I don't usually discuss mutual funds in my Investopedia articles; however, every so often something catches my eye that begs attention. In this instance it's a unique offering from ING Funds, a subsidiary of Dutch financial services giant ING Groep N.V. (NYSE:ING). By no means am I the first to mention this smallish-sized fund ($338.5 million in assets as of June 30), but I'm likely the most enthusiastic. In my opinion, the Corporate Leaders Trust Series B (LEXCX) is to buy-and-hold investing what Ben Graham was to security analysis. Naysayers of long-term investing are fooling themselves if they don't take this fund and its premise seriously. This is the rare occasion where corporate leaders earn your trust.

IN PICTURES: World's Greatest Investors

Fund Background
Created in 1935 as a passively managed grantor trust, it bought an equal number of shares in 30 leading companies of the day. It then took a detour. For starters, the trust is actually two funds, a trust fund and a distributive fund. The trust fund consists of stock units and cash. One stock unit represents a single share in all 30 companies. Today, this is down to 21 although there are 22 holdings because it received both Class A and Class B shares of Berkshire Hathaway (NYSE:BRK.A,BRK.B) in the takeover of Burlington Northern Santa Fe Corp. The cash raised from the sale of participations (an interest in trust and distributive funds) sits idle until there is enough to buy 100 stock units, the equivalent of 2200 shares. It's important to note that every purchase of stock units involves an equal number of shares. This means it currently requires $11.8 million in cash for Berkshire Hathaway, $5,980 for Exxon Mobil (NYSE:XOM) and $1,747 for Nisource Inc (NYSE:NI). It's an interesting twist.

Growth and Income
The second part of the trust is the distributive fund. While any cash from the sale of participations goes into the trust fund, all dividends and other cash received from the stock units is deposited in the distributive fund. Twice a year, June 30 and December 31, the distributions buy additional participations. Participants can request cash instead, which makes it a wonderful investment for those with an uneven income history. However, those who bought $10,000 in 1941 and reinvested the dividends were sitting on more than $11 million at the end of 2009. That's not too shabby for an outdated buy-and-hold investment philosophy.

Little Risk
Recently I wrote an article about the average lifespan of an S&P 500 company as a publicly traded stock. Down from 50 years in 1957 to 25 in 2003, today, some suggest it could be as low as 18 years. Whatever the number, you would think this spells the end for the Corporate Leaders Trust. Eventually, it has to run its course. After all, it can't buy new stocks and it can't sell existing ones. It's stuck in a rut and that's the beauty of it. A rival large-cap value fund like Yacktman Focused (YAFFX), which doesn't turnover stock, has few holdings and outperforms the market, is rare. You can buy this fund and likely you'll do well. However, if you have an aversion to risk, there's no comparison. The Corporate Leaders Trust has outperformed the S&P 500 in eight of the last 10 years with little or no risk.

Bottom Line
Corporate Leaders' original mandate was to invest in quality companies paying reasonable dividends. Compare this to PowerShares Dividend Achievers Portfolio (NYSE:PFM), based on the Broad Dividend Achievers index, which invests in a diversified group of companies (212 to be exact) that have raised dividends for 10 consecutive years. With almost identical mandates, the ETF's quarterly rebalance and annual reconstitution led to higher tax-related expenses and lower performance. Since 2005, the Corporate Leaders Trust has outperformed the ETF by an average of 4% annually. This is one corporate leader you can trust. (To learn more, see Mutual Funds Or ETF: Which Is Right For You?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  2. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  3. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  5. Mutual Funds & ETFs

    Top 5 Bear Market Mutual Funds

    Discover five bear market mutual funds that investors can turn to for generating maximum capital appreciation during a bear market.
  6. Mutual Funds & ETFs

    4 Mutual Funds to Consider If Interest Rates Rise

    Learn what mutual funds will perform best if interest rates rise. Interest rates can rise due to inflation or to an improving economy.
  7. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  8. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  9. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Series 6

    A securities license entitling the holder to register as a limited ...
  4. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  5. Dividend

    A distribution of a portion of a company's earnings, decided ...
  6. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!