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