Founders Fund

December 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 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 posted a return of 9.2% in 2021. Strong returns from the portfolio’s stocks more than offset negative returns from fixed income investments.
  • The fund is designed to have equity content in the range of 60% and it stayed close to that target throughout the year. Some clients would like the allocation to be higher given extremely low bond yields, but we remain concerned about high stock valuations and even higher levels of speculative behaviour in parts of the market.
  • Throughout the year, we leaned against rising stock prices and gradually reduced the equity weighting in the fund. This was done by allocating client inflows to cash and bonds and occasionally trimming positions in the underlying equity funds.
  • A full allocation to fixed income is Founders’ insurance policy. Holdings include a large position in the Income Fund and a cash reserve. The Income Fund provides the return potential with large allocations to corporate and high yield bonds, while the cash offers protection against rising interest rates and provides ready liquidity.
  • As a reminder, the fund’s asset mix is important, but returns are primarily driven by the performance of the underlying funds. Through these funds, Founders owns a mix of stocks and bonds across a wide range of industries, geographies, and currencies.
  • The largest transactions in the quarter (in the underlying funds) included the purchase of CBRE Group (U.S.), First Advantage (U.S.), Martin Marietta (U.S.), and Sony Group (Japan); and the sale of Raytheon Technologies (U.S.), Safran (France), Bayer (Germany), TPG Pace Beneficial Finance Corp. (U.S.), and Pet Valu Holdings (Canada).

Positioning

  • We are proceeding with caution in the current economic and market environment. 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 companies’ 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.