Ivy program

Letter to investors

May 2018

The month in a few words

News and Markets


Market commentary

A few year-to-date price changes

The US dollar has kept rising in May as a continuation of a move that started in April. The speech by the Fed president should keep rates and the US dollar on the way up. For US exporters a stronger dollar is no good news, and margins and profits might feel the impact during the second and third quarters. As a side effect, a rising US dollar also impacts emerging markets. Some, like Argentina and Turkey, made the news in the past few weeks, with a sizable acceleration in the depreciation of their currency.

In Europe, there has been an increase in markets anxiety around the political situation in Italy. The country has the second highest debt to GDP ratio of the European Union, after Greece, and will be led by a newly formed Euroskeptic government. A stimulative fiscal policy is considered with a risk on the budget deficit. Tensions with Germany and other European countries that favor budgetary rigour are to be expected.

In Spain, the political situation has evolved promptly. The previous government of Mariano Rajoy has suffered a no-confidence vote as a scandal corruption involved different members of his party. The Socialist Party (PSOE) with its allies have now formed a new government, which has shown a pro-european stance.

The Ivy program has seen its allocation evolve significantly so far this year. We are currently allocating more to commodities than usual for instance. We believe that the flexibility and the diversity of exposures brought by the program are a must in the current uncertain market environment. As of end of May, the program is down 2.2% for the year, and ready to adapt to any incoming market moves.

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
+0.65% Gas Oil
+0.51% US 10Y T-Note
+0.46% Brent Crude
+0.42% Vanguard Information Technology
Highest negative contributions
-0.78% FTSE 100
-0.54% SMI
-0.50% Palladium
-0.50% High Grade Copper

Performance and positions

The Ivy strategy yearly performance for 2018 stands at -2.2% as of end of May.

Gains in 2018 come from short positions on US rates, from various commodity positions (including longs on gasoil and crude oil), from some equity positions (technology and health sectors) and being long convertible bonds.

Losses during the year come for the most part from short positions on Canadian rates, specific futures positions on equity indices (Footsie100, SMI), and on some commodities (corn, copper, platinum).

A more detailed performance analysis is shown thereafter.

As per our convictions, we are mildly bullish on equities. For bonds, we still favor convertibles which benefit from an increased volatility. We are bearish on long term US and Canada bonds and long bunds. For real estate, we favor the ex US instruments, and we are now moderately bearish on US REITs.
In the commodity space, we are bearish on sugar despite a recent rise in prices, while we are bullish on gold and crude oil.


Performance contribution of ETFs

The graphs (one by asset class) show the contribution to performance of ETFs since January 1st 2018 (in USD).


Performance contribution of futures

The graphs (one by asset class) show the contribution to performance of the futures since January 1st 2018 (in USD).

Risk contributions

Risk contributions (component VaR 95% 1-day)

The graphs show how a position contributes to the combined portfolio VaR (Value at Risk). A positive number indicates that the position generally moves in the same direction as the overall portfolio. A negative number means the opposite, indicating that the position diminishes the overall portfolio risk level.

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


Focus on a trade

This month we are discussing our position in Brent crude oil. We entered that long position back in September 2017. Among the factors that have impacted its price recently, we want to underline the ongoing and broad economic growth in different regions of the world and geopolitical tensions, notably in the Middle East.

Crude oil demand by emerging markets keeps increasing and remains a strong driver of price changes in recent years. China is the second consumer globally with India being the fourth (and it should take Japan third place in a few years time). The share of non OECD countries for global energy demand as a whole is already high (60%) and keeps increasing. It is expected to reach 70% by 2040 according to the latest "Outlook for Energy" report by Exxon. Furthermore the importance of crude oil is not expected to decrease that much by 2040 versus other types of energy.

Geopolitics has also drived prices recently. Increasing tensions over the past 8 months have involved directly or indirectly large oil producers. American sanctions or u-turns against Russia and Iran come to mind, so does the embargo towards Venezuela. This occurs at a time when decreases in production have been decided by OPEC and non OPEC countries since January 2017, and that production containment should remain in place for the most part of 2018, even though the Saudi energy minister said end of May that a production increase could be considered to reassure consumers. In any case we have a number of countries currently going beyond the production restriction agreement, such as Venezuely, Angola, Mexico, Sudan, Bahrain and Brunei. Meanwhile the United States keeps increasing its production.

From a technical standpoint, the market remains backwardated, with deferred prices lower than spot prices. Crude oil traders have no incentive to store oil, and stockpiles go down. Since the production peak back in March 2017, crude oil inventories have decreased by 130 million barrels.

The Ivy program has been able to capture that bullish trend on crude oil. The below graph shows the contribution of that position to the portfolio since the beginning of the year, with large gains having occurred this month.


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 12.43% 5.00% 5.37% 6.89%
Volatility 10.50% 13.33% 19.32% 12.74%
Sharpe ratio 1.1 0.35 0.27 0.52
Max. drawdown 13.29% 21.66% 55.20% 26.59%
Correlation with Ivy - 0.54 0.27 0.12


The Ivy Deep Learning strategy is currently available as a managed account with a minimum investment size of 500’000 CHF/EUR/USD/GBP.

Ivy Deep Learning is also available through a certificate for qualified investors which ISIN code is DE000A2MDNL3.
The daily price of the certificate is available online: Price of the certificate

Please contact us for more information.

Want to know more?


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Interactive Ivy portfolio


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+41 22 342 47 01