Ivy Cundill Global Value Fund

Ivy Cundill Global Value Fund

Market Sector Update

  • We believe recent U.S. legislation progress, including the passing of large tax cuts for corporations and individuals, will stimulate the U.S. economy in the near term. Apart from lifting the valuation of some equities due to a corporate tax cut, capital expenditure could be stimulated as businesses can fully expense the cost of certain equipment purchased before Jan. 1, 2023. We believe this policy adds stimulus at a time when the U.S. economy and its employment situation are already in very decent shape. It is likely we could see upside surprises to inflation emerge in 2018, which could pressure bond yields upwards in the long end.
  • Europe’s economy continues to do well, with the employment situation improving. For example, Portugal posted an unemployment rate of 8.4% in October, the lowest in 12 years. European consumers are in fine shape, judging from the latest release of retail sales data. Sales rose by 2.8% year-over-year in November, led by non-food products. Economic confidence across the Eurozone has hit its strongest level in more than 17 years, according to leading economic indicators.
  • The pro-growth and pro-business policies in the U.S. have been echoed in Europe as newly elected French President Macron is pushing through reforms to make the labor market more flexible, cut public spending and cut taxes. There has been some talk of looking at corporate tax cuts in a coordinated fashion with possibly Germany. Such policy will undoubtedly take a long time to cement, and we believe it is too early to know whether it will bear fruit.

Portfolio Strategy

  • The Fund outperformed the benchmark (before the effects of sales charges) over the quarter primarily driven by strong stock selection in the energy, financials and consumer discretionary sectors. Top contributors to performance included Bristow Group Inc., Twenty-First Century Fox and Bank of America Corp.
  • We believe Bristow Group Inc. continues to trade at more than a 50% discount to its net asset value. In the interim, the company has considerably overhauled its liquidity position with a $130 million settlement, the deferral of $190 million of aircraft capital expenditures and the issuance of $140 million in convertible notes in the quarter. We continue to believe Bristow Group Inc. provides one of the highest value, least commoditized services in the Offshore Oil & Gas Services industry.
  • After weeks of rumors and speculations, Disney unveiled its plans to acquire a significant part of 21st Century Fox, one of the Fund’s top holdings, in a stock deal valued at $66 billion. Disney will acquire from Fox its movie and television studios, cable networks including FX, National Geographic and 22 regional sports networks as well as Fox’s stake in Hulu, Sky and STAR India. Fox Broadcasting, Fox News, Fox Sports, and Fox Business will be spun-off as a new entity to Fox shareholders (“New Fox”). The deal still requires anti-trust approval, which is expected to take 12 to 18 months, but on closing Fox shareholders will own 25% of Disney as well as receive shares in New Fox. Our view is the deal is highly synergistic, and adding Fox’s library of content and international assets will greatly accelerate Disney’s effort in launching a direct-to-consumer subscription service.
  • Shares of Bank of America (BAC) continued to outperform the overall market during the quarter. We believe BAC is benefiting from the strong underlying U.S. economy, the firm’s leverage to interest rates and its large asset management business. Despite a flattening yield curve, we expect that tax reform, BAC’s shrinking balance sheet, falling expenses and a lighter regulatory environment will support improved profitability and higher capital returns over the next five years.


  • In October, the European Central Bank (ECB) decided to cut the level of bonds it purchases every month, starting in January 2018, but extended the length of time that its stimulus program runs. We believe the ECB wants to remain supportive of the current recovery, but there is likelihood of further “tapering” of asset purchases later this year.
  • Brexit negotiations continues with a focus on a transition period. Recent developments showing Britain’s desire to continue to be regulated by European Union (EU) authorities in medicines, chemicals and aviation highlight how the U.K. government and industries are pushing to improve certainty and maintain trade relationships in a post-Brexit world. We continue to believe that businesses will have time to manage this transition.
  • In Asia, there are further signs that China continues to deleverage the economy. However, Chinese household sentiment remains high and the service sector is growing at the fastest pace in three years. Meanwhile, Japan’s manufacturing sector ended 2017 on a high note, growing at its fastest pace since 2014 in December as output continues to benefit from pick-up in global demand.
  • Despite political uncertainties such as separatist sentiments in Catalonia, Spain and the upcoming Italian election, we are in a period of global synchronized growth and we believe there are potentials for upside surprises in both global gross domestic product (GDP) and inflation in 2018. We believe this is a good environment for value investing and we are excited about the opportunities in our portfolio as well as in our research pipeline.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Dec. 31, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Top 10 holdings as a percent of net assets include Wells Fargo & Co. 5.7%, Citigroup, Inc. 5.7%, Bank of America Corp. 5.7%, Liberty Global, Inc., Series A 4.0%, Bristow Group, Inc. 3.5%, Chesapeake Energy Corp. 5.750%, Series A Cumulative 3.0%, Twenty-First Century Fox, Inc., Class A 3.0%, International Business Machines Corp. 2.9%, Hitachi Ltd. 2.8% and Da Vita, Inc. 2.8%

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.