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    Quarterly Fund Commentary

    Ivy Cundill Global Value Fund (prospectus)
    March 31, 2016

    Andrew Massie
    Richard Wong, CFA
    Jonathan Norwood, CFA

    Market Sector Update

    • Equity market performance thus far in 2016 can best be characterized as uneven. Diverging monetary policies have created a cross current in global market liquidity, which has percolated throughout the fixed income and banking sectors.
    • Overall, global markets saw declines in the first half of the quarter, only to recover in the second half. Concerns over global growth were offset by a more dovish stance by the U.S. Federal Reserve (Fed) and further easing provided by the European Central Bank. The Fed seems worried about additional slowing growth in China, Britain leaving the European Union (Brexit), emerging-market growth and deflationary forces. Energy prices that sold off early in the quarter also recovered.
    • The weaker U.S. dollar reversed the negative spiral in commodity prices and provided a relief valve to potential stresses in bond markets. As a result, high-yield credit spreads narrowed.

    Portfolio Strategy

    • The Fund underperformed its benchmark during the quarter, with stock selection and sector allocation contributing to the decline. A lack of exposure to telecommunication services and utilities as well as a large relative underweight to consumer staples posted declines. Strong stock selection in energy and materials was offset by poor selection in energy and financials.
    • The largest contributor to the Fund was South Korean steel maker POSCO (5.6% of Fund net assets), which benefitted to firming steel prices and promised unprofitable capacity reduction by Chinese producers. Consumer discretionary holding adidas AG (4.2% of Fund net assets) posted gains stemming from internal restructuring and announced new leadership. Largest detractors were U.S. banks Citigroup, Inc., Bank of America Corp. and insurer American International Group, Inc. (6.6%, 4.1% and 8.3% of Fund net assets, respectively).
    • Underweight the domestic U.S. market negatively impacted performance, while overweight allocations in Europe, including the U.K., were beneficial. Our overweight allocations as well as strong stock selection in South Korea and Japan benefitted performance.


    • We believe on-going volatility in the global equity markets will present opportunities for value managers. In the U.S., a profit recession has loomed as currency headwinds and lower commodity prices continue to pressure energy companies, exporters and multinationals.
    • The U.S. domestic economy continues its slow growth and monetary tightening is now expected to occur at a slower pace this year. This latter point is evidenced by the Fed’s expanding financial lexicon which now includes “downside risks to the global economy” as part of its rationale for slower rate normalization.
    • The U.S. dollar has also pulled back following the Fed’s recent dovish message. This should help to reduce foreign exchange headwinds and provide some relief to repatriated foreign earnings. Interest rates also remain historically low on an absolute basis, which we believe will make comparable fixed-return asset classes look unappealing relative to equities. We would classify the overall margin of safety in U.S. equities as moderate, with the most compelling opportunities in financials, health care, industrials and energy.
    • In summary, we are seeing opportunities in volatile markets. Portfolio construction will remain concentrated, while seeking to reflect a diversity of value-creation drivers.


    The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 2016. 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 not a guarantee of future results.

    Effective March 24, 2016, Jonathan Norwood and Richard Wong joined Mr. Massie as additional portfolio managers on the Fund.

    Risk factors. 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.

    IVY INVESTMENTSSM refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

    Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which can be obtained from a financial advisor or at www.ivyinvestments.com. Read it carefully before investing.

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