Ivy Large Cap Growth Fund


Ivy Large Cap Growth Fund

Commentary as of March 18, 2020


Since the Russell 1000 Growth Index, the Fund’s benchmark, peaked on February 19, 2020 the Ivy Large Cap Growth Fund (IYGIX) has outperformed both the index and its Morningstar Large Growth peer group. We would typically expect the Fund’s high-quality skew to benefit its portfolio in these types of drawdowns, and so far that has been the case. Through March 17, 2020, the Fund has returned -22.9% compared to -24.1% and -25.0% for the index and peer group, respectively.


The Fund’s positioning has not changed materially as a result of recent market events. We entered this environment with a more balanced approach to risk, not wanting individual factors like momentum, beta, value, etc. to drive portfolio positioning and overwhelm our fundamental research. Our goal has been and continues to be to allow stock-specific risk to be the primary driver in this sense.

In periods like this where the market focuses more on the very short term, we try to take the opposite approach by looking for opportunities to re-position the portfolio into companies where we have high conviction in their long-term ability to execute and withstand market disruptions. We continue to focus on underlying business models, not emotions or the news of the day. For example, some of the highest quality businesses in the portfolio are being priced in a way that would have a person believe the next six months are all that matters, when that’s clearly not the case. While we think there will be disruption in the short term, our focus will be on executing the Fund’s investment process of emphasizing fundamental research and multi-year time horizons to help us remain focused on the most important issues for our long-term shareholders.

We have been watching valuation spreads closely, which means we are keeping an eye on the valuation difference between what is typically considered “cheap” and “expensive” companies. (“Cheap” companies would typically include low multiples: price-to-earnings, price-to-book value, price-to-cash flow, price-to-sales, etc.; “Expensive” companies would typically include high multiple businesses.) Until recently, market leaders continued to get more expensive and market laggards became cheaper. Coming into 2020, these spreads suggested a positive environment for value investors, with spreads seeming quite wide. Eventually a tipping point is reached where the cheapest companies are too cheap and the most expensive are too expensive, and that starts to reverse. The potential impact of new quantitative easing and fiscal stimulus could be that tipping point, where those companies that had been left for dead are now resuscitated and starting to lead during the initial recovery. Many of these types of businesses fail to align with the core tenets of the Fund’s philosophy – owning enduring, competitively advantaged business models – but we will look for strong businesses amidst the rubble to tilt the portfolio toward companies that can participate in that environment. Adjustments to the portfolio will be made with the understanding that markets may disagree in the short run, but we have conviction that our investors will benefit over the longer term.


Past performance is not a guarantee of future results. This information is not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March 18, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This information 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.

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. Class I shares are only available to certain investors.

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. The Fund typically holds a limited number of stocks (generally 40 to 60), and the Fund’s portfolio manager also tends to invest a significant portion of the Fund’s total assets in a limited number of stocks. As a result, the appreciation or depreciation of any one security held by the Fund may have a greater impact on the Fund’s NAV than it would if the Fund invested in a larger number of securities or if the Fund’s portfolio manager invested a greater portion of the Fund’s total assets in a larger number of stocks. 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.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.