Founders Fund

March 31, 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, our Co-Chief Investment Officer, manages the fund and Salman Ahmed is co-manager. 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 fund brought its first decade to a close with a volatile quarter (-5.0%). Stock markets were generally weak and bonds provided little protection due to rising interest rates. Over the past 10 years, however, it’s returned a solid 6.5% per year.
  • Throughout 2021, we talked about trimming positions in the equity funds, leaning against the speculative wind if you will. This changed in 2022 with declines in the stock markets and a reduced degree of speculation. We used both flows into the fund and the cash reserve to add to stocks. This was primarily done by adding to the underlying funds that were hit hardest, namely the Global and Global Small-Cap Equity Funds.
  • We also added to bonds, which was another area of market weakness. Founders has been under committed to bonds for a number of years and will remain so, but with yields now higher, the appeal of fixed income has improved relative to cash.
  • As a result of the purchases, stocks make up 63% of the fund and bonds 28%. The cash reserve has decreased from 14% at year-end to 9% presently. The need for protection against rising rates has been reduced.
  • Keep in mind that the Founders’ asset mix is important (and we agonize over it), but returns are primarily driven by the performance of the underlying funds. Through these funds, the portfolio owns a mix of bonds and stocks across a wide range of industries, geographies, and currencies.
  • Prominent transactions in the quarter (in the underlying funds) included the purchase of Zoetis (U.S.), CNH Industrial (U.K.), FMC (U.S.), Michelin (France), and Hudbay Minerals (Canada); and the sale of Verisign (U.S.), Bank of America (U.S.), Philips (Netherlands), Dassault Systèmes (France), and Orpea (France).

Positioning

  • There are many things to worry about these days, some of which are emotionally charged. We believe, however, that the overall market risk is lower precisely because the geopolitical and economic risks are in plain view and investors are less bullish (a good contrarian indicator). We own more stocks than we did a few months ago, and may add further, not because we know where the market is going, but because the trade-off between return and risk is more favorable.

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.