Ivy Large Cap Growth Fund

Ivy Large Cap Growth Fund

Market Sector Update

  • Equities again outperformed most asset classes during the first quarter of 2018 and started the year on a good note, but then depreciated quickly as the quarter progressed.
  • Growth styles led the market for the quarter, especially the mega cap technology stocks that have led the market over the past few years. These stocks eventually succumbed to the downward market pressures as did most growth stocks late in the quarter.
  • Several mini shocks rippled through global capital markets during the quarter including an inflation scare and a larger and more dangerous global trade dispute with several trading partners. The current cocktail mix of accelerating profit growth, stronger wage and gross domestic product (GDP) growth combined with potential inflation and trade disruptions may make the next few quarters very volatile, and hence may provide some interesting opportunities for growth investors.

Portfolio Strategy

  • For the quarter ended March 31, 2018, the Fund performed well on an absolute and relative basis, outperforming the Russell 1000 Growth Index, its benchmark, before the effects of sales charges.
  • Stocks such as Adobe Systems, MasterCard, CME Group, Salesforce.com and Zoetis performed well. Stocks such as Stanley Black & Decker, Caterpillar, Home Depot, Citigroup and Monster Beverage did not perform as strongly as we expected.
  • In general our exposure to large technology stocks, capital market-related financial stocks, and our underweighting in both defensive and bond proxy-related stocks all helped to generate our relative performance.


  • Recent policy progress out of Washington, D.C. has been and will likely continue to be a large factor in both the positive and negative tailwinds to growth stocks. The sudden Republican success at passing tax reform catalyzed a belief that economic growth may accelerate and generated a strong response to stocks early in the year.
  • More recently, the Trump administration’s views on global trade imbalances have had quite the opposite effect on global capital markets and have caused quite a debate on the topic. In this debate, many have recalled the Smoot- Hawley Trade Bill, which was passed into effect in 1930. Those tariff increases, also implemented by a Republican president, Herbert Hoover, were signed into law amidst an overwhelming view that they would produce a growth shock. Hoover’s protectionism was related to farming and agriculture, and trade flows slowed substantially after the bill was passed into law. Economists still debate what effect that law had on catalyzing or adding to the Great Depression, a question that has received renewed interest from policymakers. Trade barriers in general have been coming down since the end of World War II, which helped catalyze the “globalization” theme that has helped increase both standards of living around the world and profit margins for US companies. This potential reversal in policy may continue to worry global capital markets for some time. We will have to continually monitor this situation going forward.
  • Economic growth here at home continues to be strong, with wage growth, GDP and corporate profits all moving in the right direction. We believe the extremely low short- and long-term bond yields are unsustainable, thus we view the recent rise in short-term rates as a welcome development. Ten years after the Great Recession, corporate optimism is finally high and most signs point toward an eventual pick-up in capital spending and continued declines in the unemployment rate, both of which should be welcomed on Main Street, USA.
  • There appears much to worry about in the short term, such as inflation levels, trade policy, input costs, profit margin implications, Federal Reserve policy, and peaking in short-term economic data points. With these worries come potential opportunities, as the underlying fundamentals appear sustainable, provided trade policy does not produce the shock it did nearly 80 years ago. Thank you for your confidence and continued support.

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 March 31, 2018, 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 03/31/2018: Microsoft Corp. 5.1, PayPal, Inc. 4.7, MasterCard, Inc. 4.6, Home Depot, Inc. 4.5, Apple, Inc. 4.4, Amazon.com, Inc. 4.4, CME Group, Inc. 4.3, Visa, Inc. 4.1, salesforce.com, Inc. 4.0 and Adobe Systems, Inc. 4.0.

Co-portfolio Manager Daniel P. Becker, CFA left the Fund on April 12, 2018.

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.

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. Fund holdings may have exposure to foreign markets and associated risks. 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.