The Ivy difference to global investing
Lead Portfolio Managers from the Mackenzie Ivy Team talk about the hallmark of the Ivy style and their long-term approach to investing in global markets.
For more than a quarter of a century, Ivy has been providing Canadian investors with an investment alternative that’s not only differentiated from other asset classes but also other equity mutual funds.
We’ve been growing our clients’ capital through market cycles, but, importantly, we’ve been doing it the Ivy way which is very carefully.
The Ivy business model or approach to investing is to invest in high-quality companies with a competitive advantage, but, importantly, one that we think will persist for a long period of time. And having confidence in the sustainability of a business model really comes from having a good understanding of the corporate culture. Is it supportive of whatever competitive edge that company does have?
Similarly, we intend to make the Ivy investment process sustainable for a long period of time by focusing on our own corporate culture. So, we hire people carefully and slowly over time, who share the same investment characteristics that Ivy has practised for many years.
The Ivy style is applied consistently across regions. So, in Europe, like anywhere else, we’re looking for high-quality businesses with good long-term growth prospects, defendable competitive advantages and attractive corporate cultures.
Sometimes we’re asked why Europe would be attractive at all given its challenges. But we’re not investing in Europe per se, but we’re investing in high-quality companies who happen to be domiciled in Europe. And these companies tend to be global, first, because large companies tend to be global anyway, and also because we prefer to have broader risk exposures.
But the opportunity set in Europe is a little bit different than elsewhere. For one, there are few sizeable technology companies, and in contrast, there’s a pretty large financial sector. But we generally feel that the companies in that financial sector don’t tend to be of great quality.
In contrast, Europe has produced some world-leading companies in other areas: Consumer branded goods, luxury products and select niches in health care and industrial sectors. And this is really where we tend to find our opportunities.
Well, the U.S. is home to many of the world’s great businesses. There’s lots of very innovative growth-oriented companies and many of whom have long-term mindsets and cultures that align with what we look for in companies. And so when we look at the U.S., it really is a very important region for Ivy.
Myself and Adam Gofton look after Ivy’s U.S. investment efforts. It’s interesting times in the U.S. right now because what we’re finding is that a lot of the safer stocks, the more defensive stocks, have done very well this year, and that’s really a function of fear in markets around a growth slowdown and interest rates going down, which has pushed up valuations in those stocks.
Our approach to investing in Asia is similar as it is with other markets, but with some subtle tweaks. Ultimately, what we’re looking for are either global multinationals or strong local champions that have stable earnings power, a good growth opportunity and supported by a strong competitive advantage.
We’ve been able to find a number of high-quality companies in Japan, and many of these companies have very strong balance sheets and improving corporate governance and capital allocation policies. We’ve also been able to find a few opportunities in segments of the technology sector in Asia, and having dedicated coverage of Asia allows us to be a bit more nimble and take advantage of these opportunities a bit more quickly when they do arise.
So corporate access works a little bit differently in Asia than it does in other regions. It takes time to build relationships with companies and gain access to their management teams, but we’ve now been at this journey for a number of years and we have been able to build these relationships. And so we get to know the companies and they get to know us as investors, and we get better insights.
The Ivy investment process is not just about sustainability but improvement. And at Ivy, ever since I joined back in 2000, it has been a constant evolution of improvement. And that’s what gives me confidence that not only will the Ivy investment style be around for many years to come, but it will be even better than it is today.