Quarterly Fund Commentary
Ivy Municipal High Income Fund
March 31, 2015
Michael J. Walls
Market Sector Update
- We continued seeing solid inflows into
municipal bond funds in the first quarter
as a result of higher taxes and the relative
attractiveness versus taxable equivalents.
- With higher tax rates in 2015, we believe
demand for high-yield municipal bonds
should remain strong. Although we
believe issuance will start to increase, we
are confident the demand should be
equal to meet the supply.
- With the solid inflows in 2014 and the
first quarter of 2015, we have become
less constructive on the high-yield
municipal space and view the new issue
market as fully priced on an absolute
- While we continue to participate
selectively in the new issue market,
attractively-priced deals are few and far
between, in our opinion.
- As headlines about Puerto Rico waned,
we saw a decrease in volatility in the
asset class. We believe that this may
continue in the near term and provide
high-net-worth investors with attractive
levels of income over the long term.
- We will continue to purchase deals we
feel offer above-market yields based on
the underlying credit fundamentals of
the projects or municipalities.
- We continue to favor revenue bonds
over tax-backed debt as revenue bonds,
in our view, provide diversification from
the general tax issues which affect
states and local governments and offer
more attractive yields for our investors.
- Going forward, we have begun to get
more cautious and will look for
opportunities in bonds with more
defensive structures as interest rates
rise. We believe these bonds represent
greater value and will better protect the
Fund from the potential of slightly
higher rates as growth picks up.
- In the near term, we believe volatility
will remain low as negative headlines
are a thing of the past.
- We believe that it is important for
investors to realize that prudent
managers diversify across states and
sectors and not put too many eggs in
one basket. One bond should not
materially affect the whole fund.
- We believe investors will continue to
search for tax-exempt yield due to
higher tax rates, which should benefit
the municipal market. In our view,
patient investors should be rewarded
over the long haul.
The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 2015. The manager’s views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed. Past performance is no guarantee of future results.
Risk factors. 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. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higherrated
bonds. Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. The Fund may include a significant portion of its
investments that will pay interest that is taxable under the Alternative Minimum Tax. 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.