Ivy program

Letter to investors

December 2017

Market commentary

A few year-to-date price changes

2017 will be reminded as one with the lowest volatility ever for equity indices. The same has been true for bonds with Merril Lynch's MOVE index remaining below its historical average and decreasing over the year. With levels of volatility remaining very low, investors have not been compelled to modify significantly their allocation for the time being.

As 2017 has just ended, what have been the performances of the different equity markets? Among the best performers we find the emerging markets, the United States, Japan and small caps in different regions with increases near or above 20%. In Europe, 2017 has been a positive year as well but with lower gains: as an example Eurostoxx50 has been up 8.3% and the UK market 7.2%, even though the UK has recovered in December.

Regarding 2018, there is a broad consensus that equity markets will keep going up during the first semester. We need to be a bit wary when a consensus is so broad based: it is not a negative sign per se, it just means that bad surprises can have a larger impact. They might hit a wall of complacency at first before their final impact if felt. Opinions diverge for the second semester. One question mark is about the normalization of the central banks' balance sheets and when it will start to have an impact, be it psychological. Analysts also point that certain equity sectors are expensive. For now the double stimulation - with a monetary policy still dovish and a fiscal policy stimulating in the US - lifts all boats, and a melt-up is possible. This also means that risks are increasing however that the situation will get harder to be put under control in an orderly way later on.

Having the volatility remaining low over too long periods of time can bias the estimation of risks and models such as VaR (Value-at-Risk). As exemplified by 2017, a low level of volatility is not a sure-sign that the worst is coming. Short volatility positions have done well, correlated as they are with the rise of markets. In terms of risks, we need instead to look at specific and never seen before situations. The large inflows into passive instruments selling volatility is one such situation. More distortions can occur in 2018 between expiries and/or with their underlying markets. We could have volatility spikes and important spillover effects occurring.

The Ivy program is well positioned to capture alpha from the trends that will emerge (bullish or bearish) and an optimal allocation. Such an opportunistic strategy is very well suited to the current environment, whether one foresees a continuing bullish market (like the end of the nineties) or a reversal that could shake things up.

The Ivy program, which invests in a diversified way across asset classes, has benefited in December from the best opportunities, which brings the overall yearly performance for 2017 to +24%.

Our convictions

Market convictions and active views
The graphs show our current market convictions from -100% (maximum bearish) to +100% (maximum bullish).
For each asset class, our highest and lowest three convictions are shown.


Ivy program YTD

Highest positive contributions YTD
E-mini S&P 500 +3.41%
E-mini Nasdaq 100 +3.26%
Palladium +2.66%
Vanguard Information Technology +1.57%
Highest negative contributions YTD
Platinum -1.70%
CAD 10Y -1.36%
Bund (GER 10Y) -0.52%
Long Gilt (UK 10Y) -0.36%

Performance and positions

The Ivy strategy performance stands at +24% in 2017.

The collateral constituents, made of ETFs, represent approximately 55% of those gains, and the longs and shorts on futures 45%.

Yearly gains come from the most part from equity markets and some commodities such as palladium, copper and softs. Most ETFs positions are in the black, which includes real estate and rates products as well.

Losses come from specific futures positions, on long term rates (Canadian and German ones), platinum and natural gas.

A more detailed performance analysis is shown thereafter.

As per our positions and convictions, we remain bullish on equities. Our lowest convictions are in the energy and telecommunications sectors, as well as some European markets.
We have increased our convictions on energy and durables goods.
In the fixed income space, we favor convertibles and corporate bonds. We remain short on long term US rates, neutral on Canadian rates and German bunds, and long on UK gilts.
For real estate we favor ex US real estate.
In the commodities space we are bearish on corn, natural gas and platinum, while we are bullish on copper, Brent crude oil and palladium.


Performance Contribution (collateral)

Equity ETFs represent the largest share of the gains made in the collateral in 2017.

The graphs (one by asset class) show the contribution to performance of ETFs since January 1st 2017 (in USD).


Performance Contribution (futures)

The graphs (one by asset class) show the contribution to performance of the futures since January 1st 2017 (in USD).

Risk contributions

Risk contributions (component VaR 95% 1-day)

The graphs show how our positions contribute to the combined portfolio VaR (Value at Risk). A positive contribution means that the position goes in the same direction than the risk of the overall portfolio. A negative contribution contrarily tends to diminish the overall portfolio risk level.

For each asset class we are showing the largest and lowest three contributions to risk.


Key points and benchmarking

Strengths of the Ivy program
Deep learning Swiss made
Tail risk protection & crisis alpha Daily liquidity
Metrics Ivy 12 SG CTA Trend Index S&P500 20Y Treasury Bond
Annualized return 12.78% 5.48% 5.39% 7.32%
Volatility 10.15% 13.32% 19.35% 12.79%
Sharpe ratio 1.1 0.39 0.27 0.55
Max. drawdown 14.28% 21.66% 55.20% 26.59%
Correlation with Ivy - 0.54 0.27 0.13


The Ivy strategy is currently available as a managed account, and will soon be available as a UCITS fund.
Minimum investment is 500’000 CHF/EUR/USD/GBP.
Please contact us for more information.

Management fees
Performance fees

Want to know more?


Discover Ivy in a unique and interactive way by clicking on the below link:

Interactive Ivy portfolio


And contact us

+41 22 342 47 01