Ivy Asset Strategy, the top-ranked mutual fund that invests in stocks and bonds globally, bought shares of China Mobile and Reliance Industries...
Ivy Asset Strategy, the top-ranked mutual fund that invests in stocks and bonds globally, bought shares of China Mobile and Reliance Industries as it almost doubled holdings in Hong Kong, India and Brazil.
The countries account for 27 percent of the $10.3 billion fund’s assets, up from 15 percent six months ago and the most since it opened in 1995, according to co-manager Ryan Caldwell.
Gold investments were cut in half, from as much as 20 percent of assets, to finance purchases of emerging-market securities.
“Despite the volatility, we think the emerging economies are the best place to be in terms of absolute returns,” Caldwell said in an interview from his office at Waddell & Reed Financial in Overland Park, Kan. The firm owns the Ivy and Waddell & Reed Advisors fund families.
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Ivy Asset Strategy returned 36 percent in the past year, through Feb. 19, the most among global allocation funds, according to data compiled by Morningstar in Chicago. Caldwell and co-managers Michael Avery and Daniel Vrabac also rank first in the group for the past three- and five-year periods.
The fund, which carries Morningstar’s four-star rating, the firm’s second-highest, held up better than the peer average as subprime-mortgage losses triggered stock and bond sell-offs around the world. It’s lost 1.2 percent this year, compared with a decline of 4.8 percent for the group.
Investment guidelines allow the managers “to vary their allocations quite widely, and they’ve taken advantage of that freedom,” Morningstar analyst Gregg Wolper wrote in a year-end research note.
Ivy Asset’s biggest holdings include China Mobile, the world’s largest wireless-phone operator by subscribers. Beijing-based China Mobile surged 55 percent in Hong Kong in the past year, through Feb. 19, as the company added customers after cutting calling rates.
Chinese companies that trade in Hong Kong account for 11 percent of the fund’s assets.
The fund has 10 percent of assets in India, where economic expansion ranks second after China among the world’s biggest economies. The fund owns Mumbai-based Reliance Industries, owner of the world’s third-biggest oil refinery. Reliance, led by Indian billionaire Mukesh Ambani, has advanced 75 percent in the past year on record profits.
In Brazil, which accounts for 6 percent of assets, the managers have put money in São Paulo-based Bolsa de Mercadorias & Futuros (BM&F), Latin America’s largest derivatives market. BM&F declined 14 percent since going public in November as analysts said its shares were expensive compared with peers.
The fund also owns shares of Rio de Janeiro-based Companhia Vale do Rio Doce, the world’s largest iron-ore producer, which gained 53 percent in the past year, driven by record iron-ore prices.
“We like Brazil” because “one, GDP growth has been very good, and, at the same time, they have been doing a pretty good job of bringing inflation down,” Caldwell said. The fund has a one-year Sharpe ratio of 2.35 compared with -0.58 for peers, according to Bloomberg data. A higher Sharpe ratio means better risk-adjusted returns.
The Ivy Asset fund has 65 percent of its assets in stocks and 10 percent in bonds. The rest is in cash and gold.
The managers of the Ivy Asset Fund shifted money to gold in the past 18 months as the U.S. dollar fell compared with other currencies and as the global stock markets tumbled on concerns that the U.S. was headed into a recession.