The IVA Worldwide Fund Class A (NAV) ended the quarter on March 31, 2013 with a return of 6.16% compared to the MSCI All Country World Index (Net) return of 6.50%. Since inception on October 1, 2008, on an annualized basis, the Fund returned 11.64% versus the Index return of 6.89% for the same period. Our equities (ex-gold mining stocks) performed well over the quarter averaging a return of 10.8% versus the Index at 6.5%. The Fund benefited from good stock picking within the technology, consumer discretionary, and health care sectors as well as solid returns from U.S. and Japanese equities. Our technology stocks averaged a return of 16.8% versus the Index at 4.4%, adding 2.2% to the return, led by one of our U.S. holdings that benefited from a takeover battle and one of our Japanese holdings that reported better than expected revenue and profit growth as well as announced a share buyback. Additionally, our consumer discretionary and health care stocks together contributed 1.9% to the return with all individual holdings in positive territory; however, our underweight exposure to healthcare versus the Index detracted from relative results. On the other hand, our holdings in the utilities and telecommunication services sectors lagged those in the Index and together these sectors detracted about -0.1% from our return versus the Index adding almost 0.4%. By country, our U.S. and Japanese stocks delivered double-digit gains, 13.3% and 14.7% (in USD) respectively, and together contributed 5.5% to the return due to good security selection and overweight positioning to Japan. In contrast, select holdings in Norway and South Korea underperformed and together these countries detracted about -0.1% from the return.
Over the quarter, our USD cash position rose to 21.1% from 16.8% on December 31, reaching its highest level since April 2010, while our equity exposure fell to 57.9% from 61.5% last quarter. We trimmed or sold a few stocks where the price had gotten closer to or met our intrinsic value estimate and we believe our equity exposure today consists overwhelmingly of well-capitalized, well-managed, high quality companies with many positioned to benefit from pricing power in an inflationary environment. While our exposure to cash is a detractor from relative results in rising markets, we view cash as a valid asset class and a residual of the investment process when discounts narrow on our holdings and we cannot find enough fairly valued securities. Additionally, cash gives us the option to pounce when the time is right. In January 2010, we began buying government bonds of Singapore, which now represents 5.3% of the portfolio (our largest position) at quarter-end, and is a way to diversify our cash exposure. While the yield is low, we hope to over time get an "equity-like" return from these bonds (due to the appreciation of the Singapore dollar). Since we bought them in January 2010 through March 31, 2013, they averaged an annualized return of 4.4% (in USD). While our exposure to gold and fixed income, 5.0% and 16.1% respectively, together detracted almost -0.5% from the return, it is this multi-asset class approach (including cash) that we believe at times protects the portfolio in down markets and helps reduce overall portfolio volatility. And even though gold bullion averaged a return of –4.6% over the quarter, we still view gold favorably as a hedge against the equities in our portfolio and against currency debasement. Given that we reduced our exposure to gold mining stocks over the quarter, from 0.7% to 0.1% at quarter-end, we marginally added to our gold bullion position. Our exposure to gold totaled 5.0% on March 31, down from 5.2% on December 31. Continue Reading »