Founders Fund

March 31, 2019

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.
  • Steadyhand President 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 Specfics

  • The fund benefited from strong bond and stock markets in the first quarter. All the underlying funds had substantial bounce backs after a weak fourth quarter. The fund was positioned well for the recovery, having increased its stock weighting from 55% to over 60% near the end of last year. To be clear, this shift was based on long-term valuations, not any divine insight into the market’s dramatic rebound.
  • While the shift helped first quarter returns, the fund didn’t keep up with the red-hot markets. The Equity Fund and Global Equity Fund in particular lagged behind their comparable indexes.
  • We’ve added a new underlying fund to the portfolio. After the Global Small-Cap Equity Fund was launched in February, we started building a position to complement the existing holding in the Small-Cap Equity Fund. Over time, the two small-cap funds are each expected to make up 4-8% of the Founders.
  • With the addition of the Global Small-Cap Fund, we’ve revised the Founders’s target asset mix. Originally, the fund had a bias towards Canadian stocks, but this has been reversed. The 60% target for stocks is now split 26% Canadian and 34% foreign.
  • Keep in mind, none of Steadyhand’s equity managers are constrained by borders. They have the flexibility to search widely for attractive opportunities. In the Founders, the Canada-based companies are mostly global in nature and play to Canada’s strengths — banking, transportation, energy, and utilities. Many of the foreign companies, which are based in the U.S., Europe, Asia and developing markets, are in industries not available in Canada, namely healthcare, consumer products and technology.

Positioning

  • We’re maintaining a full allocation to stocks while bonds remain below target levels. Bonds provide insurance when stocks are weak (as was the case in the fourth quarter), but their long-term returns are expected to be modest.
  • In lieu of a full allocation to bonds, we’re holding a larger cash reserve (13%). Although it offers little in the way of yield (similar to bond yields), it provides protection against rising interest rates and is a ready source of liquidity.

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.