Waddell & Reed

Quarterly Fund Commentary

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

David P. Ginther, CPA

Market Sector Update

  • U.S. and global equities closed a volatile quarter in negative territory. Crude oil prices recovered slightly from their levels earlier in the year. Commodities prices overall slumped further in the quarter and remained depressed.
  • China devalued its currency in August, ending a decades-long tie to the U.S. dollar and moving to a market-based approach instead of a daily “fixing” by its central bank. The move added to concerns about slower economic growth there and the implications for the rest of the globe.
  • The U.S. Federal Reserve in September decided to leave interest rates unchanged at near zero, citing market volatility and global economic uncertainty. Markets continued to focus on any indicators about the timing of an eventual rate hike.
  • Geopolitical concerns in and around the Middle East continued to unsettle investors. Russia’s actions late in the quarter to intervene in Syria’s civil war further complicated fighting there and the mass movement of refugees into Europe.

Portfolio Strategy

  • The Fund had a negative return for the quarter, in line with the negative return of its benchmark index.
  • The largest detractors to relative performance were the allocation to energy and the stock selections in that sector. Holdings in the energy sector at quarter end totaled about 67% of assets, above the typical allocation. The Fund’s allocation to the industrials sector also was a slight detractor to relative performance.
  • The largest contributors to relative performance were the Fund’s allocation to cash, which ended the quarter at about 9.5%, followed by holdings in the financials 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 back to shareholders via dividends or repurchases. We still have a bias toward energy companies with what we believe are the best balance sheets, best acreage, low-cost production and ability to grow in a lowprice environment.


  • 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 still do not believe short-term price volatility can mask the long-term global demand for oil. We estimate the world is oversupplied by 1.5-2.0 million barrels per day (bpd) and estimate demand growth this year of 1.4-1.5 million bpd, largely driven by lower prices. We think the year-overyear increase in global supply now will start to diminish as the Organization of Petroleum Exporting Countries and U.S. shale output are slowing.
  • While all U.S. shale offers opportunities, much of our focus is on the Permian Basin as the place we think production growth is most likely to continue. The companies in the Permian still are in the early stages of improving efficiency and productivity.
  • We’re seeking companies that we think can survive and even thrive in a low-price environment. We think the valuations of refiners still look attractive and believe U.S. refiners will have a low-cost advantage relative to the global refining market for some time to come.

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