Founders Fund

September 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 fund posted a return of 0.7% in the third quarter. As was the case last quarter, positive stock markets offset negative returns from fixed income investments. Year-to-date, the fund is up 5.5%.
  • There were no big changes to the fund in Q3. We maintained our preferred asset mix by occasionally trimming positions in the underlying equity funds and allocating client inflows to cash.
  • Founders is designed to have equity content around 60% and that’s exactly where it’s been in recent months. 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 some areas of the market.
  • A full allocation to fixed income is the fund’s 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 Founders’ asset mix is important, but returns are primarily driven by the performance of the underlying funds. Through these funds, the portfolio consists of a mix of bonds and stocks across a wide range of industries, geographies, and currencies.
  • The largest transactions in the quarter (in the underlying funds) included the purchase of Tate & Lyle (U.K.), Hammond Power Solutions (Canada), and Brunswick Corporation (U.S.); and the sale of Cerved Group (Italy), Interfor (Canada), Teleperformance (France), and Gartner (U.S.).

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.