Monthly commentary - Mackenzie Ivy Team

Portfolio Manager Monthly Insights

Adam Gofton, MBA, CFA
Vice President, Portfolio Manager
Mackenzie Ivy Foreign Equity Fund

Summer Vacation Planning and Ivy Investing: Common Principles

It’s that time of year when Canadians across the country bask in the glory that is summer and take some much-needed vacation. Interestingly, planning a stress-free vacation has similarities with how the Ivy team approaches portfolio management. Key principles involve building adaptability into the process, picking options that will work no matter the weather, and consideration of worst-case scenarios.

Ready to Act, Built to Adapt

When planning your vacation, we suggest booking refundable fares so that you can cancel and rebook if a better deal comes along. We liken “booking refundable fares” to having a list of investment candidates at the ready where analysis is complete but share prices are not yet deemed attractive. A solid process has built-in adaptability so that decisions can change when underlying prices fluctuate for reasons unassociated with your assessment of value.

During the tariff scare of late March–early April 2025, we deployed the aforementioned list and rotated 7–8 % of the Ivy Foreign portfolio in just two weeks. On an annualized basis, this would imply portfolio turnover of nearly 200% when historically we typically turnover 20 to 25% of the portfolio on an annual basis. Our investment philosophy has not changed, and we expect to revert to lower turnover in more tranquil times, but higher price volatility typically equates with more opportunities to upgrade the quality and/or expected return of the portfolio and leads to higher portfolio activity.

All-Weather Options

The weather and economy are similar in that everyone wants to know what will happen, but time after time actual outcomes are vastly different from those predicted by prognosticators. We believe knowing what you don’t know is just as important as defining what you do know. When planning a vacation, this means acknowledging thunderstorms can strike at any time and packing both sunscreen and umbrellas. With respect to investing, this means acknowledging the difficulty in forecasting the exact trajectory of the economy and selecting investments that are robust across different scenarios.

We used this principle of “selecting for robustness” in the aftermath of Liberation Day (April 2nd). In our view, there were opportunities available in two buckets: 1) Companies directly in the crosshairs of tariffs, and 2) Companies being sold off on projected second-order impacts from tariffs such as weaker consumer sentiment. While we were not completely averse to companies directly in the crosshairs of tariffs (bucket #1), we approached forecasts with caution and demanded higher expected returns due to the potential opportunity being overly dependent on a single scenario (ie. tariff de-escalation).

We saw greater opportunity associated with bucket #2; particularly bucket #2 with company-specific tailwinds such as Starbucks. While Starbucks is admittedly exposed to consumer sentiment, we also saw a company with a strong brand that had been under-managed and was being reinvigorated by a new management team. We see opportunities for Starbucks to reactivate lapsed customers and optimize store operations. The “self-help” measures available for Starbucks increase the robustness of the opportunity from our perspective such that while a strong consumer sentiment would be constructive for Starbucks, it is not a prerequisite for success.

Considering Worst-Case Scenarios

The Ivy team has a long track record of downside protection across mandates. We believe the track record in part stems from a philosophy of always being careful and avoiding investments that have the potential for catastrophic outcomes in worst case scenarios. In vacation planning, an analogy would be to check travel advisories and avoid destinations with civil or political unrest that have the potential to disrupt travel infrastructure and completely ruin a vacation in a worst-case scenario. With respect to investing, the Ivy team has observed that disastrous returns commonly occur when a company is forced to raise money at an inopportune time. Since we do not think we have any predictive ability in forecasting the timing of recessions, we always prioritize companies with low debt levels and strong cash flows that can weather any storm.

Successfully Navigating Uncertainty

There’s uncertainty involved in both planning vacations and investing in equities. And while we can’t eliminate uncertainty, we can take action that increases our probability of success in the face of uncertainty. The Ivy team believes a process that can be adaptable to new opportunities, selects for robustness across possible scenarios, and avoids catastrophic downside outcomes can lead to success in both vacation planning and equity investing. Enjoy your summer!

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This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of June 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

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