Nice Story: Corporate Leaders Trust / The Oldest Index Fund?

“If you buy a business just because it’s undervalued then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies then you can sit on your ass … that’s a good thing.” – Charlie Munger

 More than 80 years ago an Investment Trust have been created that have done … nothing!

The Corporate Leaders Trust launched in November 1935 with 30 companies in its portfolio. Its prospectus says, it can only own the 30 names on that original list and any direct descendents of those companies – created through mergers & acquisitions (that’s how Berkshire Hathaway came into play, by buying BNSF) or spin-offs of those companies. That means this is a fund on autopilot. This is reflected in the fund’s 0 percent turnover ratio.

 

Overview

  • Created in 1935 with an equal number of common stock shares of the 30 leading U.S. companies at the time; currently invested in a total of 22 leading U.S. corporations
  • New stocks can’t be purchased, so holdings have changed only due to spin-offs or mergers since Fund inception
  • The Fund is a passively managed grantor trust registered with the SEC as a unit investment trust

 

Top Holdings and % of Total Investment, we see a lot of Oil related stocks here.

Union Pacific Corp. 15.23
Exxon Mobil Corp. 11.50
Berkshire Hathaway, Inc. 10.96
Praxair, Inc. 7.17
Chevron Corp. 6.51
Honeywell International, Inc. 5.49
Procter & Gamble Co. 5.21
Marathon Petroleum Corp. 3.80
Consolidated Edison, Inc. 3.53
Dow Chemical Co. 3.21

Interesting: They also own Foot Locker!

The Funds Annual Report (link) find all holdings on Page 13

 

Performance

“Sit on your ass investing. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.” -Charlie Munger

And that is the interesting Part about it. Did this construction outperformed? Yes it did.

Corp_Lead_Fund

(I have started the chart in the 70ies, when the S&P 500 appeared. The earlier performance was also good)

OK, this chart doesn’t look impressive compared to the Index, I agree – but look at the numbers! If you would have invested 10,000 USD in 1972, you would have now have over 1 million USD – about 250K more than a person that have invested in an SP500 Index Fund – if they were around then.

 

Bottom Line:

I wish you a pleasant weekend!

 

Links

The Fund at Voya (link)

The Funds Annual Report (link) find all holdings on Page 13

 

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2 thoughts on “Nice Story: Corporate Leaders Trust / The Oldest Index Fund?

  1. Survivorship bias. Meaning to say, any other similar trusts that had a basket of stocks that didnt do well would probably have wound up/disappeared so it would be expected a priori the only ones we would see with a long track record will look good. Killjoy comment I know but I think it’s reasonable.

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  2. Hi Praxeologue,
    thank you for stopping by and leaving a comment!

    Good Point! You are totaly right! I cannot even say if they have created a set of trusts back then in 1930 and just this one have survived and did well while others have underperformed and have been liquidated.

    I just liked the story!
    And the fact that while millions of people out there devoting so much time and effort in investing this autopilot-construction is doing so well.

    Like

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