• Invest in concepts,
    not conventions.

    Our approach seeks opportunities across asset classes and around the globe.

  • Different by design
    and planning.

    The smartest investment strategies are informed by sound financial planning.
    Our clients appreciate an integrated approach and the difference it can make.

  • Sometimes the 
    greatest returns come from 
    investing in people.

    We’ve created a culture that values service over products, long-term goals over
    short-term quotas and your success over anything else.


  • The Hill LogoV2-01 Urbanization ushers in upstart industries, innovative ideas - In 2009, for the first time in world history, the number of people living in urban areas surpassed the number living in rural areas. More recently, U.S. urban population growth began outpacing suburban growth for the first time since World War II. Posted in: Insights, Noteworthy

    By Spencer Smith, Director of Research

    Originally posted on TheHill.com 1/26/17

    Flying from Los Angeles to Washington, D.C. on a clear day, one cannot help but look down at miles of open land spotted with small towns and wonder, “With all that space, who’s down there?”

    In 2009, for the first time in world history, the number of people living in urban areas surpassed the number living in rural areas. More recently, U.S. urban population growth began outpacing suburban growth for the first time since World War II.

    This trend should continue for the foreseeable future, with the world urban population, by one estimate, expected to increase 84 percent by 2050. Cities are one of the most important inventions in human history.

    Read the full article here.


  • InvestmentUpdate Investment Update, Fourth Quarter 2016 - 2016 was a good year for equity markets. Posted in: Investment Update, Noteworthy

    2016 was a good year for equity markets. The S&P 500 generated a total return just shy of 12% and the MSCI All-Country World Index, excluding the U.S., returned 4.5%. While the U.S. Presidential election and Brexit dominated headlines, the broad economic recovery was the most important financial development of the year.

    The current equity bull market began in March 2009. It has been called the most unloved bull market in history. Still fresh memories of the financial crisis have led to an almost pathological assumption that good times can’t and won’t last. In fact, since the start of the recovery, there have been net redemptions from domestic equity mutual funds and ETFs every year except 2013. Unlike 2013, when a rise in bond yields was relatively short lived, the current rise in yield appears more sustainable. This could spur a rotation back to equities from bonds, providing a catalyst for yet another leg up in the current bull run.

    The most recent surveys of institutional investors show that the majority of participants believe U.S. equity markets are overpriced. This is understandable given that the market capitalization of the S&P 500 has increased by almost $1 trillion just since the election. While we would not be surprised by a fourth consecutive weak January, led by investors who deferred selling stocks with embedded gains, important near-term indicators, including healthy market breadth, narrow credit spreads and accelerating earnings growth, point to continued strength.

    The bull market is very likely closer to its end than its beginning, but it may not be over yet. Alan Greenspan first used the phrase “irrational exuberance” in 1996. That market had three more years to go and more than doubled before it ended in 2000.

    Signals Versus Noise

    Recently, many traditional economic relationships have broken down. Sharp parallel rises in both currency and yields are rare. Usually when the U.S. dollar appreciatesrapidly, long-term interest rates do not since dollar strength slows economic growth. Emerging markets usually do well when commodity prices rise since many emerging market economies are commodity dependent. However, since the election, the MSCI Emerging Market Index has declined 5% while the Goldman Sachs Commodity Index has risen almost 15%. In an environment of strengthening global growth, cyclical currencies usually strengthen against the U.S. dollar. The opposite is occurring.

    Given these paradoxes, the metric we are watching most closely is inflation. A relatively low and stable level of inflation is a sign of a healthy economy. Equity market multiples tend to be at their highest when inflation is between 0% and 2%. The Federal Reserve Board believes that an inflation rate of 2% is ideally conducive to its mandate of price stability and maximum employment. Over time, a higher inflation rate would hamper the public’s ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would increase the probability of deflation.

    Broadly speaking, the past 30 years have been characterized by increasing globalization which is inherently deflationary. In a globalized world, more competition and access to cheaper labor reduces the costs of goods. Further, if a country experiences an idiosyncratic shock that raises domestic demand, the demand can be met with more imports rather than higher prices. Many of the factors that facilitated globalization over the past 30 years were one-off developments. China cannot join the WTO more than once. Tariffs in most developed countries cannot fall much further because they are already close to zero. There is nothing on the horizon that will match the breakthrough productivity gains in global shipping that stemmed from containerization. And the global supply chain is already highly efficient.

