The old adage “if it ain’t broke, don’t fix it” can apply to many situations, and perhaps the world of investing is among them.
A recent article in Investment News discussed the strong performance of the Voya Corporate Leaders Trust (LEXCX), a fund born during the Great Depression. In 1935, its founders bought the 30 largest companies (ruling out financials due to an understandable distrust of the sector). They believed that if a company could survive (even prosper) during the 20th Century’s worst economic downturn, it could probably last another 75 years or more.
It has done just that, and done it quite well. Now in its 81st year, Morningstar data shows that the fund has beaten the S&P 500 for the past 15 years and is up an average of 7.75% per year (versus 5.58% for the S&P). Its success seems to come from doing very little.
At the outset, the fund’s rules of engagement were straightforward: No stock could be sold unless it suspended its dividend or became delisted. No stocks could be added except through mergers and spinoffs. Original holdings included DuPont (DD), General Electric (GE), Sears, Roebuck (SHLD), Procter & Gamble (PG), AT&T (T) and International Harvester (now Navistar, NAV). Today, the fund changes holdings less frequently than the S&P. It has also outperformed the other two large-cap value funds that boast as long a history, as well as the four other large-company growth funds.
While the Voya fund faces some formidable rivals in today’s market, standing the test of time is definitely a feather in its cap.