Waddell & Reed

Quarterly Fund Commentary

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

Andrew Massie

Market Sector Update

  • U.S. and global equity markets closed a volatile quarter with negative returns.
  • In August, China surprised the markets and devalued its currency by a little more than 4% over three days. Subsequently, markets sold off heavily as concerns of slower-than-expected growth and additional currency devaluation measures in China spiked.
  • Monetary policy in Europe and Japan remain aggressive and policy heads are prepared to do more if deemed necessary. Recent negative economic growth in Japan suggests the local economic impact of quantitative easing (QE) is much less than hoped for – causing the market to question the efficacy of QE. With poor global economic growth, headlined with hard landing concerns in China, the U.S. Federal Reserve (Fed) delayed their long-awaited rate rise.
  • Emerging-market equity returns were the weakest since the third quarter of 2011, posting double-digit declines.

Portfolio Strategy

  • The Fund underperformed its benchmark during the quarter, with poor stock selection in materials and an underweight allocation to the relatively strong-performing consumer staples sector posting the largest declines.
  • Over the quarter, the Fund had no exposure to health care, telecommunications and utilities as we believe the sectors are overpriced. Strong stock selection in consumer discretionary posted relative gains. South Korean automobile manufacturer Hyundai Motor Co. (5.3% of Fund net assets) was the top individual contributor to performance for the period.
  • The portfolio continues to be overweight South Korea and continental Europe as we believe these areas continue to provide the best value opportunities. Despite the European economic outlook, we think a number of quality companies are selling at healthy discounts to intrinsic value.


  • We believe many sectors and regions remain relatively expensive, though there are far more equity bargains present than earlier in the year, which is helpful in the long run.
  • With expected U.S. gross domestic product growth between 2% and 2.5%, if unemployment remains low and the larger global economy stabilizes, we expect pressure to continue to mount on the Fed to raise rates.
  • At this point, we expect materials and energy to likely remain weak through the fourth quarter. We think it will take sustained growth to move commodity prices up. Likewise with energy, growth in demand or cuts in supply are required to provide price inflation.
  • Europe at an economic and social level continues to have difficulties, many of which may take considerable time to resolve. It’s unlikely we’ll see much change on the economic front in the short term.


The opinions expressed in this commentary are those of the Fund’s manager and are current through September 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. s. 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, political or economic conditions affecting the foreign l country, and differences in accounting standards and foreign regulations. These risks are magnif ed in emerging markets. The value of a security believed by the Fund’s manager to be undervalued may i 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 f nancial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully before investing.

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