    We believe the deflationary pressures that were the hallmark of the post-Bretton Woods era are behind us and we are entering a reflationary period where the risks of deflation have receded, but widespread inflation is not yet imminent. This is generally good for risk assets in the short-term, particularly cyclical equities.

    Portfolio Positioning

    With global economic growth improving, higher inflation still suppressed and real yields negative in Europe and Japan, stocks remain attractive relative to bonds. The majority of our equity holdings are beneficiaries of trends that we believe are powerful enough to influence corporate performance.  Most of our investment themes are secular rather than cyclical, driven by technological or demographic forces that persist independent of economic cycles and thus have the potential to outperform across different market environments. On occasion, at economic turning points like we believe we are witnessing now, cyclical forces can have an outsized influence on equity market performance. Currently, two of our six themes are motivated primarily by cyclical changes impacting financials and energy.

    The macroeconomic transition from a deflationary to a reflationary environment will put upward pressure on interest rates. Concurrently, the financial regulations implemented post-crisis have been absorbed and will likely ease under a new administration. Both of these changes will benefit banks. The financial sector is the only major S&P sector still trading below its 2007 high. We believe a pick-up in lending activity due to accelerating global growth, rising interest rates, wider net interest spreads and financial deregulation will be tailwinds to large U.S. banks in 2017.

    Another sector that we believe will disproportionately benefit from faster global growth is energy. It is often said, the cure for high oil prices is high oil prices and the cure for low oil prices is low oil prices. At $30 per barrel, most oil companies could not profitably drill for oil, so they stopped and supply fell. Because demand growth was also tepid in the first half of the year, the drop in supply did not result in an increase in price.  As economic growth accelerated in the second half of the year, demand rose and the price of oil began to climb.  Simultaneously, OPEC reemerged with some unity and production discipline. Ride-sharing services like UBER have and will continue to increase automobile usage and gas consumption, likely at the expense of public transportation. This creates additional oil demand in the short run. These factors should combine to produce tailwinds for some energy companies in 2017.

    Genomics remains one of our highest conviction secular themes. The broader healthcare sector underperformed the market in 2016 after five straight years of strong performance. We still believe advances in molecular medicine will dramatically improve the ability to identify and combat disease, and will benefit innovative companies facilitating this life sciences revolution. The pipeline of oncology drugs has never been greater. A November 11th article in the Washington Post, titled “How a researcher used big data to beat her own ovarian cancer,” provides a real life case study of how a combination of DNA sequencing, new therapies and big data analytics (another Chevy Chase Trust theme) can dramatically change the impact of cancer.

    From a geographic perspective, we are increasing our holdings in developed market non-U.S. equities, in particular, Japan. In the third quarter of 2016, Japan corporate profits reached a record high yet foreign fund flows into Japanese equities were still negative for the full year.  Japan is a prime example of how an aging population will eventually push up interest rates. The household savings rate in Japan was over 14% in the early 1990s. Since then the percentage of the population that has moved from working age to retirement age has more than doubled, from 12% to 26%. The savings rate today is only 2%. Meanwhile, the ratio of job openings-to-applicants is at a 25-year high. This will eventually lead to higher wages and end persistent deflation. Japan will benefit from this shift because inflation will pressure real rates (as opposed to nominal rates), lead to a weaker yen, a stronger stock market, and even higher inflation expectations.  We are looking at investment opportunities in Japan, particularly ones tied to our global themes.

    From a longer term perspective, there are reasons to be concerned. In the U.S., rising interest rates coupled with a stronger U.S. dollar will be a drag on U.S. economic growth.  Additionally, when inflation is on a firm upward trajectory, central banks everywhere may find it difficult to slow the trend. These two factors will then weigh on equity market multiples. And a strong U.S. dollar puts pressure on emerging markets. As of mid-2016, dollar denominated debt held outside the U.S. had risen to almost $10 trillion dollars. About one-third of the debt is held in emerging markets. As the dollar rises against other currencies, the cost of servicing debt increases. Nonetheless, barring an exogenous shock, these risks are real but probably not pressing enough to change near-term equity market momentum. It may be a bumpy ride, but we believe there is still upside entering 2017.

    Fixed Income

    2016 was a wild year in the bond market. 10-year bond yields started the year at 2.27% and fell to a low of 1.32% shortly after Brexit. Prior to the U.S. election, yields climbed back to 1.88%, and after the election shot up another 76 basis points to a 2016 high of 2.64%, before settling back to end the year at 2.44%. Although the absolute numbers may seem small, in percentage terms these are large moves.

