This Market-Beating Fund Has Never Sold a Single Holding: What Can We Learn From It

The Voya Corporate Leaders Trust has a history of excellence. Over the past 35 43 years between 1979 1970 and 2013, it has turned every $10,000 investment into $1.11 million. Comparatively, the S&P 500, a broad measure of the American share market, had grown the same initial investment into only $749,764 in the same time frame.

Market-beating performance can already be a rare trait amongst mutual funds and unit trusts. With Voya Corporate Leaders Trust, it has taken ‘rare’ to another level with its investing philosophy: Since its inception in 1935 when it bought 30 different American shares in equal portions, it had subjected those 30 shares to a rule that they can never be sold unless a company “went bankrupt, merged or [got] spun-off.”

After more than 79 years, though the trust’s holdings have since been whittled down to 21 names, its ability to beat the market hasn’t shrunk judging from its aforementioned track record.

Being such a unique fund with a solid performance to boot, there are bound to be great takeaways from it. Here’s two:

1. Long-term investing can truly generate great returns

Contrary to the beliefs of some that the key to making a profit in the share market is to dance in and out of shares rapidly, Voya Corporate Leaders Trust has managed to show that holding shares of great companies (more on that in the second takeaway) for the very long-term can make for spectacular returns.

2. How to pick winning shares

When Voya Corporate Leaders Trust was first constructed by its founders in 1935, the USA and much of the global economy was in the midst of the Great Depression. But, there were some companies that managed to perform well despite the rough overall economic climate and those were the ones that the trust betted on. The founders had the thought that “if companies could prosper even in those tough times, they could stay strong forever.”

This highlights how a company’s performance in severe recessions can be a very useful judge of the overall quality of its business.

2007-09 was the time when the relatively recent Great Financial Crisis hit. To showcase how bad that episode was, the Straits Times Index (SGX: ^STI), Singapore’s stock market barometer, had shrunk in value by almost two-thirds from its pre-crisis October 2007 peak of 3,876 points to a low of 1,457 points on March 2009.

While the following shares are certainly not a recommendation of any sorts, they have been businesses that continued to perform well during the crisis and could be well worth a deeper look at the very least. They are namely Vicom (SGX: V01), Oversea-Chinese Banking Corporation (SGX: O39), Hongkong Land Holdings (SGX: H78), and Super Group (SGX: S10).

The first share had managed to grow its profit in each consecutive year throughout the crisis while the latter three had been able to either grow or maintain their dividends.

Foolish Bottom Line

It’s not my intention to say that the only way to succeed in the share market is to do it the way Voya Corporate Leaders Trust does – i.e., to buy-and-never-sell companies that have weathered economic storms.

Each individual investor would have his or her own unique skill sets and financial needs that could warrant a similar strategy to Voya Corporate Leaders Trust as being inadequate or, in the worst scenario, even useless. But that said, it still pays to recognise how long-term winners go about the investing business in order to glean lessons on what works, and what doesn’t.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Super Group.