Overview
Stephens Investment Management Group, LLC ("SIMG") is an Arkansas limited liability
company which was established in June 2005 and began providing investment advisory
services in December 2005. We became registered with the Securities and Exchange
Commission on September 2, 2005.
Who Are Our Owners
Our Firm is a wholly owned subsidiary of Stephens Investments Holdings LLC, which is
a privately held company owned by the Warren A. Stephens Trust which is controlled by
Warren A. Stephens. Certain key employees of SIMG are beneficiaries of an incentive
plan and owners of “phantom shares” which entitles them to receive a percentage of the
net profits of SIMG, but these key employees have no ownership interest in the voting
shares of SIMG. Most of the beneficiaries of the incentive compensation plan previously
owned non-voting B units of SIMG. These were repurchased and replaced by the current
incentive plan and “phantom shares” in 2019.
SIMG operates from two geographic locations—Houston, Texas and Little Rock,
Arkansas. Investment management, trading, marketing, client service, and certain
compliance and operations functions are located in Houston, Texas. Operations,
administration, compliance and legal functions and additional client service functions are
located in Little Rock, Arkansas.
Our investment team initially joined Stephens Inc. in September 2004 and provided
investment advice through Stephens Inc. through the end of November 2005. Advisory
services began to be offered through SIMG in December 2005.
Our Assets Under Management
As of December 31, 2023, total assets managed and advised by SIMG were
approximately $7.15 billion, with approximately $6.99 billion managed on a
discretionary basis and approximately $159 million advised on a non-discretionary basis.
The Types of Investment Advisory Services We Provide
We provide investment advisory services to institutions, high net worth and other
individuals, pension plans, foundations, corporations and other business entities, mutual
funds and other types of clients. Our investment focus is on U.S. equity securities,
although fixed income securities, mutual funds, exchange-traded securities, ADRs and
other types of securities could be purchased for client accounts from time to time. We
are a long only manager, and we do not generally use margin.
SIMG manages client assets under seven distinct investment management strategies
described below. Although we do not tailor a customized investment program for the
unique financial circumstances and objectives of a particular client, clients can impose
reasonable investment restrictions on securities that would otherwise be traded in the
strategy they select such as restrictions on investing in particular securities or types of
securities and restrictions on investing in particular industries.
Our Separately Managed Account Advisory Programs
We offer investment management on a discretionary basis through separately managed
accounts in the following seven strategies:
• Small Cap Growth
Our Small Cap Growth Strategy seeks long term growth of capital by investing
primarily in small cap securities of U.S. companies which appear to us to have
clear indicators of future earnings growth or appear to demonstrate other
potential for growth. The applicable benchmark for this strategy is the Russell
2000® Growth Index. Our Small Cap Growth Strategy is available as a
separately managed account advised by SIMG.
• Mid Cap Growth
Our Mid Cap Growth Strategy seeks long term growth of capital by investing
primarily in mid cap securities of U.S. companies which appear to us to have
clear indicators of future earnings growth or appear to demonstrate other
potential for growth The applicable benchmark for this strategy is the Russell
Midcap® Growth Index. Our Mid Cap Growth Strategy is available as a
separately managed account advised by SIMG and in model programs offered
through various affiliated and unaffiliated investment advisers. It is also
available in wrap fee programs sponsored by various advisers.
• Small and Mid Cap Core Growth (“SMID Core Growth”)
Our Small and Mid Cap Core Growth Strategy is a diversified strategy which
seeks long term growth of capital by investing primarily in small cap and mid-
cap securities of U.S. companies which appear to us to have clear indicators of
future earnings growth or appear to demonstrate other potential for growth of
capital. The applicable benchmark for this strategy is the Russell 2500®
Growth Index. Securities purchased for this strategy are predominantly
securities of companies we perceive to be high quality, well managed
businesses that have the potential for consistent, predictable revenue and
earnings growth. Our SMID Core Growth Strategy is available as a separately
managed account advised by SIMG, in a wrap fee program sponsored by
Stephens Inc. for which SIMG acts as sub-adviser and in model programs
offered through various affiliated and unaffiliated investment advisers.
Small and Mid Cap Select Growth (“SMID Select Growth”)
Our Small and Mid Cap Select Growth Strategy is a diversified strategy which
seeks long term growth of capital by investing primarily in small cap and mid-
cap securities of U.S. companies which appear to us to have clear indicators of
future earnings growth or appear to demonstrate other potential for growth of
capital. The applicable benchmark for this strategy is the Russell 2500®
Growth Index. Securities purchased for this strategy are predominantly those
perceived by us to have a significant positive business catalyst that may
translate into accelerated earnings growth in the short term or long term. Our
SMID Select Growth Strategy is available as a separately managed account
advised by SIMG.
• Leaders and Innovators
The Stephens Leaders and Innovators Strategy is a diversified all-cap growth
Strategy which seeks to invest in domestic companies, but can include
international companies that we consider to be leaders and/or innovators in a
particular industry and provides the opportunity to capitalize on the success of
these companies. For comparison purposes this strategy is measured against the
Russell 3000® Growth Index. Our Leaders and Innovators Strategy is available
as a separately managed account advised by SIMG and in a model program
through Stephens Inc., an affiliated investment adviser.