    Pundits debate whether the 30-year bull market in bonds is finally over. We do think the cycle-low for bond yields is behind us and yields will continue to climb from current levels, just not linearly. But, we don’t expect another doubling in yields until spare capacity outside the U.S. is absorbed. Only when other central banks start raising rates will the Federal Reserve be able to sustain its rate hikes. Until then, any Fed tightening beyond what is already expected will put upward pressure on the U.S. dollar, thereby reducing the need for further hikes.

    Given this outlook, we are maintaining our current portfolio positioning. The average duration of our bond holdings is approximately 3.5 years. As bonds reach maturity or we identify swap opportunities, we will seek to reinvest the proceeds in higher yielding instruments. Continued volatility in the bond market will present opportunities to buy high quality securities at discount prices.  We will capitalize on these opportunities to add value.



  • The Hill LogoV2-01 Innovation, demographics make automation increasingly appealing - We are, indeed, witnessing a revolution in industrial automation. However, it is important to separate the hyperbole from the underlying economic realities. Posted in: Noteworthy

    By Spencer Smith, Director of Research

    Originally posted on TheHill.com 12/21/16

    Industrial automation technologies are not new. Articulated robots, for example, have been used for decades, primarily in the automobile industry.

    However, the pace at which automation technologies are being adopted is increasing rapidly and a growing variety of industries are coming to rely on them. This acceleration is largely driven by two factors — improvements in information processing and changing labor force demographics in the world’s largest economies.

    For the United States, these forces will likely lead to an increased investment in domestic manufacturing and industrial capacity.

    We are, indeed, witnessing a revolution in industrial automation. However, it is important to separate the hyperbole from the underlying economic realities.


    Read the full article here.

  • Money_edited Chevy Chase Trust Ranks #2 Nationally on Forbes/RIA Channel 2016 Top 100 RIA Firms - Important Disclosures. Posted in: Announcements, Noteworthy

    Important Disclosures.Original content by Julie Cooling, Forbes Contributor

    This year’s unique Top 100 RIA Firms ranking showcases the wealth management firms by growth in assets over the past ten years with a majority of the firms accruing more than $1 billion in assets.

    These firms are leading because of their independence, their commitment to their clients and their ability to grow through a decade of market challenges and rewards.


    Read the list here.


  • Blake-noteworthy Blake Keeley Doyle Joins Chevy Chase Trust - Blake Keeley Doyle has joined the firm as Managing Director to build its institutional client business. Posted in: Announcements, Noteworthy, People

    November 14, 2016

    Bethesda, MD     Chevy Chase Trust, a research-driven investment management firm, announced today that Blake Keeley Doyle has joined the firm as Managing Director to build its institutional client business. Ms. Doyle joins Chevy Chase Trust from Height Securities, LLC, in Washington, D.C. where she was head of Institutional Sales and Capital Markets, with a focus on thematic research, regulatory and policy driven investment ideas, and special situations.

    Ms. Doyle joined Height Securities in 2009, served on the firm’s Executive Committee and worked to launch a joint venture with a Dublin-based thematic and policy-focused advisory firm.  Earlier, she worked at FBR Capital Markets in Arlington, VA. Ms. Doyle graduated from Vanderbilt University with a degree in Economics.

    “Blake is a seasoned professional in the securities industry. Her experience developing and launching institutional ventures will strengthen and augment Chevy Chase Trust’s success in family wealth management,” says Peter Welber, President and CEO.

    Ms. Doyle added, “Chevy Chase Trust is a firm I have admired for some time. Their thematic investment process and proven track record present a unique opportunity for me to be a part of something truly differentiated in the investment industry.

    The pre-eminent investment management firm in the Washington, DC area, Chevy Chase Trust is privately-owned by a family with a century of roots in the Washington community.  With $24 billion in  assets and 88 professionals, Chevy Chase Trust specializes in thematic research and investment management for wealthy individuals, endowments and institutions.

    For more information
    Stacy Murchison

  • Wall-Street-photo Market Update - U.S. equity markets closed higher both days after the Donald Trump victory and Republican sweep of Congress. Posted in: Noteworthy

    U.S. equity markets closed higher both days after the Donald Trump victory and Republican sweep of Congress. The positive reaction stems from the possibility of corporate tax reform, repatriation of foreign cash, and increased deficit spending. We’re hesitant to take the initial reaction as an “all clear” signal.

