Centenarian fund manager, MFS, is one of few global investment firms with an in-built institutional grip on the much-vaunted ‘long term’.
The Boston-based business claims the title as the originator of the open-ended managed fund structure in the US (known as mutual fund in its home country) with the 1924 launch of the Massachusetts Investors Trust (MIT) – the first product to ‘democratise’ the stock market for the people.
In a recent 100-year retrospective, MFS notes: “At a time when a diversified portfolio was beyond the means of most, for about $250, an investor could buy a share in MIT, which held about 50 companies, including railroads, utilities, car makers and food producers.”
Of course, US$250 adjusted for inflation would be about US$4,600 in today’s money but the managed fund concept pioneered by MFS set the template for barrier-to-entry-smashing products that have seen investment minimums plunge to almost zero.
While the traditional managed fund is facing new threats today from the likes of exchange-traded funds or direct retail platforms, MFS says the core investing principles honed over the last century remain as relevant as ever.
“Over the past 100 years, we have found that taking a long-term view enables us to tune out the noise and focus on information that aligns with the goals of our clients,” the note says. “Some companies need time to achieve strategic goals, while others have an established business model worthy of long-term ownership.”
Among the ‘Lessons Learned from 100 Years of Investing’, MFS lists fundamental research, valuation over price, risk management and diversification as the key tenets of a resilient investment process.
If markets have moved on considerably since 1924 when in the US, for example, there was no Securities Exchange Commission nor even simple corporate disclosure requirements, the manager says old-fashioned fundamentals still matter.
“While the world has changed, our focus on fundamentals, such as business model durability, financial health, profitability and valuation, has not,” the MFS paper says.
“… Over the past century, we have found that understanding a company’s fundamentals is the best way to assess its future earnings potential, and analysis has shown that earnings are the most important driver of stock market returns.”
MFS, which was bought by the Canadian Sun Life company in 1982, boasts several other firsts in its 100-year history (the first growth and active bond funds, for example) but none probably as influential as its first first.
“Today, a full century after its founding, MIT lives on — a radical innovation that birthed a [US]$56.2 trillion industry and changed the way we live,” the MFS official history says.
In NZ the manager is best-known via an active equities mandate with ANZ and as a stand-alone portfolio investment entity vehicle offered by Clarity Funds.