Colony Market Update

To state the obvious, it’s been an extremely difficult year for investors as markets digest higher inflation, rising interest rates, and geopolitical uncertainty. Both stocks and bonds have experienced broad declines while asset categories that benefit from higher inflation, such as commodities, have generated gains. As of the close on Friday, September 16, 2022, the broad global equity market (MSCI All Country World Index) has declined by almost -20% so far in 2022 while the technology-heavy NASDAQ 100 Index is down over -26%. Traditional “safe” assets, like investment grade fixed, income have also experienced declines as bond yields increased sharply over the past several months alongside monetary policy tightening. For example, the Barclays 1-10 Year Municipal Bond Index has declined -6% on a year-to-date basis in 2022.

The economic outlook has deteriorated, and we assume a continued deceleration in US and global growth driven by tightening monetary policy in response to sustained high inflation. The near-term (next 12 months) recession risk continues to rise and represents a reasonable conservative scenario, but is not a certainty. Most relevant to investment strategy is assessing the potential severity of any economic downturn and its impact on corporate earnings and interest rates—and what is being discounted in asset prices. Given the strength in corporate and consumer balance sheets, we believe any potential recession is likely to be brief and shallow—perhaps a more “normal” type of cyclical recession rather than akin to the 2008-2009 financial crisis or the 2000-2002 dotcom bubble burst. And the sharp fall in stock prices already experienced this year suggests markets have priced in some expectation of meaningful earnings decline.

The economic and geopolitical backdrop remain highly uncertain; therefore, market volatility is likely to remain elevated. While risks have risen, starting point valuations have also improved—indicating better prospects for future long-term returns. In the current environment, we believe that proper diversification beyond traditional US stocks and bonds remains as important as ever. Our tactical portfolio positioning themes include:

  • Continue to target an underweight position to core/investment grade fixed income, but add to municipal bonds given recent weakness and more compelling yields. High yield credit remains attractive given recent spread widening.
  • Maintain an underweight to US stocks while emphasizing higher quality companies. Despite more attractive valuations following recent declines, we remain somewhat concerned that earnings expectations may still be too high.
  • Remain fully invested in non-US stocks that trade at a steep discount in valuation relative to the US, as a lot of bad news and negative sentiment is already priced into these markets.
  • Continue to target an overweight position to public “real assets” like commodities and energy-related stocks given the risk of sustained higher inflation.
  • Where appropriate, continue to develop private equity and real estate investment programs to potentially enhance long-term returns.

Please see the attached presentation that provides our assessment of the market backdrop and shares our views on portfolio strategy going forward.

Colony Trust Company is expanding to Tennessee

Colony Trust Company, LLC is pleased to announce the opening of a branch office in Nashville, TN. Tennessee is a leader in progressive trust legislation and one of the more favorable states to establish and administer a trust.* We are excited to be able to offer corporate trustee services under the governing laws of both North Carolina and Tennessee going forward. Some of the advantages Tennessee offers over trusts administered in North Carolina, South Carolina, Georgia, Florida and a majority of other states include:

  • Community property trusts created in TN allow the potential for contributions of assets by out-of-state couples in order to qualify the assets for 100% step-up in basis on the death of both spouses
  • Relaxed notice requirements to qualified beneficiaries in order to decant a trust in TN
  • Possibility of mitigating state income taxes of an irrevocable non-grantor trust; provided, the trust has no other taxable connection with another state as articulated in that state’s taxing statute or the recent landmark Supreme Court case of N.C. Dep’t of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust.

Colony Trust Company opened as a North Carolina public trust company in 2018. We currently serve in a fiduciary role for over $1.1 billion in assets under administration and do not manage investments. Colony Trust Company’s sister company Colony Family Offices is a multi-family office with over $2.15 billion** in assets under management that provides comprehensive wealth advisory services to a select group of client families across all regions of the country. Our mission is to provide financial peace of mind to families with significant wealth. The Colony team works closely with each client family and their other trusted advisors to develop an integrated financial strategy. Our objective is to develop long-term professional relationships with client families and serve them for generations to come.

As professional trustees, we have the technical expertise and flexibility to serve families in a variety of ways, including:

  • Sole corporate trustee with full fiduciary powers
  • Co-trustee with an individual trustee to support them in their fiduciary role
  • Directed trustee with a third-party committee, trust protector and/or investment advisor
  • Successor trustee
  • Executor, co-executor or agent
  • Trust protector

We continue to serve client families by exercising sound and prudent judgment based upon our fiduciary duties, experience and collective knowledge. We strive to understand our client families and serve them in a nimble, flexible and practical manner when meeting their needs.

To learn more about our Tennessee branch or how its governing law may be beneficial to your family or your clients, please feel free to contact us.

To read our press release, please click here.

*Source: Oshins Trust State Rankings, 2020-2021
**As defined by the SEC, as of June 30, 2021

Colony Trust Company Announces Sponsorship of Queens Estate Planners Day

Colony Trust Company is pleased to announce that it is a Premier Virtual Sponsor of the Queens University of Charlotte 42nd annual Estate Planners Day. Queens’ single-day conference offers a comprehensive educational program for estate planning professionals.  Nationally recognized experts in the fields of estate planning, tax, accounting, insurance, and state and federal law will cover topics of timely interest to all in the field of estate planning.  Click here for the full announcement.