System Trader Success
Share It!

Ivy-10 Portfolio 2015 Update

It’s that time of year to update the performance of the Ivy-10 Portfolio.

What is the Ivy-10 Portfolio?

Back in 2012 I finished reading a very interesting book called “The Ivy Portfolio”. This book was written by two money managers, Mebane Faber and Eric Richardson, who work at Cambria Investment Management. The authors wanted to answer the question of why money managers who manage some of the world’s best Ivy League schools produce such consistent results. Routinely Harvard and Yale endowments produce double digit annual returns. Since 1985 Yale University has returned around 16% annual returns and Harvard over 15% annual returns. Not only did they produce outstanding returns, but they did it by also reducing volatility and drawdown.

This inspired me to create the Ivy-10 Portfolio which I track on System Trader Success. If you want to learn more about it, please read the original article here. In short, it’s a slightly modified version of the strategy with a shorter look-back period used for the moving average filter. The original rules used 10 months while my version used a 5-month look-back.

2015 Performance

Below is the performance summary for the year 2015 only. Please note, returns include dividends but exclude commissions and slippage. First up is the equity curve. The Ivy-10 Portfolio is the green-colored equity curve (Backtest) while the benchmark (SPY) is the blue equity curve.



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.


click to enlarge

Ivy-10 2015 Only Returns

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.

Ivy-10-2009-2015 EQ Chart

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%.

Ivy-10-2009-2015 Summary

Ivy-10-2009-2015 Annual Performance

click to enlarge

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.

Ivy-10-2006-2015 EQ Chart

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.

Ivy-10-2009-2015 Summary

Ivy-10-2009-2015 Annual Performance

click to enlarge

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.

Ivy-2009-2015 EQ Chart
Ivy-2009-2015 Summary

Ivy-2009-2015 Annual Performance

click to enlarge

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.

Ivy Portfolio Book Cover

About the Author Jeff Swanson

Jeff is the founder of System Trader Success - an inBox magazine dedicated to sharing great ideas and concepts from the world of automated trading systems. Read More Google

follow me on:

Leave a Comment: