Founders Fund

September 30, 2022

Fund Overview

  • The Founders Fund is a balanced fund with a target asset mix of 60% stocks and 40% fixed income. It gains this exposure from investing in Steadyhand’s other funds.
  • Tom Bradley (Steadyhand Chair and co-founder) manages the fund along with Chief Investment Officer Salman Ahmed. They have considerable scope to adjust the portfolio although without extremes in valuation and investor sentiment, their bias is to stay near the target mix.

Portfolio Specifics

  • The Founders Fund was virtually unchanged in the quarter (-0.4%), but the road to get there was anything but dull. Markets rallied dramatically from mid-June to early August and then proceeded to give back all the gains and plumb new lows. Year to date, Founders is down 14.3%.
  • This year’s market declines reflect two things: an over-exuberant 2021 and an uncertain economic outlook in 2022 due to high inflation, supply chain and COVID disruptions (still), and the war in Ukraine. The economy has been deteriorating and a recession now seems probable, although how stocks react to it is less of a sure thing. Stock prices have adjusted a lot already (it will be a highly anticipated recession), rampant speculation has turned to widespread fear (a good counter indicator), and valuations in many parts of the market are attractive again. In other words, expected 5-year returns for stocks and bonds are better than they’ve been since the spring of 2020.
  • As noted in our last report, Founders has a full allocation to stocks after significant buying in the second quarter. We used flows into the fund, as well as money from the cash reserve, to add to the Equity and Global Equity Funds. This pattern continued late in the third quarter, as the fund did some rebalancing to offset market declines. As a result, the asset mix is little changed from June 30.
  • As usual, we remind investors that the fund’s asset mix is important, as are the adjustments we make, but returns are primarily driven by the performance of the underlying funds. Through these six funds, Founders owns a mix of bonds and stocks across a wide range of industries, geographies, and currencies.
  • The largest transactions during the quarter (in the underlying funds) included the purchase of HDFC Bank (India), Aritzia (Canada), and Saab (Sweden); and the sale of Experian (Ireland), Winpak (Canada), and Kadokawa (Japan).

Positioning

  • Founders holds more in stocks than its long-term average. This positioning reflects the considerable retrenchment we’ve had in stock prices, better valuations relative to long-term potential, and an unusually high degree of bearishness amongst individual and institutional investors.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Important information about the Steadyhand funds is contained in our Simplified Prospectus. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.