Why Is the Ivy Global Growth Fund Closely Tied to US Markets?

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Mar. 11 2016, Updated 8:07 a.m. ET

Ivy Global Growth Fund’s performance

In this article, we’ll discuss the performance of the Ivy Global Growth Fund – Class A (IVINX), which is one of the classes available for retail investors. The fund is invested in stocks of companies like JB Hunt Transport Services (JBHT), the Coca-Cola Company (KO), Rockwell Collins (COL), TripAdvisor (TRIP), and Fuji Heavy Industries (FUJHY), among others.

From a purely NAV (net asset value) return standpoint, the IVINX was an average performer for both the one-year period until February 29, 2016, and 2015 compared to the peers reviewed in this series. For return comparisons, we have chosen two ETFs: the iShares MSCI ACWI ex U.S. ETF (ACWX) and the Vanguard FTSE All-World ex-US ETF (VEU). To evaluate benchmark-related metrics, we’ve chosen ACWX as the benchmark for all funds in this review, as it tracks the MSCI All Country World ex-U.S. Index.

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Other metrics

IVINX’s standard deviation, or the volatility of returns, in the one-year period until February 29 was 16.5%. This is much higher than both the ACWX’s 15.4% and the peer group’s average of 15.7%. It was the fund with the most volatile returns among the 12 chosen for this review.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for the one-year period ended February 29. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. The ratio stood at 0.35 for 2015, placing it fifth among its peers.

The information ratio, calculated with ACWX as the benchmark, was 0.54 for the one-year period ended February 29, placing it second to last among its peers. The information ratio shows the consistency of fund managers and their ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015 as well, the fund’s information ranked it 11th among its peers.

A note to investors

The IVINX is different from most other funds in this review, as most of its assets are invested in US stocks. This makes it of little interest to investors who already have a sizable exposure to these securities and want more international exposure instead. However, the fund can be suitable for investors who want their fund to be focused on domestic equities but provide them some diversification by investing in foreign securities as well. The fund’s fortunes will be closely tied to where the US stock market heads.

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