Steadyhand has a very definite investment philosophy. We believe our funds should be (1) absolute-return oriented; (2) concentrated on the managers’ best ideas; (3) unconstrained; and (4) have low turnover (i.e. tax efficient).

The least understood of these four tenets is the notion of being ‘unconstrained.’ What do we mean by that?

At its most basic, we mean that our fund managers should have the freedom to go wherever they find the most attractive opportunities. Too often managers are constrained by diversification rules (“don’t stray too far from the index!!!”) or style guidelines. On the latter point, the industry consultants like to put funds into nice tidy boxes. When a fund has been categorized as growth versus value, or small cap versus large cap, or domestic versus foreign, the box becomes the sand box the manager plays in.

At Steadyhand, we want our managers to have a very big sandbox to play in. We are style agnostic. While the consultants are trying to categorize our funds, we want our managers focusing on making our clients money.

We’re not suggesting that Steadyhand’s managers have no constraints on them. In laying out the mandates for the funds, we’ve ensured that our managers are being responsible as to diversification and are in the sweetspot of their investment skills. When we started our manager search, we had a view as to what our funds should look like. But ultimately, we fine-tuned the mandates to fit the managers’ strengths.

What does ‘unconstrained’ mean to Steadyhand clients?

• It means that our Global Equity Fund is allowed to invest anywhere in the world, including Canada. If Edinburgh Partners finds something in our market that is attractive in the global context, we want them to own it.
• It means that our Equity and Global Equity funds have the scope to own large and small cap stocks. It means that Wil Wutherich, our small-cap manager, can buy anything from micro-cap (i.e. I’ve never heard of them) to mid-cap stocks.
• It means not worrying about whether more than one of our equity funds owns the same stock. Currently, we have two funds that own HSBC, Nokia and Shoppers Drug Mart. If more than one of our managers thinks a stock is a great value, then we’re happy to see our clients own more of it. Having said that, there’s typically not a lot of overlap between our funds’ holdings.
• It means not worrying about the index weighting of a particular stock or industry sector. All of our equity managers invest in stocks or sectors where they see the best opportunities. The terms “underweight” and “overweight” are irrelevant in the investment process.
• It means allowing our fixed income manager to have almost all the Income Fund’s bonds in corporate issues if valuations are attractive, or virtually none in corporates if valuations are poor. They also are free to make the call as to whether bonds or income-oriented equities have the best reward/risk characteristics.

As with many aspects of Steadyhand, we’ve tried to make sure that industry norms are not dictating what is best for our clients. We don’t have a high enough regard for the mutual fund industry in general to be locked into its standard practices.

Our investment philosophy is the most important part of what we do. Keeping our fund managers as unconstrained as possible is an important element of that philosophy.