From Reuters:
Buy-and-hold fund prospers with no new bets in 80 years
Equity investors pursuing a buy-and-hold strategy might want to check out a fund that hasn't made an original stock market bet in 80 years.HT: Alphaville's Further Reading post
The Voya Corporate Leaders Trust Fund, now run by a unit of Voya Financial Inc bought equal amounts of stock in 30 major U.S. corporations in 1935 and hasn't picked a new stock since.
Some of its holdings are unchanged, including DuPont, General Electric, Procter & Gamble and Union Pacific. Others were spun off from or acquired from original components, including Berkshire Hathaway (successor to the Atchison Topeka and Santa Fe Railway); CBS (acquired by Westinghouse Electric and renamed); and Honeywell (which bought Allied Chemical and Dye). Some are just gone, including the Pennsylvania Railroad Co. and American Can. Twenty-one stocks remain in the fund.
The plan is simple, and the results have been good. Light on banks and heavy on industrials and energy, the fund has beaten 98 percent of its peers, known as large value funds, over both the past five and ten years, according to Morningstar.
"This fund has been around a lot longer than I have, and it's working," said Craig Watkins, 29, an investment analyst for Conover Capital Management in Bellevue, Washington. Conover has recommended the Voya fund to 401(k) plans it advises.
Watkins compared the Voya fund's "deep-value" approach to investor Warren Buffett's, whose Berkshire Hathaway is the fund's second-largest holding.
"It's deep-value in the sense that all the companies in the portfolio have an amazing tenure," Watkins said. He said the Voya fund's strategy can be better than an index fund because it doesn't have to change its weightings when the index changes
The winning performance has drawn record inflows: Since 2011, the fund has taken in about $708 million from investors, its best four years ever, according to Thomson Reuters' Lipper unit.
The fund has made a comeback since 1988, when it was reorganized by Lexington Management in Saddle Brook, New Jersey. Former Lexington executive Lawrence Kantor said high fees tied to its outdated trust structure kept it from getting any flows, and changing to a unit investment trust made it competitive with modern funds.
The fund "was dead in the water for like 20 years" because "it had such an outdated structure that it wasn't saleable," Kantor said.
Told the fund now has $1.7 billion, Kantor, 67, said "That’s incredible, because when we reopened the fund I think it had $60 million in assets."...MORE
Possibly also of interest:
Long Time Horizon's: The Methuselah Trust of Hartwick College
The post immediately below, "From Rob Arnott's Research Affiliates: What Assets Should Go Into a Portfolio You Can't Touch for Three Years", reminded me of one of the odder stories in the investment biz.
First posted September 2011.
From Lapham's Quarterly:
Hartwick College didn’t really mean to annihilate the U.S. economy. A small liberal-arts school in the Catskills, Hartwick is the kind of sleepy institution that local worthies were in the habit of founding back in the 1790s; it counts a former ambassador to Belize among its more prominent alumni, and placidly reclines in its berth as the number-174-ranked liberal-arts college in the country. But along with charming buildings and a spring-fed lake, the college once possessed a rather more unusual feature: a slumbering giant of compound interest.
With bank rates currently bottomed out, it’s hard to imagine compound interest raising anyone much of a fortune these days. A hundred-dollar account at 5 percent in simple interest doggedly adds five bucks each year: you have $105 after one year, $110 after two, and so on. With compound interest, that interest itself get rolled into the principal and earns interest atop interest: with annual compounding, after one year you have $105, after two you have $110.25. Granted, the extra quarter isn’t much; mathematically, compound interest is a pretty modest-looking exponential function.
Modest, that is, at first. Because thanks to an eccentric New York lawyer in the 1930s, this college in a corner of the Catskills inherited a thousand-year trust that would not mature until the year 2936: a gift whose accumulated compound interest, the New York Times reported in 1961, “could ultimately shatter the nation’s financial structure.” The mossy stone walls and ivy-covered brickwork of Hartwick College were a ticking time-bomb of compounding interest—a very, very slowly ticking time bomb.
One suspects they’d have rather gotten a new squash court....MUCH MORE