    President-elect Trump has been clear about his desire to renegotiate trade deals and impose tariffs on foreign goods. He can accomplish these objectives by executive order; therefore, implementation of protectionist policies is a real possibility. Protectionism would be inflationary, and will likely lead to lower corporate margins and reduced consumer purchasing power.

    Higher inflation will also lead to higher interest rates. The President-elect has been critical of Federal Reserve Chair Janet Yellen. It is likely that he will replace her in 2018, and other members sooner, favoring those with a more hawkish bent. The bond market is already beginning to discount this possibility with 10-year government bond yields rising 8% today to slightly above 2%. We expect interest rates to continue to climb. This will be a negative for consumers and consumer stocks, and will likely exert pressure on market multiples.

    The sectors most likely to benefit from the election’s results include healthcare and financials. Proposition 61, the drug pricing initiative in California, was soundly defeated and a Republican Congress is less likely to focus on the pharmaceutical industry. The financial sector may benefit from some strategic clawbacks of Dodd Frank and from higher interest rates.

    Our long-term, balanced, thematic approach to equity investing and our focus on relatively short duration bonds enable our client portfolios to withstand market gyrations from exogenous events, like political elections, better than many others. However, these are uncertain times. From a risk management and opportunistic standpoint, we are selectively raising cash reserves, reducing foreign exposure in favor of a more U.S.-centric portfolio, reducing some consumer oriented holdings, and potentially increasing holdings in the healthcare and financial sectors.

  • InvestmentUpdate Investment Update, Third Quarter 2016 - There has been no shortage of newsworthy events this year. We’ve endured terrorist attacks on multiple continents and a widespread epidemic, Zika. Posted in: Investment Update, Noteworthy

    There has been no shortage of newsworthy events this year. We’ve endured terrorist attacks on multiple continents and a widespread epidemic, Zika. In a historic move, Britain voted to leave the European Union. The crisis in Syria continues to displace millions of people. Economic prospects in many countries around the world, including the U.S., seem even more dependent on accommodative actions of central banks than usual. As a result, every sentence uttered by a central banker has received extraordinary scrutiny. In this noisy atmosphere, it is critical for investors to remain focused on the important underlying, and sometimes less sensational, factors that influence investment outcomes. In this quarterly update, we thought we’d highlight some of the trends that shape our current portfolio construction and will likely influence our investment strategy for years to come.

    The Intersection of Demographics, Productivity and the Fourth Industrial

    Population aging is one of the most important demographic trends worldwide. Population aging is most acute in the more economically developed countries of the world. Typically, as countries grow wealthier, fertility rates drop. Population aging is also a large concern for the most populous country in the world, China, due to the one-child policy introduced in the late 1970s. Declining fertility rates, improved health and increased longevity are swelling older populations dramatically.

    By 2050, the number of people 60 and older will increase from 900 million to 2 billion, going from 12% to 22% of the world’s population. By 2020, for the first time in history, people aged 65 and over will outnumber children under age five. Improvements in nutrition, sanitation and healthcare are reasons why most children today reach adulthood and why most adults reach old age. The longer you live, the longer you’re likely to live.

    The demographics of aging pose a headwind to economic growth. This can be clearly seen in the long-term trend of dependency ratios. Dependency ratios reflect the percentage of people 65 and older to the working-age population (defined as ages 15-64). As the name implies, the higher the ratio, the more workers need to produce to satisfy the standard of living for all. Some of the countries that currently are among the largest contributors to global GDP are the most demographically challenged, including Japan and those in Europe.

    Dependency Ratios


    Economic growth is a function of labor worked and labor productivity. Growth in both labor supply and labor productivity have been weak in recent years. Weak labor supply growth is almost certain to persist since demographic trends are predictable and essentially irreversible in the short and intermediate term. Fewer births eventually lead to slower labor force growth and in some instances, even labor force declines.

    That leaves productivity. Productivity is defined as output per hour. Productivity growth is the primary driver of a rising standard of living. From 1995 to 2005, U.S. real GDP growth was 3.4%. Since 2005, GDP growth has averaged 1.4%. The 1995 to 2005 period saw big enough productivity gains to offset demographic headwinds. However, these gains began to dissipate in the middle of the last decade, even before the financial crisis began. The current slow pace in productivity gains is puzzling since technology seems to be permeating our daily lives at an ever-increasing rate. Big advancements tend to come in waves. We think transformative innovations are on the horizon and we are optimistic about the next decade.

