The IVA Worldwide Fund Class A (NAV) (“the Fund”) ended the quarter on March 31, 2018 with a return of -0.11% versus the MSCI All Country World Index (Net)(“Index”) return of −0.96%. for the same period.
2018 began much as 2017 ended- global equity markets rising with extraordinarily low volatility. This tranquility ended with a brutal correction at the end of January. Markets recovered from the brief chaos of this correction, but much of the remaining quarter was marred by volatility as investors became wary of a multitude of potential troubles, including: rising inflation, political uncertainties, escalating trade war rhetoric and questions surrounding the business models of the FANG stocks (Facebook, Amazon, Netflix, Google) after a devastating data breach at Facebook was revealed. As Charles de Vaulx (Trades, Portfolio) said on the IVA Funds Semi-Annual Update Call on March 21, “Volatility is back finally! If this were to continue, this would be music to a value investor’s ears and even greater music if we had a proper bear market.”
The Worldwide Fund outperformed the Index this quarter by minimizing drawdowns during tumultuous times in the market, helped by our cash and gold exposure. Our equities also held up well on a relative basis, down -0.03%, compared to those in the Index* which were down -0.9%. Our names in Japan contributed the most to performance, adding 0.8%, led by Astellas Pharma. The Netherlands added 0.2%, led by Airbus SE. Hong Kong and Mexico contributed a total of 0.02%. Switzerland and the United Kingdom each detracted -0.2%, and the United States detracted -0.1%. In Switzerland, performance was hurt the most by Nestle S.A.
Our fixed income names detracted less than -0.01% this quarter and our exposure decreased from 2.0% to 1.8%. High yield continues to be overvalued, making it difficult for us to find opportunities.
Our currency hedges detracted -0.1% and were relatively unchanged over the quarter. As of March 31, 2018, they were: 39% Australian dollar; 10% euro; 26% Japanese yen; 31% Korean won.
Gold was up 1.8%, contributing 0.1%. Our gold exposure increased from 5.6% to 5.7%. Gold continues to be an important part of our portfolio, acting as a potential hedge against extreme outcomes- whether it be in the economic, financial or geopolitical sphere.
Equity exposure increased slightly to 52.6% and cash decreased to 39.9% over the quarter. Although stretched valuations continued to make it challenging to put meaningful amounts of cash to work this quarter, we added to some of our existing positions in the portfolio and initiated a new position in the U.S.
On the recent IVA Funds Semi-Annual Update Call, Charles and Chuck discussed activity in the portfolio over the past six months and gave thorough analysis on some of the industries and businesses that we have exposure to. They also highlighted the many risks and challenges facing all investors today, including stretched valuations in nearly every asset class, heavy disruptions in a number of industries and the rising debt levels in the world.
A full transcript of the call can be found on our website at www.ivafunds.com.
In today’s uncertain and volatile market landscape, our strongest commitment, as always, is preserving our clients’ assets.
We appreciate and thank you for your continued support.
* Excludes gold mining stocks
