We can see the Ivy-10 languished just below the zero level (100) for 2016. On the other hand, the benchmark generally climbed higher through the entire year. Below is the performance summary for both the Ivy-10 and the benchmark.

The Ivy-10 produced a CARG of -.2% while the Benchmark produce a 12.0%. In short, this strategy produced zero returns for the year. In fact, over the past two years, this portfolio has lost money.

Performance Since Financial Crash

Expanding our view out to the last major market bottom of 2009 we can see that the S&P (chart below) is performing better in terms of total return. It appears since late 2012  the Ivy-10 has not been able to gain any traction and then in 2015 a dramatic drawdown took place. In short, the last three years or so have seen the Ivy-10 portfolio really struggle.

The portfolio experienced slightly lower drawdown than the benchmark and slightly lower CARG. The benchmark had a drawdown of 52.3% while the Ivy-10 had a drawdown of about 26.4%. The benchmark generated a CAGR of around 7.1% while the Ivy-10 Portfolio has generated a CAGR of 6.1%.

Out-of-Sample Performance

The Ivy Portfolio book was published back in 2006. Since this portfolio concept was conceived before that date I think it’s safe to say we can use 2006 as the starting period for our out-of-sample data for the portfolio. Below are the results from 2006 through the close of 2016. Here you can clearly see the equity curve of both our portfolio and the benchmark have collided when our portfolio crashed. The recent drawdown in 2016 really took its toll on returns.

Looking at the summary statistics below we can see both our benchmark and our portfolio are producing similar CARG. The max drawdown when compared to the benchmark is significantly better. Our portfolio experienced around 26% drawdown while our benchmark experienced a 55% drawdown during the financial panic.

As the SPY climbs and scales to new highs over the past couple of years, the Ivy-10 Portfolio has struggled to keep up with those recent gains. Recent market activity of 2015 resulted in losing a good percentage of gains and 2016 the Ivy-10 portfolio languished. Only over the longer term horizon do we see both the benchmark and our Ivy-10 portfolio producing identical CARG. Once again, the original intent was to produce stock market index gains without the deep drawdown (55%) experienced with our benchmark.

What About The Original Ivy Portfolio?

Remember, the study above is NOT the original rules for the Ivy Portfolio. The original rules used a 10-month moving average as a filter while our strategy used a 5-month moving average. This made me wonder how well the original rules held up through 2016. Let’s see.

Here we can see the original rules performed similar with regards to CARG. Our portfolio produced a 6.9% CAGR for the original rules and 7.3% for the modified rules. The original rules also score points in producing a smaller drawdown. The max drawdown for the original rules is a reasonable 17% instead of 26% with the modified Ivy-10 rules.

So, which system is better? It’s looking like the orginal rules are producing better. You get about the same amount of reutrn with less drawdown. It will be interesting to see if the Ivy-10 and Ivy Portfolios will bounce back over the next year or two.

Get The Book

If this topic interests you at all, you can get a copy of the book, The Ivy Portfolio,  which describes the concepts and backtesting that inspired the Ivy-10 Portfolio.

Below is the performance summary for both the Ivy-10 and the benchmark. We can see the Ivy-10 took a huge dive when the market turned south in July and August of 2015. On the other hand, the benchmark meandered the entire year. The Ivy-10 produced a CARG of -19.6. In short, this strategy really took it on the chin.

Performance Since Financial Crash

Expanding our view out to the last major market bottom of 2009 we can see that the S&P (chart below) is performing better in terms of total return. It appears since later 2012 that the Ivy-10 has not been able to gain any traction and has moved lower.

The portfolio experienced slightly lower drawdown than the benchmark and around half the CARG. The benchmark had a drawdown of 27% while the Ivy-10 had a drawdown of about 24%. The benchmark generated a CAGR of around 14.7% while the Ivy-10 Portfolio has generated a CAGR of 7.5%.

Out-of-Sample Performance

The Ivy Portfolio book was published back in 2006. Since this portfolio concept was conceived before that date I think it’s safe to say we can use 2006 as the starting period for our out-of-sample data for the portfolio. Below are the results from 2006 through the close of 2015. Here you can clearly see the equity curve of both our portfolio and the benchmark have collided when our portfolio crashed. The recent drawdown in 2015 really took its toll on returns.

Looking at the summary statistics below we can see both our benchmark and our portfolio are producing similar CARG. The max drawdown when compared to the benchmark is significantly better. Our portfolio experienced just under a 24% drawdown during last year’s market drop while our benchmark experienced a 55% drawdown during the financial panic.

As the SPY climbs and scales to new highs over the past couple of years, the Ivy-10 Portfolio has struggled to keep up with those recent gains. Recent market activity of 2015 resulted in losing a good percentage of gains. Only over the longer term horizon do we see both the benchmark and our Ivy-10 portfolio producing identical CARG. Once again, the original intent was to produce stock market index gains without the deep drawdown (50%) experienced with our benchmark.

What About The Original Ivy Portfolio?

Remember, the study above is NOT the original rules for the Ivy Portfolio. The original rules used a 10-month moving average as a filter while our strategy used a 5-month moving average. This made me wonder how well the original rules held up during 2015. Let’s see.