• SMID Hybrid Growth
The SMID Hybrid Growth Strategy invests primarily in small cap and mid-cap
common stock of U.S. companies which appear to have near term catalysts for
growth in addition to a consistent long term growth potential. This strategy is
actively managed, and securities are frequently purchased and sold. For
comparison purposes the composite is measured against the Russell 2500®
Growth Index. Our SMID Hybrid Growth Strategy (previously known as the
Hybrid Growth Strategy) is available as a separately managed account advised
by SIMG.
• Artificial Intelligence and Automation
Our Artificial Intelligence and Automation Strategy invests primarily in
securities of growth companies which provide artificial intelligence or
automation technology, products, or services, or which sell technology,
products, or services which enable the creation or delivery of artificial
intelligence or automation solutions, or which are leveraging artificial
intelligence or automation to enhance, improve, or grow their existing
businesses. The portfolio is comprised largely of equity securities of US issuers,
but can contain investments in a significant number of non-US issuers and non-
equity investments. For comparison purposes the composite is measured against
the Russell 3000® Growth Index. Since construction of this portfolio is focused
on artificial intelligence and automation technology, its industry and sector
exposure can vary greatly from that of the Russell 3000® Growth Index and we
expect significant variances in returns. Our Artificial Intelligence and
Automation Strategy is available as a separately managed account advised by
SIMG and in a model program through Stephens Inc., an affiliated investment
adviser.
Investing in small cap and mid cap issuers involves greater risk than investing in more
established companies and investors should only invest a portion of their total portfolio in
these securities.
Our separate account business represents approximately 28% of the assets we advise as
of December 31, 2023. In separately managed accounts we advise, we have the
discretionary authority to determine the securities, and the amount of securities, to be
bought and sold for our clients without obtaining specific client consent. The
discretionary authority regarding investments may, however, be subject to certain
restrictions and limitations placed by the client on transactions in certain types of
securities or industries. Any such limitations are to be agreed upon in advance with each
client.
Mutual Funds We Sub-Advise
We sub-advise the American Beacon Stephens Small Cap Growth Fund and the
American Beacon Stephens Mid-Cap Growth Fund. These funds use the same respective
investment models that our advised separate accounts use for the Small Cap Growth
Strategy and the Mid Cap Growth
Strategy. Additionally we serve as one of the
investment advisers to the following multi-manager mutual funds using our SMID Select
Growth Strategy or Small Cap Growth Strategy:
Vanguard Explorer™ Fund;
Bridge Builder Small/Mid Cap Growth Fund; and
First Trust Multi-Manager Small Cap Opportunities ETF.
SIMG’s Small Cap Growth and Mid Cap Growth Strategies are available to eligible
investors through investments in collective investment trusts.
Mutual fund assets represent approximately 72% of our assets under management as of
December 31, 2023.
Wrap Fee Accounts
SIMG serves as a portfolio manager in various wrap fee programs sponsored by its
affiliate, Stephens Inc., and by unaffiliated advisers. In these programs, SIMG receives a
portion of the wrap fee as its advisory fee. SIMG’s investment advisory fee under these
wrap fee or all inclusive fee arrangements may differ from that offered to other clients.
The total investment advisory fees charged by the wrap fee program sponsor, a portion of
which includes the fee paid to SIMG, can be higher than if SIMG advises the client
directly. In evaluating these arrangements, a client should recognize that brokerage
commissions or the execution terms of transactions in the client’s account are established
by the sponsor and not by SIMG.
In these wrap fee arrangements we are retained by the wrap fee program sponsor which,
in turn, recommends or selects the advisory services of SIMG to one or more of its
clients. Depending on the terms of the particular wrap fee program, we may or may not
have investment discretion with regard to a particular program or account.
In addition to other indicia of individual ownership, including the right to withdraw,
hypothecate, vote, or pledge securities held in the wrap fee client’s account, a wrap fee
client has the ability to place reasonable limitations and/or restrictions on the investments
in their portfolio. Where restrictions are imposed, we will modify the client’s portfolio
investments to comply with these restrictions but the investment performance of the
client’s account will likely differ (positively or negatively) from other clients following a
similar investment strategy. The minimum account size for wrap fee programs varies
from sponsor to sponsor, and a person considering a wrap fee program should review the
disclosure document provided by the sponsor of the applicable program for details
regarding the operation of the program, its risks, fees, and other charges.
In determining the suitability of an investment strategy for a particular wrap fee program
client, we rely on the extensive information on the prospective client maintained by the
sponsor of the program. This information may come from, among other sources, a
personal interview with the client and a written questionnaire completed by the client that
seeks to elicit certain financial and other relevant data including the client’s investment
objectives, risk tolerances and investment restrictions, if any. Our strategies are not
appropriate for all investors, and investors should only invest a portion of their portfolio
in these programs.
