Waddell & Reed

Quarterly Fund Commentary

Ivy Global Natural Resources Fund (prospectus)
December 31, 2014

David P. Ginther, CPA

Market Sector Update

  • U.S. equities closed the year with gains across the broad market indexes, again reaching record-high levels late in the quarter. Global equities in general also finished the quarter slightly higher.
  • Crude oil prices plunged worldwide, reaching levels not seen since 2009, on forecasts of reduced global demand along with OPEC’s unwillingness to cut production. The decline pressured stocks and raised concerns that the price tumble, if sustained, could stall economic growth in some regions.
  • U.S. economic indicators continued to show steady growth and the U.S. remained the leader among developed countries. Economic growth forecasts for Europe were revised lower in the quarter.
  • Commodities prices declined at an accelerating pace as the year ended, reflecting the low-growth, low-inflation environment around the world as well as a stronger U.S. dollar against most world currencies.

Portfolio Strategy

  • The Fund had a negative return for the quarter and underperformed its benchmark index, which also had a negative return, reflecting the state of commodities markets worldwide.
  • Energy remained the largest sector in the Fund, followed by materials and industrials. U.S. equities dominated the Fund’s holdings in the quarter.
  • The five greatest contributors to performance in the quarter were Shell Midstream Partners, PPG Industries, CME Group, Marathon Petroleum and Tesoro. The five greatest detractors were Halliburton, Weatherford International, Continental Resources, Schlumberger and Freeport-McMoRan.
  • In general, we focus on companies with what we consider good growth profiles, low-cost positions and prudent approaches to cash flow, and the willingness to give 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 have long-term potential for the Fund.


  • We think the U.S. will continue to have steady economic growth and low inflation in 2015, and we expect it to lead the developed countries. We believe economic growth will continue globally, although also at a mild rate.
  • We think commodities remain in a low-demand environment because of the slow pace of the global economy. The prospects for growth have improved in several emerging countries but not to a level sufficient to greatly increase demand.
  • We think global energy demand will continue to grow, although at a slower pace than previously forecast. In our view, lower oil prices will prompt cuts in capital expenditures that in turn will reduce the growth rate of global production. We also think the plunge in crude oil prices is unlikely to be sustainable in the long term.
  • We remain concerned about heightened geopolitical risks related to the Mideast and Russia and believe these will continue to overhang markets and generate uncertainty.


The opinions expressed in this commentary are those of the Fund's manager and are current through Dec. 31, 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.

Top 10 Equity Holdings as a percent of net assets as of 12/31/2014: Schlumberger Ltd., 5.3%; Halliburton Co., 4.2%; Dow Chemical Co., 3.9%; Rio Tinto plc, 3.4%; Baker Hughes, Inc., 3.0%; Suncor Energy, Inc., 2.9%; BHP Billiton plc, 2.8%; EOG Resources, Inc., 2.7%; Canadian Pacif c Railway Ltd., 2.6%; LyondellBasell Industries i N.V., Class A, 2.6%

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.

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