Let me tell you an incredible story about a mutual fund that bought a few stocks 84 years ago and hasn’t moved a muscle ever since.
The fund, known today as Voya Corporate Leaders Trust, was launched Nov. 18, 1935, with its hands tied.
The fund, known today as Voya Corporate Leaders Trust, was launched Nov. 18, 1935, with its hands tied.
It would hold the identical number of shares in each of its 30 stocks. It could never buy new holdings or sell out of its existing ones unless a company went bankrupt, underwent a merger or became “inadvisable” to keep.
Corporate Leaders is so old, nobody seems to know its performance back to 1935. Between the beginning of 1970 and Nov. 30, 2019, the fund gained an average of 11.1% annually, according to Morningstar Inc.; the S&P 500 returned 10.5% annually over the same period.
The fund ended up owning Buffett’s Berkshire Hathaway in 2010 after Mr. Buffett bought Burlington Northern—an offspring of one of the fund’s 1935 holdings, the Atchison, Railway. Union Carbide has morphed into Linde PLC, which is up 1,200% in a period when the S&P 500 gained 230%
The fund was set up to counteract the crash of 1929. Because risk-loving portfolio managers had inflamed the mania that triggered the crash, the fund was put on permanent autopilot. It would buy, hold and do nothing for 80 years. In 2015, its charter was extended to the year 2100
The $800 mn fund has almost all its assets in 4 sectors: industrials, energy, basic materials and financial services. (Its only financial stock is Berkshire Hathaway.) And 2/3rd of the fund is in only four stocks: Union Pacific Corp., Berkshire Hathaway, Linde and Exxon Mobil.
John C. Bogle, the late founder of the Vanguard Group, often said individual investors should buy an equal amount of two or three dozen high-quality stocks and salt them away for a lifetime.
He believed many would go to zero, but if only a few turned out to be big winners they would carry the whole portfolio to an outstanding return—without any burden of fees. Mr. Bogle always cautioned that this approach could work its magic only for investors who never traded.
