Waddell & Reed

Quarterly Fund Commentary

Ivy Cundill Global Value Fund (prospectus)
December 31, 2014

Andrew Massie

Market Sector Update

  • During the fourth quarter, U.S. stocks were generally buoyed by strong economic results.In Europe, concerns continue over the recovery, or lack of one. Focus is on the European Central Bank (ECB), which states it intends to expand its balance sheet in order to support the economy. Concerns surrounding Russia’s political stance and the questionable impact of sanctions as well as concerns around a snap election in Greece (which may have an unpredictable outcome) have weighed on the region.
  • In Asia, China is the focus with economists and equity markets looking for more monetary easing to prop up a slowing economy and a banking system with questionable health. Generally, emerging markets had a rough quarter with the exception of China and Turkey.
  • The big event has been the continued slide in oil pricing, which has been exacerbated by OPEC’s actions. While the imbalance between oversupply and demand may seem slight and likely to quickly correct, it is worth noting that governments do not necessarily react rationally from an economic perspective. Lower prices are likely good for gross domestic product (GDP) growth, though may pressure inflation targets.

Portfolio Strategy

  • The Fund underperformed the benchmark, primarily due to poor stock selection in consumer discretionary, industrials and energy, for the period. Energy holding EnCana Corp. (2.4% of Fund net assets as of Dec. 31, 2014) was the largest detractor to performance. On a positive note, the Fund’s sector allocation and relatively high U.S. dollar cash allocation benefitted performance.
  • Top individual stock contributors to Fund performance included Italian broadcaster Mediaset S.p.A and Bank of America Corp. (4.6% and 5.1% of Fund net assets as of Dec. 31, 2014, respectively). A currency hedge on the Japanese yen also contributed to performance, while strength in the U.S. dollar negatively impacted international stocks.
  • Valuations and price are of paramount importance to deep value managers. As such, with seemingly expensive markets, finding suitable investment candidates proved difficult.


  • The U.S. economy seems to be improving, supporting lofty valuations in many investments. However, in the near future, we may see a spike in volatility as global economic uncertainty is not a friend to markets in general.
  • Chief concerns over the next few quarters include: continued declines in the price for crude oil; new concerns in the Eurozone, particularly destabilization resulting from the possibility of a Greek anti-austerity government; continued slowing growth in China; and ultimately the strength of the U.S. dollar and its impact on the export economy.


The opinions expressed in this commentary are those of the Fund’s manager and are current through Dec. 31, 2014. 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. 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. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. Not all funds or fund classes may be offered at all broker/dealers. 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 Ivy Funds, call your financial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully before investing.

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