Ivy Foreign Equity Fund turns twenty

Happy 20th birthday to the Ivy Foreign Equity Fund!

Fund Manager Paul Musson sent me the following message on October 16th.

Twenty years ago today, Mackenzie founded the Ivy group of funds.

At that time, who was to know that over the ensuing 10 years we would experience a bull market focused on technology followed by a severe bear market that wiped out much of those gains? And who could have predicted that in the last 10 years we would witness a global resources and housing market boom and then suffer through the greatest financial crisis since the Great Depression?

We have no idea what the next 20 years has in store for us. However, we do know that no matter what happens, we will continue to strive to carefully grow our investors’ capital in our conservative, risk-conscious way.

The Ivy Foreign Equity Fund is one of those under-appreciated funds that lacks sex appeal but consistently gets the job done.  Their investment philosophy consists of identifying great businesses whose shares can be acquired at a fair price and confidently held for the long term.  For the Ivy team, a great business is one that has a top-level market share, a powerful brand name, barriers to entry, low debt, a history of consistent earnings, trustworthy management and a rational long-term business plan.  Their style is quite similar to that of Warren Buffett.

How has the Ivy Foreign Equity Fund done over the years?  Quite well. I generated the chart below to compare the fund to a benchmark, the MSCI World Index.  You can see that the Index (red) outperformed Ivy in the 1990’s when the tech boom was raging, but when the Index fell about 50% the Ivy Foreign Equity fund saw only a small decline.  In the five years that followed the Index again outperformed before a decline of about 50%, during which the fund had a modest decline.  Ater 20 years the fund has shown better performance than the Index with much lower fluctuations.  I believe it has shown the lowest level of fluctuations of any similar fund during this time.

Don’t forget that the value added by the fund managers – both a higher performance and a lower price volatility – includes all the fund management expenses that cover:

1. the investment management of the fund;
2. the administrative and regulatory tasks performed by Mackenzie;
3. the administration done by the investment dealer (Investia Financial Services Inc. in my case);
4. the administration and location provided by the branch office; and
5. all the investment and other financial advice provided by me, the financial advisor.

As I have come to know the Ivy team over the years my confidence in them has grown and I have recommended the fund more often.  As with the other funds owned by my clients, I watch them regularly to see that they stick to their stated philosophy and investment approach and always keep my eyes on a few other managers in case I need to recommend a manager change.  While the Ivy Foreign Equity Fund has never had high performance, investors have tended to be very comfortable knowing it has produced such stable performance and avoided the major price declines see by almost all competitors.  If you don’t already own the fund, don’t be surprised if we discuss adding it to your portfolio in the years ahead.

Full information about the fund’s performance and current holdings can be found here.