    Three industrial revolutions have occurred over the past 250 years. Each has produced quantum leaps in productivity and standards of living. The First Industrial Revolution used water and steam power to mechanize production. The Second used electricity to create mass production. The Third used information technology to automate production.  

    We are now on the brink of a Fourth Industrial Revolution, which was a major topic at this year’s World Economic Forum in Davos, Switzerland. The Fourth Industrial Revolution consists of a wide range of new technologies that combine the physical, digital and biological worlds. Intelligent automation will connect digital systems to physical systems creating autonomous solutions where machines make decisions and take action with no human involvement. It is in its infancy.

    One example of how digital and physical systems are combining for improved productivity is warehouse automation. The rapid growth of e-commerce is placing pressure on fulfillment networks, not just for e-retailers  but for all retailers. Autonomous mobile robotic systems are being developed and deployed that combine physical characteristics with embedded intelligence and application software. These robots are overturning the business of storing, handling and moving goods among storage racks in distribution centers. They travel untethered at speeds up to 25 miles per hour, in aisles as narrow as 28 inches, storing and retrieving objects.

    For retailers, the three big costs of distribution centers are labor, time and real estate. Robotic automation can cut labor costs by 80% and reduce the size of warehouses by up to 40%. These robot systems work 24/7 without breaks, functioning in “lights out” warehouses that require human intervention only for repairs and process issues.

    Another industry that may be both revolutionized and disrupted by new technologies is the automotive industry. The car is arguably one of the most underutilized and time-consuming machines on earth. Cars are in operation for an average of one hour per day for a utilization rate of 4%. Considering that most of the time only one seat in the car is occupied, the utilization rate on a per seat basis is roughly 1%.

    Globally, there are approximately one billion cars that each travel about 10,000 miles per year. At an average speed of 25 miles per hour, this amounts to 400 billion hours of time spent operating a vehicle and doing nothing else (other than being distracted talking on a phone). Another 100 to 200 billion hours can be added for passengers unproductively confined to an essentially unconnected car.

    Three trends will likely converge to disrupt an automobile industry that has barely changed in 100 years. First, shared vehicles will move the industry from a privately owned and operated model to a fleet management model. Mobile technology and data management are already making this possible. Second, autonomous vehicles will eliminate the single biggest inefficiency, the human driver. Again, technology and data will be at the core of this transformation. And third, electric vehicles with better battery packs will become more efficient and more economical when used in the context of shared autonomous fleets.

    Today the auto industry sells machines to consumers who buy parts, gas, insurance, parking and repairs year after year and then repeat the process every six years or so — all for the privilege of driving an hour a day. In the future, automotive transportation will afford consumers mobility while they pursue other activities. The car will become the fourth content screen alongside the PC, phone and TV.

    The Fourth Industrial Revolution will be characterized by an acceleration of innovations, faster and broader diffusion of those innovations and disruption of many traditional business models. It will boost productivity growth and add to global market capitalization. Significant shareholder value will be created by first movers, enablers and disruptors.

    Capital Markets Update

    The S&P 500 Index generated a total return of 3.85% during the third quarter of 2016. This brings the year-to-date return to a respectable 7.84%. Importantly, the beginning of the third quarter marked a complete reversal in sector performance. During the first six months of the year, the two strongest S&P sectors were Utilities and Telecom, with returns in excess of 20% each. During the third quarter, these sectors were both down over 5%. They were the weakest sectors in the Index in the third quarter.

    Conversely, Technology and Financials, which both lagged the Index in the first half of the year, posted the strongest gains in the third quarter.

    The rotation in market leadership is encouraging. It is unusual for equity markets to rise with defensive leadership. More stable stocks such as Utilities and Telecoms tend to do best when fear is high and economic prospects grim. On the other hand, cyclicals such as Financials and Technology outperform when the outlook brightens and growth accelerates.

    The latest batch of global economic indicators show the global economy is more or less stuck in secular stagnation. It’s neither boom nor bust. The third quarter was the first this year in which international markets broadly outperformed the S&P. The MSCI World Index generated a return of almost 5%, which brings its year-to-date return to 6.06%.

