The IVA Worldwide Fund Class A (NAV) (“the Fund”) ended the quarter on June 30, 2018 with a return of -1.27% versus the MSCI All Country World Index (Net)(“Index”) return of 0.53%, bringing YTD performance to -1.38% versus the Index return of -0.43% for the same period.
Markets continued to behave erratically during the second quarter of 2018 as investors reacted to a multitude of concerns, including rising interest rates in the United States, turmoil in emerging markets, political uncertainties in Europe and a simmering trade war between the United States and China. This volatility provided opportunities for us to initiate a few new positions. In addition, as our equities were down -2.2% for the quarter, we were able to take advantage of temporary price weakness in some names we believe to be good long term investments. For example, Acuity Brands, Inc., Sodexo SA and Cimarex Energy all became top 10 positions in the portfolio over the quarter as we increased their positions at depressed prices. After we added to Cimarex earlier in the quarter, its price rose significantly in June.
By country, South Korea detracted the most from performance, taking away -0.6%, followed by Japan and Ireland, which detracted -0.4% and -0.1% respectively. In South Korea, we were hurt most by our Consumer Discretionary names and Samsung Electronics. China, the Netherlands and the United States each contributed 0.1%. By sector, Consumer Discretionary detracted the most, taking away -0.5%, followed by Industrials and Holding Company, which detracted -0.4% and -0.3% respectively. Energy, helped by Cimarex’s strong performance in June, was the top contributor by sector, adding 0.2%. Materials, Consumer Staples and Technology contributed a total of 0.1%.
Fixed income contributed 0.1% to performance. We added a new energy related bond this quarter, and total exposure increased from 1.8% to 2.1%.
Our currency hedges contributed 0.2% and were relatively unchanged this quarter, remaining at: 40% Australian dollar; 10% euro; 25% Japanese yen; 28% Korean won.
Gold was down -5.6%, detracting -0.3% from performance. Our gold bullion position was 5.5% as of June 30, 2018. Gold continues to be an important part of our portfolio, acting as a potential hedge against extreme market events.
We were net buyers this quarter, as we were able to add to some existing positions and find new names in Japan and South Korea. We also trimmed a few positions that went up in price and approached our intrinsic value estimates. Our equity exposure increased from 52.6% to 54.6%, while cash decreased from 39.9% to 37.7% over the quarter.
Increased global market volatility should continue to provide us with select stock picking opportunities as we attempt to preserve your capital and deliver respectable positive absolute returns.
We appreciate your continued confidence and thank you for your support.
