Waddell & Reed

Portfolio Perspectives


Introducing Ivy Global Equity Income Fund

John Maxwell, CFA
Portfolio Manager

  

Robert Nightingale
Portfolio Manager

Ivy Global Equity Income Fund - June 2012

 
 

Dividend-paying securities can be particularly appealing in the current post-recessionary period given the historically low yields available on fixed-income investments. Dividend-paying securities provide a critical component to total return and offer downside protection potential in volatile markets. Launched on June 4, 2012, the Ivy Global Equity Income Fund offers a global focus on dividends. The Fund’s investment team scours global markets, searching for securities issued by companies that the managers believe will generate a reasonable level of current income, given current market conditions, and that demonstrate favorable prospects for total return.

What is Ivy Global Equity Income Fund’s objective?

The Fund seeks to provide total return through a combination of current income and capital appreciation. Who manages Ivy Global Equity Income Fund? Senior Vice President John Maxwell, CFA, and Vice President Robert Nightingale co-manage the new Fund. Both tenured members of Ivy Funds’ international investment team, they employ substantially the same investment philosophy, investment strategy and portfolio management techniques used in managing the equity portion of Ivy Global Income Allocation Fund. The Ivy Global Equity Income Fund may be new, but the strategies and processes used in managing it have been in place for many years.

It is important to note that, while each of the Ivy Funds has its own manager or co-managers, all investment team members — including portfolio managers, assistant portfolio managers, analysts and economists — work together in providing and sharing market and security analysis, economic insight, ideas and monitoring portfolio holdings. This process has been in place for many years and provides what we believe to be a key differentiator for our firm.

What differentiates Ivy Global Equity Income Fund from Ivy Global Income Allocation Fund?

The Funds are similar in many respects and it is anticipated that they will hold many of the same securities. Ivy Global Income Allocation Fund will invest in a mix of equity and fixed-income securities. The Fund ordinarily invests at least 35 percent of its total assets in equities, and at least 25 percent in fixed-income securities. Ivy Global Equity Income Fund seeks to provide total return through a combination of current income and capital appreciation by investing almost entirely in dividend-paying common stocks, making it a slightly less conservative fund than the Ivy Global Income Allocation Fund.

What is the Ivy Global Equity Income Fund’s investment approach?

The Fund’s managers use a top-down approach, based on macroeconomic themes, along with a bottom-up stock selection process. They generally seek what they consider to be reasonably-valued dividend-paying companies with good growth prospects, strong balance sheets, and solid cash flow generation. Dividends from stable companies can offer income potential without the extra risk often associated with high-yield investments. Of course, some companies in which the Fund invests may choose not to pay a dividend or the dividend may be less than anticipated.

Normally, at least 80 percent of the Fund’s net assets are invested in equity securities, primarily dividend-paying common stocks across the globe.

The Fund currently is focused on an overarching investment theme: the growing middle class populations in emerging markets, whose increasing wealth and aspirations fuel demand for the products and services of leading multinational companies. The Fund seeks to capitalize on this trend by investing in multinationals domiciled in developed countries that service consumers in, and that benefit from revenues coming out of, emerging countries, and, to a lesser extent, direct emerging market exposure.

When will Ivy Global Equity Income Fund pay dividends?

The Fund will seek to pay dividends to shareholders on a quarterly basis, depending on dividend payments from the companies in which it invests. The frequency and timing of company dividend payments can vary among regions. For example, most U.S. dividend-paying companies distribute dividends quarterly, while those in the U.K. and Asia typically pay dividends semiannually. European companies typically pay dividends just once per year, usually in the spring.

How are Ivy Global Equity Income Fund assets allocated?

The Fund will generally maintain a small cash allocation, depending on the market environment and what opportunities the managers are identifying. Sector and country allocations for the Fund will be diversified across many industries and regions. While the Fund invests primarily in developed markets, it also can invest directly in emerging market companies. The Fund is actively managed and is not tied to the composition of its benchmark. It may under- or over-weight sectors and countries relative to its benchmark index as the managers see fit.

Does the Ivy Global Equity Income Fund use derivatives?

The Fund may use a range of derivative investment techniques in an effort to hedge various market risks, most notably currency risk. In practice, the Fund intends to maintain the currency exposure of its underlying holdings. However, in cases where the managers think these techniques can protect on the downside or preserve income, the managers may enter into foreign currency contracts.

What are the Ivy Global Equity Income Fund’s Morningstar Category and performance benchmark index?

Morningstar will not place Ivy Global Equity Income Fund into its classification system immediately. However, based upon the Fund’s mandate, it is expected the Fund will be classified as World Stock. The Fund’s benchmark is the MSCI World High Dividend Yield Index, a market-weighted benchmark designed to reflect the performance of equities (excluding REITs) with higher than average dividend yields that are both sustainable and persistent.

Are there many investment products like this Fund currently available to investors?

No. In fact, Ivy Funds is one of the first to offer a truly global equity income fund. There are few competitors in the global equity income space and no global peer group at this time. This Fund could be a good choice for suitable investors’ equity portfolios during various market environments given its potential for current income and downside protection relative to other equity investments.

What share classes are available and what are their ticker symbols?

What are the Fund’s fees and expenses?


Through July 31, 2013, the Fund’s investment manager, distributor, and/or transfer agent, have contractually agreed to cap the expenses for the Fund as shown above.

Consider all factors. Past performance is not a guarantee of future results. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. Certain types of the Fund’s authorized investments and strategies, such as derivative instruments, foreign securities, and junk bonds, involve special risks. Depending on how much the Fund invests or uses these strategies, these special risks may become significant. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available, a summary prospectus, containing this and other information for the Ivy Funds, call your financial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully before investing.

The Ivy Funds are managed by Ivy Investment Management Company and distributed by its subsidiary, Ivy Funds Distributor, Inc.

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