Institutional Strategies

Mid Cap Growth

Strategy focuses on mid-capitalization U.S. companies with large cap potential that demonstrate profitability, balance-sheet strength and sustainable earnings growth. Seeks quality growth opportunities in three categories; Greenfield, Stable and Unrecognized Growth.

Our Mid Cap Growth philosophy is based on a belief that high quality growth companies that have sound capital structures and attractive valuations will provide significant opportunities for outperformance. We believe the market will generally apply a growth rate fade factor that will overestimate the deceleration in future growth over a 3-5 year time horizon. It is this market inefficiency that the strategy attempts to isolate and generate alpha.

Other tenets of the Mid Cap Growth philosophy are:

  • Quality growth defined as profitable growth
  • Emphasis on valuation
  • Seek to be early in recognizing growth potential
  • Utilize a medium to long term mindset
  • Avoid a “benchmark driven” approach to portfolio construction
  • Bottom-up stock selection as primary source of value added

Investment Process

Initial Universe - Idea Generation

Screen for:

  • Profitability metrics
  • 12 month cash flow trends
  • Valuation metrics
  • Estimate revisions

Qualitative Sources:

  • Interaction and discussion with Ivy Investments team resources
  • Meet with companies’ management
  • Quarterly earnings reports and calls
  • Conferences, research reports

Investment Universe - Company Selection

Primary Criteria:

  • Sustainable growth
  • Durable financials
  • Effective management

Conditional Criteria:

  • Valuation
  • Cash flow trends
  • Informational edge
  • Top-down factors

Mid Cap Growth Portfolio - Quality Growth Opportunities

  • Greenfield Growth – Innovators, Repeat Revenues, Global Reach, Long Runways for Growth
  • Stable Growth – Durable business models producing moderated, yet solid revenue and earnings growth
  • Unrecognized Growth – Undiscovered or interrupted growth, Low institutional following, Contrarian holdings, Seeking early ownership
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Key Features

Composite Performance History Since 1/1/2005 
Benchmark Russell Midcap Growth Index
Style Fundamental, Growth
Target Alpha 300 bps above Index
Over full market cycles (3-5 years)
Peer Universe U.S. Mid Cap Growth Equity
Typical Tracking Error 300-500 bps
Holdings Range 60-70
Max Position Size 5%
Sectors +/- 10% of the Index weight
Max exposure 30% to any one sector
Proprietary Growth Spectrum Diversification across three growth buckets: Greenfield, Stable and Unrecognized Growth
Investment Vehicles Institutional Separate Account
Collective Investment Trust
U.S. Mutual Fund: Institutional Share Class
Variable Insurance Portfolio