Waddell & Reed

Quarterly Fund Commentary

WRA Energy Fund (prospectus)
March 31, 2015

David P. Ginther, CPA

Market Sector Update

  • U.S. equities closed a volatile quarter with a very small gain in the broad market index. Global equities in general also finished the quarter slightly higher. Crude oil prices remained at depressed levels worldwide during the quarter.
  • Mixed results in U.S. economic indicators during the quarter still indicated steady growth. The U.S. dollar continued to show strength against world currencies – a factor for crude oil prices, which are set in dollars.
  • The European Central Bank began its bond-buying program late in the quarter as part of efforts to stimulate Europe’s economy. It also increased its economic growth forecast for the region.

Portfolio Strategy

  • The Fund posted a positive return for the quarter (before the effect of sales charges) while its benchmark index showed a negative return.
  • Strong security selection within the energy sector accounted for nearly all of the Fund’s outperformance of the benchmark, with holdings in the sector up an average of about 4%. Small allocations to the financials and information technologies sectors, which outperformed energy in the quarter, also contributed to performance.
  • Holdings in cash were variable during the quarter and ended as a slight drag on absolute performance, given the performance of equities in the Fund. Holdings in the Industrials sector were the largest relative detractor to performance.
  • The greatest equity contributors to performance relative to the benchmark were Exxon Mobil, Concho Resources, Tesoro, Newfield Exploration and Chevron. The greatest relative equity detractors were Kansas City Southern, Targa Resources, Core Laboratories, Whiting Petroleum and Antero Resources.


  • We continue to think the U.S. will show steady economic growth and low inflation in 2015, remaining the leader among developed countries. We think global economic growth also will continue to show mild improvement.
  • We think global energy demand will continue to grow slowly, spurred by the lower oil prices. With higher-cost projects around the world going offline because of current pricing, we think supply and demand will move closer to equilibrium and believe oil prices are unlikely to be sustainable in the current low range in the long term.
  • The growth rate in U.S. oil and gas production is slowing as higher-cost and lower-productivity projects have been postponed because of the price decline. But core areas of shale continue to produce at a high rate and we think that will continue.
  • We remain think there is heightened geopolitical risks in the Mideast and Russia, and believe these will continue to overhang markets and generate uncertainty.


The opinions expressed in this commentary are those of the Fund’s managers and are current through March 31, 2015. The managers’ 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.

Top 10 Equity Holdings as a percent of net assets as of 03/31/2015: Halliburton Co., 3.7%; Schlumberger Ltd., 3.5%; Baker Hughes, Inc., 3.5%; Cimarex Energy Co., 3.1%; EOG Resources, Inc., 3.0%; Marathon Petroleum Corp., 2.6%; Pioneer Natural Resources Co., 2.5%; Phillips 66, 2.5%; Tesoro Corp., 2.4%; Weatherford International Ltd., 2.3%.

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 companies involved in one specif ed sector may be more risky and i volatile than an investment with greater diversification. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. These and other risks are more fully described in the Fund’s prospectus.

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 mutual funds offered by Waddell & Reed, call your financial advisor or visit us online at www.waddell.com. Please read the prospectus or summary prospectus carefully before investing.


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