Quarter 2, 2016 Investment Brief

As part of our approach in managing client portfolios, we have sought to carve out a section that has the ability to hold various security types (stocks, bonds, commodities, cash) from anywhere in the world.  We have predominantly used two funds in this “Global Opportunity” category for the last five-plus years: BlackRock Global Allocation and Ivy Asset Strategy.

We have been searching for another Global Opportunity fund the past couple of years to supplement our existing holdings.  Thus far we have been unable to find options that meet our high standards of long-term management, a favorable track record (especially during down markets) and sufficient flexibility to go anywhere in pursuit of value.  As Bill mentioned in his note last quarter, the lead manager of Ivy Asset Strategy is retiring effective June 30, and we have spent a significant amount of time evaluating options in light of this development. 

Unfortunately we are less certain that Ivy Asset Strategy’s two remaining managers (both with the fund for less than two years) can implement the strategy with the same level of success as the previous management.  We have therefore decided to transition out of Ivy and will be contacting clients with specific recommendations in the coming weeks.

Our general plan is to redeploy most of the Ivy proceeds into the existing international funds, which would bring clients’ international allocation closer to parity with the domestic side.  We will also be introducing a new domestic mid-cap fund as a way to further diversify our US holdings. 

In closing, we are grateful for the patience our clients have exhibited as the last several years have not been ideal for value-oriented investment strategies.  We continue to favor mutual fund managers who look for bargains and would rather hold cash than buy something expensive – an approach we think is increasingly critical given the current market environment. 

We look forward to discussing specific portfolio recommendations with you.  Please call with any questions in the meantime.

Aaron Pettersen, CFA, CFP®