Waddell & Reed

Quarterly Fund Commentary

Ivy Cundill Global Value Fund (prospectus)
June 30, 2015

Andrew Massie

Market Sector Update

  • Broad U.S. markets posted mixed results for the quarter despite the overall economy continuing to move forward. As with last quarter, markets seem to be in a holding pattern waiting on an inevitable rate hike from the U.S. Federal Reserve, which may be as early as the fall.
  • The Eurozone negotiations on the debt crisis in Greece preoccupied global equity markets, although an agreement reached just after the quarter ended appeared to establish a framework for what needs to be done to secure a roughly 85 billion euro bailout.
  • China’s A-share (onshore) stock market tumbled nearly 30% from a high in June and then bounced to the biggest daily gain in six years in early July. The moves raised concerns about the potential impact on China’s economy and market structure.
  • Energy and commodity prices have again dipped – bad for the sectors, but good for consumers and the overall economy.

Portfolio Strategy

  • The Fund slightly underperformed its benchmark for the quarter. Sector allocation detracted from performance, with the Fund’s large overweight to the poor-performing consumer discretionary sector posting relative losses. In addition, the Fund’s relatively large cash allocation (averaging approximately 12%) detracted from performance in a rising market.
  • On the other hand, strong stock selection in financials benefited performance with American International Group, Bank of America and Citigroup (8.1%, 5.1% and 7.2% of Fund net assets, respectively) posting the largest relative gains for the period.
  • Over the quarter, the Fund’s energy exposure was slightly increased while net exposure to South Korea was reduced. Additionally, with turmoil in Greece, we reduced our exposure to the country. At quarter end, the Fund’s exposure was less than 1.5%.


  • Markets remained expensive at quarter end. Expensive markets are not necessarily good indicators of shortterm performance; however, expensive markets tend to be correlated with substandard long-term returns. At present, we believe long-term equity market returns are likely to be well below the results experienced over the past few years.
  • Although long-term government yields rose during the quarter, they still remain at very low levels and offer minimal real returns. We are of the belief that real rates have to eventually normalize (i.e. offer positive rates of return). As a result, the Fund is positioned for this eventuality.
  • Over the foreseeable future, we think it is likely the European Central Bank’s accommodative policy to support the European economy will, among other things, inflate equity prices much like the Fed’s quantitative easing did in the U.S.


The opinions expressed in this commentary are those of the Fund’s manager and are current through June 30, 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. International investing involves additional risks including currency f uctuations, l 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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