Waddell & Reed

Quarterly Fund Commentary

Ivy Global Natural Resources Fund (prospectus)
June 30, 2015

David P. Ginther, CPA

Market Sector Update

  • U.S. and global equities closed a volatile quarter essentially flat. Crude oil prices and commodities prices in general continued to trade at depressed levels worldwide.
  • Markets closely watched the U.S. Federal Reserve (Fed) for any indications about the timing of eventual interest rate hikes. U.S. economic data showed steady improvement and the dollar – the currency of global oil trading – showed ongoing strength against world currencies.
  • The eurozone negotiations on the debt crisis in Greece preoccupied global equity markets, although an agreement was reached just after the quarter ended that appeared to establish a framework for a bailout.

Portfolio Strategy

  • The Portfolio had a negative return for the quarter, in line with the negative return of its benchmark index.
  • The largest sector detractor to relative performance was the allocation to industrials. The Portfolio also underperformed the benchmark in the energy sector, primarily because of allocations to “upstream” energy companies (oil and gas exploration & production). Holdings in the energy sector ended the quarter above our typical allocation and slightly underperformed the index. Performance in energy also was hurt by the effect of a strong U.S. dollar.
  • The largest contributor to relative performance was stock selection in the materials sector, where the Portfolio's holdings averaged a positive return versus the benchmark’s slightly negative return in the sector.
  • In general, we focus on companies with what we consider a good growth profile, a low-cost position and a prudent approach to cash flow, as well as a willingness to give it back to shareholders through dividends or repurchases. We mainly find that larger companies fit that profile now. We still have a bias toward energy companies that we believe offer long-term potential.


  • We think steady economic growth and low inflation will continue in the U.S. this year, keeping it the leader among developed countries. We think global economic growth will remain slow overall but continue to show mild improvement.
  • We think global energy demand will continue to grow slowly, spurred by the lower oil prices. With higher-cost projects around the world being delayed or cancelled because of current pricing, we think supply and demand will move closer to equilibrium and believe oil prices are unlikely to be sustainable in the current low range in the long term.
  • We believe the U.S. will continue to increase oil and gas production, but at a slower rate because of the price decline. We also think exploration & production companies, oil service companies and infrastructure providers will remain the main beneficiaries of this growth.
  • We remain concerned about geopolitical risks related to the Middle East and are carefully watching China after recent stock market volatility for any impact on its economy and energy demand.

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. 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. Investing in companies involved in one specif ed sector may be more risky and volatile than an investment with i greater diversification. 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. Investing in natural resources can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments; and the cost assumed by natural resource companies in complying with environmental and safety regulations. Investing in physical commodities, such as gold, exposes the Fund to other risk considerations such as potentially severe price fluctuations over short periods of time. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the 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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