    Ten-year bond yields rose slightly in the quarter to 1.59% from 1.47%. Yields fell to a low of 1.36% during the second quarter, having started the year at 2.27%. Globally, long-term bond yields have been moving higher, albeit gradually. We expect the same to occur in the U.S.


  • A message from the President & CEO - I like to think of Chevy Chase Trust as an investment think tank. Posted in: Noteworthy, Video

  • InvestmentUpdate Investment Update, Second Quarter 2016 - During almost all of the second quarter, U.S. equity markets seemed impervious to bad news. Through June 23, the S&P 500 traded in a 100 point range between 2,025 and 2,125, close to its record high of 2,134 in May, 2015. Then came Brexit. Posted in: Investment Update, Noteworthy

    During almost all of the second quarter, U.S. equity markets seemed impervious to bad news. Through June 23, the S&P 500 traded in a 100 point range between 2,025 and 2,125, close to its record high of 2,134 in May, 2015. Then came Brexit.

    Pundits, experts and polls did not expect the U.K. to vote to leave the European Union. Usually, people vote in their economic best interest. Money managers believed this, and their surprise contributed to the violent sell-off in equity markets in the days that followed.

    We, too, believed Britain would vote to remain in the European Union; but given significant structural issues facing the entire Continent, our exposure to Europe was and remains low. Only 1% of our equity holdings are domiciled in the U.K. and less than 9% in Continental Europe. Over 40% of the European equities we own are based in Switzerland which never joined the E.U. The remainder are dominated by industrials and energy exporters who generate the majority of their sales outside the region. Europe represents only 15% of sales for our combined portfolio holdings. We believe the source of global revenues is as relevant a long term investment criterion as country of domicile.

    An Imperfect Union
    Since the formation of the European Union in 1993 and the introduction of the Euro currency in 1999, many experts questioned their sustainability. Doubts stem primarily from a union having monetary authority but no fiscal authority.

    Over the years, there have been occasions when it appeared that a member nation might secede, with the Greek bailout referendum being the most recent. However, before now, no member has left. Brexit represents a significant break from the post WWII movement toward open trade and economic integration across Europe. In many respects, it is fortunate that the first country to separate from the Union was not a member of the Euro currency. Secession by a member of the currency union would be infinitely more complicated and likely have far greater financial consequences.

    Global Implications of Brexit

    The U.K. economy represents less than 3% of global GDP, so in and of itself, a recession in the U.K. should not materially slow global growth. However, in the short-term, the Brexit decision will increase volatility in financial markets and fuel demand for “safe-haven” assets like the U.S. dollar. A stronger dollar effectively tightens financial conditions in the U.S. and the 40% of the world economies that tie their currency to the dollar. This will likely cause a temporary slowdown in global growth.

    Longer-term, if the separation is orderly and other European countries do not follow suit, we think this will be unfortunate for Britain, but will not have broader impacts. On the margin, it may turn out to be beneficial for Luxembourg and other money centers in Continental Europe that could see increased investment as financial activities are redirected from London to secondary European money centers.

    An Investment Perspective
    The Brexit vote and other nationalistic/protectionist movements are essentially responses to non-economic problems. From an investment perspective, protectionism has the potential to diminish one of the few economic bright spots of late. Globalization has improved productivity, increased corporate profit margins and lowered prices for most consumer products. This potential negative combined with the surprise factor of the vote outcome had the markets looking shaky before firming up quickly. Events in Europe are still unfolding. Other crises, related and unrelated to Brexit, are sure to follow. When, where and what are unknowable. What we do know is that there are still attractive long term investment opportunities in the global equity markets. We believe our thematic investments can ride the tailwinds of strong secular trends. Companies at the forefront of innovations in robotics, genomics, urbanization and data inundation will, we believe, outlast the next crisis and outperform the markets over time.

    We also see near-term opportunities in certain markets, sectors and companies that are out of favor or undervalued. Currently, only 1% of our holdings are in Japan but the risk/reward trade-offs of some segments of the Japanese market look attractive. Similarly, European banks look extremely undervalued with many of the uncertainties priced in. On balance, we think it presents a buying opportunity, particularly with respect to banks with Eurozone exposure as opposed to U.K. domestic earners. Many are trading at less than 50% of book value with
    high single digit yields.

