 2024, compared to Economic Earnings of $3.0 million in Q1 2024 and $4.0 million in Q2 2023.

Cash and Equity: As of June 30, 2024, Westwood held $44.1 million in cash and short-term investments, with stockholders' equity totaling $118.5 million and no debt.

Dividends: A cash dividend of $0.15 per common share was declared, payable on October 1, 2024, to stockholders of record on September 2, 2024.

Pipeline Development

Exchange-Traded Funds (ETFs): The successful launch of MDST and WEEI in Q2 2024 marks a significant expansion in Westwood's product offerings. These funds aim to provide high distributable monthly income to investors.

Managed Investment Solutions (MIS): The upcoming launch of MIS in Q3 2024 is expected to attract new clients by offering customized index solutions.

Technological Platform and Innovation

Westwood's technological advancements include:

Proprietary Technologies: The firm has developed proprietary investment strategies and platforms to enhance client returns and manage risk effectively.

Scientific Methodologies: Westwood employs disciplined investment processes, integrating quantitative and qualitative analyses to inform decision-making.

Leadership Team

Brian Casey: Chief Executive Officer. Under his leadership, Westwood has expanded its product offerings and client base.

Terry Forbes: Chief Financial Officer and Treasurer. He oversees the company's financial operations and strategic planning.

Leadership Changes

In the third quarter of 2023, Westwood announced the sudden passing of Chris Guptill, co-founder of Broadmark Asset Management. His long-term partners assumed joint leadership roles, ensuring continuity in the firm's operations.

Competitor Profile

Market Insights and Dynamics: The investment management industry is highly competitive, with firms vying for institutional and high-net-worth clients. Market trends indicate a growing demand for customized investment solutions and ETFs.

Competitor Analysis: Key competitors include large asset management firms offering similar investment strategies and products. Westwood differentiates itself through its specialized investment offerings and client-centric approach.

Strategic Collaborations and Partnerships

Texas Stock Exchange: Westwood is a founding member of the Texas Stock Exchange, positioning itself as a key player in the region's financial ecosystem.

Operational Insights

Westwood's strategic initiatives, such as the launch of ETFs and the MIS platform, aim to strengthen its market position and attract a diverse client base. The firm's focus on innovation and client service provides a competitive edge in the investment management industry.

Strategic Opportunities and Future Directions

Product Expansion: Continued development of new investment products, including additional ETFs and private market strategies, to meet evolving client needs.