Founders Fund

June 30, 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 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 second quarter was another positive one for the fund. It posted a return of 3.0% and is up 18.1% over the past year. Strong stock markets more than offset the modest (or negative) returns from fixed income investments.
  • Founders has been fully invested in stocks (60-66% of total fund) over the last year, although the weighting has gradually been brought down to its long-term target of 60%. We are proceeding more cautiously due to limited opportunities in fixed income (credit spreads are at historically low levels), full valuations on most stocks, and a stubbornly high degree of bullishness and speculation (note: investor sentiment is a contrarian indicator of future returns).
  • We continue to diversify the fixed income holdings, complementing a large position in the Income Fund and with a cash reserve. Provincial, corporate and high yield bonds (along with dividend stocks) give the Income Fund more return potential while the cash offers protection against rising interest rates and provides ready liquidity.
  • As part of ongoing rebalancing, we trimmed the funds that have been strong (Global Equity and Small-Cap Equity) and used the proceeds, along with new cash coming into the fund, to add to fixed income. We also added opportunistically to the Equity and Global Small-Cap Equity Funds. Both funds have lagged this year after being stalwarts in the previous two years.
  • As a reminder, the Founders’ asset mix is important, but 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 currencies.
  • The largest transactions in the quarter (in the underlying funds) included the purchase of Grifols (Spain), Rotork (U.K.), and MEG Energy (Canada), and the sale of Zimmer Biomet (U.S.), and Challenger Financial (Australia).

Positioning

  • We’re proceeding with caution in the current economic and market environment. In Founders, this means a full allocation to fixed income (including some cash), minimal exposure to speculative sectors, and consistent rebalancing towards the funds where stock prices have not kept up with the company fundamentals.

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.