    Fixed Income
    From a fixed income perspective, the most important and immediate implication of the U.K. decision to leave the E.U. is lower sovereign yields. The uncertainty created by this event triggered a flight to safety, sending sovereign yields lower in all major bond markets including the U.S., Japan, Germany, France and the U.K. Not surprisingly, U.K. yields fell the most.

    The 10-year U.S. Treasury bond fell to 1.40% the day after the Brexit result. On July 1st it declined below the former all-time low of 1.39% in 2012. Prior to the vote, the 10-year had been trading in a range of 1.70% to 1.95%. It started 2016 with a yield of 2.27%. Market reactions to unusual events tend to have similarities. Looking back at past financial crises, immediately after the 1987 stock market crash, 1998 failure of Long Term Capital Management and 2008 Lehman bankruptcy, yields fell briefly and then evened out. We think the 10-year U.S. Treasury bond will rebound from these extreme levels and trade in the 1.50% to 1.70% range until there is a clearer picture of the implications of the U.K. vote and the impact on U.S. and global economic growth.

    A current consensus view in both fixed income and equity markets is that inflation will remain at extremely low levels. As a result, buying inflation protection in the form of Treasury Inflation-Protected Securities (TIPS) is relatively inexpensive. Core CPI, which excludes food and energy, has been above 2% per year for the past seven months. We think it is highly likely that once energy prices stabilize due to supply reductions which are already underway, aggregate CPI will rise to this level, or higher.  In addition to TIPS, we continue to purchase both taxable and tax-exempt investment grade bonds with average durations between three and four years. Given recent flattening of the yield curve, we believe these bonds offer value with very modest risk.


  • ducks What Differentiates Chevy Chase Trust? - Clients tell us they find our approach to be refreshingly straightforward. We offer careful planning, global thinking, exhaustive research and thematic portfolios. This is investing pure and simple. Posted in: Noteworthy


    Private ownership by the B.F. Saul family, with roots in the community that date back more than 100 years.

    • No outside shareholders with quarter to quarter profitability concerns; no pressures regarding business model or profit margins.

    • No need to scale the business; firm can maintain a service model that is in the best interest of our clients, and can attract and retain talented professionals.

    More than 80 employees, all (including decision-makers) based in the same location.

    • Large enough to offer world class expertise and services, but not so large to require segmentation that leads to disjointed delivery of services.

    • Small enough to know and accommodate our clients and their unique needs.

    We manage all portfolios internally, using individual equity and fixed income securities.
    No outside managers, no proprietary funds. Easy for clients to understand what they own.

    • Our clients have a personal relationship with their equity and fixed income portfolio managers who are directly accountable to clients for all investment decisions and performance.

    • We do not subscribe to the common style box approach (i.e. we do not allocate specific percentages to Large Cap, Small Cap, International, Growth, Value, etc.) that frequently results in over-diversification and index-like returns, usually at a high cost with layered fees.

    • We are thematic investors; we look for investable ideas that stem from economic, demographic and technological trends powerful enough to influence corporate performance across multiple industries. We invest in companies of all sizes and located almost anywhere in the world. As examples, current themes include urbanization in the U.S. (with both baby boomers and millennials choosing to move into cities rather than suburbs) and the advent of molecular medicine (the impact of genetic sequencing on medicine and health care).

    • Portfolios of new clients are not automatically liquidated and reinvested into our strategy. We take a careful look at existing holdings and consider tax consequences of any changes. We strive to achieve the best after-tax performance for our clients.

    Each client relationship includes a planner; ideally, all new relationships begin with
    a financial plan.

    • Planners work to gather pertinent financial data and help clients assess their short- and long-term objectives.

    • Resulting plans inform the investment strategy and asset allocation recommendations.

    • The financial plan and investment strategy are not static; financial plans are updated regularly through the years as the client’s unique needs, the economy, markets, and tax laws change.

    We are a trust company that can serve in a fiduciary role when those services are needed, providing a continuum of investment management, planning and fiduciary oversight for our clients and their families.

    • Our staff includes a deep bench of professionals with experience administering trusts and estates, including estate planning lawyers who had 15 to 20 years in private law practice before joining Chevy Chase Trust.

    • We are able to hold non-traditional trust assets, such as private company stock, partnership interests and real estate investment assets that some firms are hesitant to, or will not, hold in fiduciary accounts.

    • We develop a personal relationship with beneficiaries considering how best to meet their financial objectives within the terms and spirit of the trust.

    Chevy Chase Trust charges one investment management fee that covers all of its services.