Waddell & Reed

Quarterly Fund Commentary

Ivy Global Natural Resources Fund (prospectus)
June 30, 2014

David P. Ginther, CPA

Market Sector Update

  • U.S. equities continued to reach record highs in the broad market indexes during the quarter. Global equities in general also gained.
  • U.S. economic indicators are showing some pickup in activity after a first quarter slowed by severe winter weather. We estimate U.S. gross domestic product (GDP) growth in the second half could reach 2.5 to 3% after being virtually flat in the first half.
  • Crude oil touched a nine-month high as tensions in Iraq drew the world’s attention away from the ongoing unrest in Syria and Ukraine. Agricultural commodities prices fell, driven by higherthan- expected U.S. inventories of corn, soybeans and wheat.
  • Actions by the European Central Bank in June to cut interest rates and make additional low-cost loan funding available for companies with difficulty getting credit supported the economy and markets there. Economic growth in Japan was somewhat stronger than expected, as it was in India where a change in leadership generated optimism about economic reform and growth. China’s economy showed signs of slight slowing.


Portfolio Strategy

  • The Fund had a positive return for the quarter and finished above its benchmark index (before the effect of sales charges).
  • Energy again was the largest sector in the Fund, followed by materials, and we remain overweight in energy versus the index. Top contributors to performance in the quarter were spread across the energy industry, with key performers in the equipment & services and storage & transportation segments. Positive security selection in the energy sector contributed to the quarter’s results.
  • We continue to have a bias in the Fund toward growth companies, particularly in the exploration & production and equipment & services segments. We look for low-cost producers with quality assets and management teams that are careful stewards of capital. Overall, we continue to seek energy companies that are gaining the benefit of past capital expenditures over those with new costs for investment and exploration.
  • We still see opportunities in oil and gas producers with exposure to shale basins, services companies with North American exposure and U.S. refiners because of their cost advantage.



  • We expect slow economic growth to continue worldwide this year. Global commodities prices still are weak as supplies remain at high levels without a significant increase in demand. We think this will continue until there is stronger global economic growth.
  • Emerging markets have not significantly increased their demand for commodities, given their slow economic activity, and inflation remains low in many. While the prospects for growth have improved in several emerging countries, we think economic improvement in developed countries will provide needed support.
  • We think there will be continued growth in U.S. oil and gas production in the medium term, based in part on the continued expansion in shale fields and improvements in related technology. We believe exploration & production companies, oil service companies and infrastructure providers may be the main beneficiaries of potential expansion in oil production.
  • We still think natural gas prices are likely to remain in their current range for the foreseeable future, as demand fundamentals have not changed and supplies in the U.S. remain adequate for demand. We think U.S. natural gas exports are likely to grow over the next several years, but this is unlikely to have any effect on domestic prices in the near-term.


The opinions expressed in this commentary are those of the Fund’s manager and are current through June 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. Investing in companies involved in one specified sector may be more risky and volatile than an investment with 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.

Financial Advisor Opportunities
Corporate Careers