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 That's not too shabby for an outdated buy-and-hold investment philosophy.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. Products and Investments

    There's a Reason They're Called Junk Bonds

    The closing of Third Avenue Managemet's Focused Credit Fund is a warning to investors and advisors. Beware the junk.
  2. Mutual Funds & ETFs

    Top 3 PIMCO Funds for Retirement Diversification in 2016

    Explore analyses of the top three PIMCO funds for 2016 and learn how these funds can be used to create a diversified retirement portfolio.
  3. Mutual Funds & ETFs

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  4. Mutual Funds & ETFs

    The 4 Best Lord Abbett Mutual Funds

    Discover the four best mutual funds administered and managed by Lord, Abbett & Co., LLC that offer investors a wide variety of investment strategies.
  5. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  6. Mutual Funds & ETFs

    The 3 Best Vanguard Funds for Value Investors in 2016

    Find out which of Vanguard's value funds are the best for building a solid core-satellite value investing strategy for your portfolio.
  7. Mutual Funds & ETFs

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  8. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  9. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  10. Mutual Funds & ETFs

    The 5 Best US Small Cap Value Index Mutual Funds

    Find out which index mutual funds do the best at investing in small-cap value stocks for higher potential returns at the lowest cost.
RELATED FAQS
  1. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  2. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  3. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center