Ivy Large Cap Growth Fund

Ivy Large Cap Growth Fund

Market Sector Update

  • Market strength continued in the quarter as equities posted positive returns, adding to sizeable gains in first quarter. The Fund’s benchmark, the Russell 1000 Growth Index, was up approximately 21.5% year-to-date. Equities across all capitalization ranges and all styles had positive gains during the quarter. Growth styles continued to outperform relative to value styles while mid-cap returns were more mixed across styles.
  • The Federal Reserve (Fed) remained supportive. During the quarter, markets began to price in at least one rate cut as early as July, with small odds of a more aggressive, larger cut. The Fed continued to signal a willingness to cut rates to offset the impacts from global slowing/trade pressures or to further stimulate the U.S. in the hopes of inciting some level of inflation. Investors have responded positively to a more dovish stance by the Fed.
  • It was another noisy quarter for global trade. There was a temporary tariff spat with Mexico during the quarter that resolved quickly. However, the bigger news was the building expectation for easing trade tensions between the U.S. and China that ultimately ended with a temporary “trade truce” between the countries during June’s G20 Summit. The news was welcomed by the market but also anticipated.
  • Economic data remained mixed. Employment and housing remain supportive in the U.S. while manufacturing data around the globe has weakened, with many countries moving into contraction territory.
  • From a factor perspective, momentum (price returns and relative strength) and quality (return on equity and return on assets) outperformed during the quarter. Quality has been a strong performer for entire year. Underperforming factors included value (price to sales and price to book) and risk (beta and variability of earnings).

Portfolio Strategy

  • The Fund posted a positive return, outperforming its benchmark during the quarter. Performance benefited from strong stock selection across several sectors, including information technology, industrials, health care, financials, consumer discretionary and consumer staples. The communications services sector was the only notable detractor to performance.
  • Information technology posted strong relative contribution to performance through significant overweight positions in VeriSign, Visa and Broadridge Financial Solutions. Performance also benefited from continued strength in overweight software names, Microsoft and Adobe.
  • Industrials was another notable positive contributor to performance as investors remained attracted to the strong late-cycle growth prospects from both CoStar Group and Verisk Analytics, both overweight positions.
  • Health care saw strength in a few stock-specific names, including Zoetis, which continues to benefit from its slow, steady and stable growth in the animal health sector. Illumina was a relative outperformer as investors gained incremental confidence in strong second half growth. The Fund also benefited from underweight exposure to the large-cap biotechnology and pharmaceutical sectors, both of which performed poorly during the quarter.
  • Financials was additive due to strong performance from CME Group as volatility moved higher in April. Consumer discretionary benefited from an overweight to Ferrari as investors continued to appreciate the company’s strong new car launch slate and stronger price realization.
  • The notable detractor during the quarter was communications services. The Fund was overweight Alphabet, which underperformed, and was underweight Facebook, which outperformed. The Fund also was negatively impacted by lack of exposure to Disney, which was strong in the quarter due to investor excitement over Disney’s new video streaming service.


  • Easing rates likely due to slower growth. As illustrated by strong market gains, investors seem to be taking bad news as good news. The inference is that the Fed rate cuts are to be viewed as an attempt to further accelerate growth in order to incite some level of inflationary pressures. Another view of potential cuts, one we see as more probable, is to counter weakening trends in the U.S. driven by years of Fed rate hikes and slowing global growth.
  • The U.S.-China “trade truce” is hardly a resolution. This latest news of “kick the can” simply implies that trade will continue to be a source of volatility in the second half of 2019. We see the trade dispute as having serious long-term ramifications on allocation of capital and business investment. We believe it is difficult for companies to have confidence in a long-range plan without knowing the rules of engagement with respect to global trade.
  • Financial tightening is still hanging around. The impact of the nine rate hikes, plus quantitative tightening, working through the system is yet to be fully digested and should result in continued slowing in back half 2019. We foresee earnings risk and negative revisions ahead.
  • Growth scarcity trade is in effect, for now. We believe as growth slows investors will continue to favor high quality, highly visible, durable growth names. We believe if earnings encounter sharper negative revisions in the second half of the year there may be more opportunity to look for cyclical exposure for the Fund before 2020.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2019, 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 of 06/30/2019: Microsoft Corp. 8.6, Amazon.com, Inc. 5.1, Visa, Inc. 4.9, Apple, Inc. 4.6, Alphabet, Inc. 4.4, CME Group, Inc. 3.5, Zoetis, Inc. 3.1, PayPal, Inc. 3.1, Verisk Analytics, Inc. 3.0 and Adobe, Inc. 3.0.

The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

All information is based on Class I shares.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Investing in companies involved primarily in a single asset class (large cap) may be more risky and volatile than an investment with greater diversification. 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. 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.