Founders Fund

March 31, 2021

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 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 first quarter extended the Founders’ strong recovery, leading to a 26.9% return over the past 12 months. More importantly, the fund passed the 9-year mark in February and has generated a 7.0% average annual return since inception. Over that period, it has benefited from declining interest rates (until recently), rising stock markets, and some advantageous buying on market dips.
  • We said last quarter that, “We have diversity across the pandemic spectrum ... with a bias towards the unheralded recovery stocks that have low expectations and more reasonable valuations.” In the first quarter, the markets bounced back and forth between the lockdown and recovery stocks (sometimes alternating days), but overall, our bias towards the latter helped the fund’s return.
  • Diversifying the fixed income holdings across the Income and Savings Funds also enhanced performance, making up for some foregone returns in previous quarters. We’ve maintained a large cash position to protect against rising interest rates, which is what occurred in the first quarter, pushing bond prices down.
  • Founders has been fully invested in stocks over the past year, although since last summer we’ve been gently rebalancing the weighting down. Valuations have returned to more fulsome levels and market sentiment has turned decidedly bullish, both good reasons for caution. Indeed, some parts of the capital markets are rife with speculation (cannabis, IPOs, and bitcoin come to mind).
  • While the Founders’ asset mix is important, returns are primarily driven by the results of the underlying funds. Through these funds, Founders owns a diverse mix of stocks across industries, geographies, and as noted above, the pandemic continuum.
  • The largest transactions during the quarter (in the underlying funds) included the purchase of new positions in Aon (commercial insurance broker & retirement services), Meggitt (aerospace parts), and Euronext (the largest stock exchange in Europe). On the sell side, we eliminated Novartis, Cenovus, and Discovery.

Positioning

  • The wide disparity between stock and bond returns is prompting us to be more active rebalancing the fund. The stock funds are being trimmed on strength and flows into the fund are being allocated to bonds (via the Income Fund).

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.