Chilton Trust recently held its private Intergenerational Forum on June 11th and 12th, 2015 in New York City. The forum included industry experts who shared their knowledge on a variety of wealth management topics. We discussed art, investing, philanthropy and recent developments in Silicon Valley. For those who were able to attend, thank you for joining us and we look forward to seeing you again soon. For those who were not in attendance, we thought you would enjoy reading the summary on the forum below.
The Forum began on Thursday, June 11th with dinner at The Colony Club, which was accompanied by a talk with Emily K. Rafferty, Chair of the Board of Directors for the Federal Reserve Bank of New York, Chair of NYC & Company, President Emerita of the Metropolitan Museum of Art. Emily spoke about “Art on the Global Stage,” highlighting that art museums represent far more than a place to visit on a weekend. They not only display masterpieces but also provide understandings into the development of societies and cultures around the globe. They are institutions that often bridge political ideologies, religious beliefs and cultural differences, fostering a sense of unity across humanity. Museums are often the first institution to be protected when countries are at war or going through a period of transition. We saw this in Egypt when human barricades were formed to encircle the Egyptian Antiquities Museum on the Tahrir Square during the Arab Spring. Emily also shared the importance of opening the Met after 9/11 when Mayor Giuliani requested they open their doors. After a lot of hard work, the museum opened the next day to thousands of people looking for a place of comfort and solace. Emily was full of many wonderful anecdotes from her years overseeing the Met and we all enjoyed getting an insight into her perspective.
On Friday, June 12th, we started the day at the New York Stock Exchange to meet with Thomas Farley, President of the NYSE Group. We spent the morning in the historic building, built in the early 1900s, which combines both preservation of the past as well as an adoption of modern practices. Tom provided a brief history of the Exchange, which started with 24 brokers in 1792. Today, as part of The Intercontinental Exchange, together they are part of 11 exchanges, trading 12,000 securities and holding over $28 trillion in market capitalization of NYSE listed companies. Tom then led a tour of the trading floor displaying the technological advancements that have been implemented over the past few decades. Although there may be fewer traders and papers on the floor, a high level of energy still remains. We were able to enjoy the excitement of the 9:30am opening bell for InterOil Corporation and then headed uptown to continue the discussion on capital markets and investing.
At the University Club, Richard L. Chilton, Jr., Chairman & Chief Investment Officer – Equities of Chilton Trust Company, and Jennifer Foster, Portfolio Manager – Equities of Chilton Trust Company, began the Investment Insights segment with a presentation on “Creative Destruction and How to Find Quality Business Models.” They spoke about their research and stock picking process, highlighting that while many investors define “quality” solely by leverage ratios, Chilton utilizes many proprietary quantitative and qualitative screening measures to find quality business models. Further, Chilton conducts various analyses to test the durability of quality. By investing in the right quality names, historical returns show that one can outperform the market over the long run with some consistency.
This type of analysis is particularly important in light of “creative destruction,” which refers to innovation that results in new production units replacing outdated ones. This term was coined by Joseph Schumpeter (1942), who considered creative destruction an essential fact of capitalism. This powerful force is particularly interesting right now as it is merging with social behavior. As a result of new technologies such as smart devices, we now have a whole generation of “digital natives” (those born after 1994) who know no other aspect of social behavior before these new technologies existed and their social behavior is dramatically altering the economic landscape. Businesses need to adapt to these changes as older business models are becoming obsolete. For example, video streaming companies are becoming commonplace as consumers prefer content available on demand as an alternative to expensive and outdated bundled cable services. Understanding and anticipating these creative destructive forces is yet another important component of analyzing companies as the team looks for investment opportunities in the equity market.
The Investment Insights segment continued with Timothy W.A. Horan, Executive Vice President & Chief Investment Officer – Fixed Income of Chilton Trust Company, who presented on “Navigating the Normalization of US Interest Rates: Examining the Global Framework.” Looking at the current global landscape, there is divergence between the U.S. economy and the rest of the world as reflected through the lens of global bond markets. Through their respective versions of Quantitative Easing, both the European Central Bank and the Bank of Japan have purchased government bonds in an effort to provide some economic stimulus. However, Tim noted that governments must also play a central role in strengthening economies by implementing sound fiscal policies. In the U.S., the Federal Reserve has set the stage for the normalization of interest rates, after years of accommodation. Much debate continues surrounding the timing of “lift-off” or the first move-up in the Federal Funds rate. Regardless, however, of “when” normalization happens, the critical conclusion is that rates will still remain “lower-for-longer” with limited inflationary expectation, given the outperformance of the U.S. dollar against both developed and developing markets, together with weak U.S. wage-growth and low commodity prices, particularly oil.
During lunch, Seval Oz, CEO of Continental Intelligent Transportation Systems, spoke about “Embracing the Unconventional” and how not all outcomes are what we hope for, but that they do present opportunities. This was a personal reality for Seval when she became the sole provider for her daughter. Faced with this situation, she decided to reinvent herself and turned to her passion, transportation, where she eventually made her way to Google [x], Google’s self-driving-cars program, and then to Continental Intelligent Transportation System where she is currently CEO. When thinking about transportation, Sevals asks, “What would a car be like today if the computer would have been invented before the car?” There has been exponential growth in computing over the past 110 years and the technological advancements have focused on value creation for the user, design, services and data. While we have seen some advancement in the motor vehicle industry, millions of people are still spending many hours of their day in the car driving. The data to support autonomous vehicles is quite favorable. Efficiency and safety gains are tremendous and with an aging population, the need for transportation improvements is imminent. Seval ended her presentation with a touching short film she created to demonstrate how a self-driving car can be life-changing. Echoing the sentiments of the video, Seval concluded by encouraging all of us to get out and contribute positive change in the world.
After lunch, the Philanthropy Panel held an engaging discussion on “Blending Legacy with Innovation,” moderated by Lauren Hammer Breslow, J.D. M.P.H., Principal of Philanthropy Advisory Group New York. Panelists Caroline Rafferty, Co-Chair of the Max M. & Marjorie S. Fisher Foundation, and Justin Rockefeller, Trustee of the Rockefeller Brothers Fund and Co-founder of The ImPact, provided wonderful insights on being stewards of their respective family foundation and legacy, while Douglas Bintonti Stewart, Executive Director of the Max M. & Marjorie S. Fisher Foundation, was able to provide perspective outside of the family, in his role as a foundation director. At the core of philanthropy is defining one’s values with which to structure philanthropic efforts. Caroline stated that the best approach to grant making starts with your heart – from the passions of the family, then from your head – through creating meaningful strategy and grant partner relationships through the due diligence process. Doug added that a Letter of Intent from the founder(s) outlining the family’s values and its philanthropic mission is invaluable, particularly when multiple generations are involved, as it can serve as a critical guide for a foundation or the family’s philanthropy. The challenge with these letters is to make them specific enough to provide framework, but also flexible enough that it remains relevant and timeless for generations to come. Justin spoke about the Rockefeller Brothers Fund, whose founders in 1940 allowed for flexibility to accommodate current needs, in this case, divesting of fossil fuels to achieve a values-aligned investment strategy. All agreed if you are just starting your philanthropic efforts, you can start small and grow your efforts as you become more informed and comfortable with the process. Doug also mentioned the benefits of keeping philanthropic efforts local, as it allows younger generations to see your efforts in action. Finally, the panel suggested taking advantage of various existing specialist organizations to navigate questions surrounding family philanthropy.
For any questions, please contact Harry S. Grand, Head of Client Advisory