‘Doing all the right things’
Fund focuses on DIY investors, no middlemen
Five years after inception, Tom Bradley’s Steadyhand Investment Funds soldier on, shunning the traditional advisor-sold mutual fund model to provide investment funds direct to investors at lower fees.
Steadyhand now has respectable five-year performance numbers to further its noble cause, but it has not been an easy path for the Vancouver-based startup, Mr. Bradley says in an interview. The former president of Phillips Hager & North Ltd. says assets under management are a modest $175-million. PH&N itself was swallowed by RBC, which should be a plus for Steadyhand.
Like Altamira before it, Steadyhand’s actively managed funds bypass the middlemen, bucking the embedded compensation model. It pays no trailer commissions to financial advisors, although some sell them regardless, since its six funds are listed on FUNDSERV and some clients insist on their purchase.
There would have been more assets had Mr. Bradley taken the traditional approach of rival Edgepoint Wealth Management Inc., which has gathered $2-billion in just more than three years. The crucial difference is the business model: EdgePoint sells through financial advisors, says fund analyst Dan Hallett.
That makes Steadyhand “an important firm for those devoted to do-it-yourself investing,” Mr. Hallett says. The ranks of good, direct-selling no-load funds has shrunk over the last decade and “Steadyhand appears to be doing all of the right things for investors.” They keep fees relatively low, hire managers to stand apart from the indexes, concentrate portfolios in a few names and use prudent risk controls.
Steadyhand’s investor focus earned it high grades from Morningstar Canada’s stewardship reports: an “A” in corporate culture, “A” in Manager Incentives and a “B” on Fees.
Mr. Bradley sees his funds competing with but complementary to ETFS. He trademarked the term “Undexing” to differentiate his approach from index funds and ETFS.
Steadyhand’s fees are well below what its embeddedcompensation rivals charge. Its Equity Fund (North American stocks) charges 1.42% or less; its Global Equity and Small-cap Funds are 1.78% or less, its Income Fund is at 1.04% and its new balanced fund, the Founders Fund, a competitive 1.34% or less.
Those fees usually drop over time.
How do the five-year returns stack up? Stock-picking is most likely to pay off in less efficient markets, which is the case with Steadyhand. Its small-cap fund returned 7.8% over the five years ended Feb. 29, 2012, versus 3.9% for the BMO Small Cap index.
Offsetting that, the Equity Fund’s 0.6% five-year return slightly lagged the TSX composite’s 2.2%, and the Global Equity Fund’s loss of 5.9% lagged the loss of 3.9% of the MSCI World Index (in Canadian dollars). Since the Income Fund’s 6.5% return edged out the DEX Universe Bond Index’s 6.1% five-year return, it’s pretty much a tie between indexing and undexing.