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This Medalist Fund Seeks Out Innovation, Wherever It May Be

Despite a rocky 2014, Ivy Science & Technology remains a compelling choice for investors looking for exposure to innovative companies, both in and out of the tech sector.


Leo Acheson: This week's medalist is Ivy Science & Technology (WSTAX). This is a specialty strategy that actually falls into Morningstar's technology category, but it's more than just a tech fund. Manager Zachary Shafran has managed the strategy since early 2001. If I had to describe the strategy in one phrase, I would say he's looking for innovative companies.

To elaborate a little bit on that, he's looking for companies that use either science or technology to gain a competitive edge or to create new business opportunities. Over time, his portfolio has been invested about 60% in information technology, about 25% in health care, and then the remainder in a variety of other sectors.

So, for example, Pentair (PNR) is nearly a top 10 holding in the portfolio, and that's an industrial manufacturer of technologically advanced filters for water and other types of fluids. So, regardless of the sector that a holding falls into, one common thread among all holdings will be innovation.

Under Shafran, the strategy has turned in excellent results. Since he stepped in through January 2015, the fund beat its S&P North American Technology benchmark by six percentage points annualized. And if you compare those results versus a custom benchmark that matches his sector allocations during his time, the fund beat that benchmark by 4% annualized. So, long-term results have been very strong.

2014 proved to be a challenging year for this strategy. It actually has a small-cap bias, and so that weighed on results as large caps led the way. And also, some holdings that did extremely well for the fund in 2012 and 2013 actually lagged, and some even turned in negative results during the year. So, it proved to be a tough year; but over the long term, Zachary Shafran has proven an ability to effectively execute this strategy. It's not a pure-play tech fund, but it remains a solid option to get exposure to innovate companies.

Leo Acheson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.