Founders Fund

September 30, 2018

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 5 funds.
  • Tom Bradley manages the fund and Salman Ahmed is co-manager. They have considerable scope to adjust the portfolio to reflect their views on valuations, corporate fundamentals and investor sentiment.

Portfolio Specifics

  • The Founders Fund’s return was flat in the third quarter, with only modest moves in the underlying funds.
  • The geographic mix of the stock holdings shifted due to a manager change on the Global Equity Fund. Exposure to U.S.-domiciled stocks increased from 7% of the Founders Fund to 14%. The new manager, Velanne Asset Management, is finding out-of-favour stocks in the U.S. that have been lost in the shadows of the large technology companies.
  • As a reminder, none of Steadyhand’s equity managers are constrained by geographic borders. They have the flexibility to search widely for attractive opportunities. Most of the Canada-based companies are global in nature and play to Canada’s strengths: banking; transportation; and energy. Many of the foreign companies are in industries not prominent in the Canadian market: healthcare; consumer products; and technology.
  • The portfolio’s strongest performers this year have been the Small-Cap Fund and Equity Fund. Within these two funds, industrial-related holdings have been the key drivers of performance.
  • As we note in Bradley’s Brief, the fund has maintained a cautious stance. We continue to feel it’s prudent to have below-average exposure to stocks. The fund’s current weighting is 55%, which is 5% below its long-term target of 60%.
  • The bond allocation has remained at 28% which is below the long-term target (35%). Bond yields have risen, but remain at low levels. As long-term investors, we’re looking further out and assessing the likelihood that they will normalize (rise) over time. As a reminder, when yields go up, bond prices come down. We don’t view the asset class as particularly attractive, yet we also see it providing some insurance in a balanced portfolio.
  • Our below average weighting in both stocks and bonds has led to a higher than normal weighting in cash. Between the Savings Fund and cash held in the equity funds, it finished the period at 17%. Although cash offers little in the way of yield, it provides protection against rising interest rates and is a ready source of liquidity.