IVA Worldwide Fund commentary for the second quarter ended June 30, 2015.

The IVA Worldwide Fund Class A (NAV) (“the Fund”) ended the quarter on June 30, 2015 with a return of -0.90% versus the MSCI All Country World Index (“Index”) return of 0.35%, bringing YTD performance to 0.57% versus the Index return of 2.66% for the same period.

IVA Worldwide Fund

The quarter was marked by bouts of volatility in global markets caused by political uncertainty in Greece, anxiousness over future interest rate increases in the U.S. and turbulence in the Chinese stock market.  We continue to see stretched market valuations globally, driven by ultra-low interest rates as investors focus more on relatives than fundamentals in their search for yield.  As bottom-up, fundamental investors, it remains difficult for us to find quality opportunities in this environment.

IVA Worldwide Fund performance Hurt by U.S. and Japanese stocks

Our names in the U.S. and Japan detracted the most from performance this quarter, taking away a total of -1.4%.  In Japan, performance was hurt by a pullback in Astellas Pharma Inc, a top 10 name in the portfolio.  Our performance in the U.S. was brought down by losses from 4 large positions- DeVry Education Group., Berkshire Hathaway, News Corporation, and Oracle.  Underperformance by DeVry Education Group Inc. and News Corporation made consumer discretionary the portfolio’s biggest detractor by sector this quarter, taking away -0.6%, followed by healthcare at -0.5%, which was brought down by Astellas Pharma, Inc.  We continue to be comfortable holding these investments and view this quarter’s losses as temporary.  The top contributing sector in the portfolio was consumer staples, adding 0.2% to performance, followed by financials and technology which contributed a total of 0.3%.  South Africa, China and France were the top contributors by country, adding 0.6%, led by technology names in each country.

IVA Worldwide Fund – Currency hedges detracted

Fixed income contributed 0.2% to our return for the quarter.  Total fixed income exposure was 8.0% at the end of the quarter, up slightly from 7.6% at the end of the first quarter.  Currency hedges detracted -0.01% and ended the quarter at: 60.0% Japanese yen, 39.7% Australian dollar, 27.8% South Korean won, 30.7% euro.  Gold was down -1.0%, detracting -0.04% from performance.  Our gold position was 4.6% at the end of the quarter, up slightly from 4.3% at the end of last quarter.  We continue to believe it is important to hold gold in the portfolio as a hedge against extreme outcomes.

Our cash position was 36.3% at quarter end, down from 37.3% at the end of the first quarter.  We continue to focus on the optionality of the cash we hold.  Despite dilutive effects of cash on our short term performance, we believe that over the longer term it will benefit performance by allowing us to pounce when we see quality values become available.

IVA Worldwide Fund – Equity exposure

Equity exposure was 51.2% at the end of the quarter, up from 50.6% at the end of the first quarter.  We began building a position in a consumer discretionary name in South Korea over the quarter and have been adding to a few existing names, mostly in Asia ex-Japan where we continue to find the most opportunities.  Markets tend to be less efficient in this area, giving us the opportunity to uncover some misunderstood and mispriced smaller names.  At the same time we trimmed some of our existing positions as they approached our intrinsic value estimates.  The majority of this selling was in Japan as the market extended its rally.

Overall, the portfolio remains conservatively positioned.  We believe that continued market manipulation by central bankers and uncertainties facing markets today necessitate caution.  In this environment, it is crucial to be adequately compensated for risk and we do not believe that is the case today.

At IVA we focus on preserving our clients’ capital.  We will attempt to do this by remaining disciplined in our approach, exercising patience and searching for quality opportunities one name at a time.  We appreciate your continued confidence and thank you for your support.