Securities transactions for accounts that are under a wrap or all inclusive fee arrangement
are effected “net” (i.e., without commission), and a portion of the wrap or all inclusive
fee is generally considered as being in lieu of commissions. Under terms of the programs
as established by the wrap fee program sponsor, trades are generally routed only to the
broker-dealer sponsor with which the client has entered into the wrap or all inclusive fee
arrangement so that SIMG may not be free to seek best price and execution by placing
transactions with other broker-dealers. Although generally the best price can be offered
for listed transactions, no assurance can be given that such will continue to be the case.
Where SIMG is given permission to route orders away from the wrap fee sponsor
(“trading away”), clients will incur commission charges, and these commission charges
will decrease the net performance of the client’s account.
Model-Based Portfolio Programs
We provide a number of our current investment model portfolios to various affiliated and
unaffiliated investment advisers which offer these models to their clients in advisory
programs through Separately Managed Account (SMA) programs or Unified Managed
Account (UMA) program structures.
In these model-based portfolios, we do not enter into a direct advisory relationship with
the clients of the investment advisory firm offering the model portfolios (“Sponsor”), and
we provide no administrative, portfolio accounting or account-specific performance
reporting services to those clients.
Generally, we do not know the identity or any specific information about the advisory
firm’s client. The Sponsoring investment advisory firms offering SIMG’s model
portfolios are solely responsible for initiating all trading and rebalancing activity
recommended by our model(s). SIMG serves as the advisor to the Sponsor of the model-
based programs, and we do not have discretion over the accounts at the Sponsor which
are following our model portfolio. With UMA structures which incorporate a separate
overlay manager, typically SIMG’s agreement is with the overlay manager. In those
situations, we serve as adviser to the overlay manager, and it is the overlay manager to
which we provide our model portfolio(s).
In these model-based programs it is the sole responsibility of each Sponsor to determine
the operational aspects of its particular model-based program. Depending on the
structure of the Sponsor’s program, and consistent with its fiduciary obligations to its
clients, the Sponsor may elect not to implement the model portfolio we provide to it in
whole or in part, may choose not to implement changes we make to our model portfolio
or may delay the timing of trading for changes we make to our model portfolio. As a
result, the investment performance of a particular client will differ from the investment
performance of the clients of SIMG that have elected to follow the particular investment
strategy.
SIMG receives fees from these investment adviser Sponsors for providing our investment
model portfolio(s), and our fees are negotiated on a case-by-case basis with each
Sponsor. Our fees vary depending upon the specific services we provide. Our fees are
based upon a percentage of the amount of assets allocated to the model investment
strategy we provide to the investment adviser Sponsor. Our fees are paid by the Sponsor
quarterly in advance, but this can differ from program to program. Please refer to the
Sponsor’s Form ADV and investment advisory agreement for further information about
the operation of the Sponsor’s model-based program.
We provide our updated model portfolio(s) to the Sponsor on an agreed upon, periodic
basis which varies depending upon the particular terms of the agreement between SIMG
and the Sponsor. Our updated model(s) are released to a Sponsor only after we have
completed the execution of orders for the separately managed accounts, the wrap fee
clients, and the mutual fund clients we advise or sub-advise. As a result, accounts
following our model portfolios can receive inferior executions on particular transactions
called for in the model changes relative to the clients we advise due to the timing of
trading orders and general market conditions. Additionally, accounts following our model
portfolio may be positively or negatively impacted if companies included in our model
portfolio(s) release important or material information prior to the time trading orders for a
particular security have been completed by the Sponsor.
As discussed above, Stephens Inc. sponsors the Stephens Small-Mid Cap Core Growth
Program which is a wrap fee program that we sub-advise which follows our SMID Core
Growth Model. Orders for securities traded in this program are usually directed to
Stephens Inc.’s trading desk for execution by Pershing. Stephens Inc. also offers its
clients a model-based program known as the Stephens Managed Assets Program (MAP),
which follows models of various advisers including SIMG. The Stephens MAP Program
currently offers SIMG’s SMID Core Growth model, its Mid Cap Growth model, its
Leaders and Innovators model and its Artificial Intelligence and Automation model as
investment choices to MAP clients, and models can be added or no longer used by
Stephens Inc. at any time. Consistent with our policy on the timing for the release of our
models, our updated model portfolios are released to Stephens Inc. after orders have been
completed for the managed accounts we advise and after orders have been completed for
the Stephens Small-Mid Cap Core Growth Strategy which we advise or sub-advise.
Clients interested in a model portfolio program following SIMG’s models through an
SMA or a UMA should review the Form ADV and investment advisory agreement of the
Sponsor of the SMA or UMA program for information regarding the details of the
operation of the Sponsor’s particular SMA or UMA program, including arrangements
with respect to fees, the timing of payment of fees and policies regarding fees in the event
of termination.
Clients who participate in wrap fee programs that direct orders to the program’s sponsor
should review the important disclosures under Brokerage Practices in Item 12 below.