Waddell & Reed

Quarterly Fund Commentary

Ivy Cundill Global Value Fund (prospectus)
September 30, 2014

Andrew Massie

Market Sector Update

  • The third quarter saw most major indices deliver tepid gains, after dividends, with few exceptions. Emerging markets were weak, especially Europe, with bright spots in China and India.
  • The European Central Bank (ECB) dropped short-term rates into negative territory, expressing concern that the already slow European economy is slowing further and that the prospect of deflation is very real. The ECB suggested that outright bond purchases were the next measure to try to revive the economy.
  • Consumption demand from China, particularly with respect to resources and commodities, is showing signs of slowing. The situation is depressing demand and creating uncertainty regarding growth globally.

Portfolio Strategy

  • The Fund recorded a loss and underperformed the benchmark for the quarter. Both sector allocation and stock selection contributed to the underperformance.
  • Top individual contributors to Fund performance included Korean conglomerate LG Corp (3.5% of Fund net assets) and U.S.-based banks Citigroup and Bank of America (5.4% and 4.5% of Fund net assets, respectively). Top detractors include European stocks TNT Express, Vinci SA and Mediaset SA (3.1%, 2.1% and 2.3% of Fund net assets, respectively). A currency hedge on the Japanese yen contributed to performance, while strength in the U.S. dollar negatively impacted performance.
  • The Fund continues to hold positions in South Korea, where three of four Fund positions appreciated. Research wise, South Korea continues to yield opportunities; however, we do not expect our current exposure (approximately 13%) to change significantly.


  • We have seen a long period of market appreciation with less than robust growth in the U.S. In our belief, there are significant pockets of over valuation around the world and seemingly fewer opportunities as money is forced into assets, particularly equities, creating risk. Investor and writer John Mauldin penned there is “a bubble in complacency.” We agree, as we watch investors push stocks to new highs with seemingly little concern for valuation and risks.
  • We suspect markets will be somewhat turbulent though the fourth quarter as a result of toppish valuations; uncertainty, particularly in Europe and to a degree in China; and tax loss selling “season.”


The opinions expressed in this commentary are those of the Fund’s manager and are current through Sept. 30, 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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