Here we can see the original rules performed similar with regards to CARG. Our portfolio produced a 7.6% CAGR for the original rules and 7.7% for the modified rules. The original rules also score points in producing a smaller drawdown. The max drawdown is reduced to around 17% with the original rules.

So, which system is better? Hard to say but if you’re looking to reduce drawdown sticking with the original rules which uses a 10-month lookback filter, it may be better.

Get The Book

If this topic interests you at all, you can get a copy of the book, The Ivy Portfolio,  which describes the concepts and backtesting that inspired the Ivy-10 Portfolio.

Below is the performance summary for both the Ivy-10 (Backtest) and the benchmark (SPY). We can see the Ivy-10 is underperforming the bench market significantly. The benchmark had a strong year as the overall market rocketed into new nominal highs.  The Ivy-10 did produce a timid 3.8% return. It’s not surprising the market outperformed and where the Ivy-10 Portfolio really shines is protecting capital during prolonged bear markets.

Performance Since Financial Crash

Expanding our view out to the last major market bottom of 2009 we can see the S&P (chart below) is performing better in terms of total return. It appears since later 2012 the Ivy-10 has not been able to gain much traction.

The portfolio has slightly lower volatility than the benchmark and around half the drawdown. The benchmark had a drawdown of 27% while the Ivy-10 had a drawdown of about 15%. This is exactly what the Ivy-10 is supposed to do over the long haul: Index like returns without the large drawdowns. Enduring a 15% drawdown is a lot easier to handle than a 27% drawdown.

The benchmark has generated a CAGR of around 17% while the Ivy-10 Portfolio has generated a CAGR of nearly 13%.

Out-of-Sample Performance

The Ivy Portfolio book was published back in 2006. Since this portfolio concept was conceived before that date I think it’s safe to say we can use 2007 as the starting period for our out-of-sample data for the portfolio.  Below are the results from 2007 through the close of 2014. Here you can clearly see that even with the recent flat performance of the Ivy-10, our benchmark still has a way to climb before matching the performance.

The out-of-sample performance of the Ivy-10 Portfolio is producing a 11.1% CAGR vs. the benchmark of 7.0%.

The max drawdown when compared to the benchmark is significantly better. Our portfolio experienced just under a 19% drawdown during the financial panic while our benchmark experienced a 55% drawdown.

As the SPY climbs and climbs to new highs over the past couple of years the Ivy-10 Portfolio has struggled to keep up with those recent gains. Only when you take into account the massive bear market of 2008-2009 do you see what the Ivy-10 truly affords, capital preservation.

Get The Book

If this topic interests you at all, you can purchase the book which describes the concepts and backtesting that inspired the Ivy-10 Portfolio. Amazon: The Ivy Portfolio

Below is the performance summary for both the Ivy-10 (Backtest) and the benchmark (SPY). We can see the Ivy-10 is underperforming the bench market significantly. The benchmark had a very strong year as the overall market rocketed into new nominal highs. However, the Ivy-10 did produce a 9.8% return. It’s not surprising the market outperformed and where the Ivy-10 Portfolio really shines is protecting capital during prolonged bear markets.

Performance Since Financial Crash

Expanding our view out to the last major market bottom of 2009 we can see the portfolio (chart below) performed slightly better than the benchmark right up until very recently. It’s only over the past 7 months or so have we seen the benchmark strongly outperform. You will notice the drawdowns are not as severe for the Ivy-10 Portfolio. For example, take a look at the debt crisis crash in the late summer of 2011. You see a strong drawdown in the SPY but the Ivy-10 Portfolio fairs much better.

As of this writing, both the benchmark and the portfolio have generated a CAGR of just around 17% – nothing to complain about. The portfolio has slightly lower volatility than the benchmark and around half the drawdown. As seen in the equity graph we can see the Ivy-10 experienced a 12.6% drawdown vs. the 27.1% drawdown of SPY. Again, this is one of the strengths of the Ivy-10 Portfolio. Enduring a 12.6% drawdown is a lot easier to handle than a 27.1% drawdown.

Out-of-Sample Performance

The Ivy Portfolio book was published back in 2006. Since this portfolio concept was conceived before that date I think it’s safe to say we can use  2007 as the starting period for our out-of-sample data for the portfolio.  Below are the results from 2007 through the close of 2013.

The out-of-sample performance is producing a 13.8% CAGR which is very solid. The max drawdown when compared to the benchmark is significantly better.

Shorting

A few readers have brought up the idea of adding a shorting component to the Ivy-10 to see how it affects the performance. Currently during bear markets the portfolio is sitting in cash (SHY). In the following test I’m going to introduce the inverse SPY ETF called SH. I will simply add this to the portfolio to create a collection of 11 different ETFs. When a bear market arrives we would expect the SH to perform better than all the other ETFs within the portfolio and it would get selected for trading. The following results were executed over the out-of-sample period. During this period, 245 trades were closed over a total of 1,762 days.

The addition of a single shorting component does seem to help the portfolio by reducing the maximum drawdown and very little expenses to the CAGR. Keep in mind the Ivy-10 Portfolio selects the top three performing ETFs. Thus, during a bear market at most SH will represent 33% of the portfolio while the remaining will be allocated to “cash”. Exploring the use of other inverse ETFs may prove useful in further reducing drawdown and maybe even increasing total return. This will be a great topic for a future article.

Get The Book

Amazon: The Ivy Portfolio