Waddell & Reed

Quarterly Fund Commentary

Ivy Global Growth Fund (prospectus)
December 31, 2014

Sarah C. Ross, CFA

Market Sector Update

  • Global markets increased modestly in local currency during the quarter. Positive U.S. equity markets offset modest negative international equity returns due to a more favorable economic backdrop in the U.S. relative to the rest of the world. Equity market volatility continued to increase in the quarter on continued global growth uncertainty and falling oil prices. The U.S. dollar strengthened, while the yen and euro remained weak.
  • Global economic growth has slowed despite a continued policy of central bank easing. European growth remains weak despite multiple easing steps the past few months. Emerging markets, which tend to have more exposure to commodity production, are generally facing weaker growth, currency declines and pressure on commodity prices. The U.S. has been a relative bright spot with solid consumer spending, an improving unemployment rate and relatively strong gross domestic product (GDP) growth versus other parts of the world.
  • During the quarter, consumer discretionary stocks were one of the strongest performing sectors, while energy stocks posted materially negative returns. Commodity prices in energy persistently dropped throughout the quarter, creating significant fear of energy production cuts and negative earnings revisions in the sector.

Portfolio Strategy

  • The Fund outperformed the benchmark (before the effects of sales charges) for the quarter. Increased exposure to U.S. stocks, as well as currency hedging against the yen and euro, both contributed to positive performance. Strong stock selection in technology, healthcare and energy were all positive contributors to performance. In addition, an overweight allocation to technology and consumer discretionary helped drive outperformance. Poor stock selection in industrials and financials, along with an overweight to energy stocks, contributed negatively to performance.
  • We are taking advantage of increased equity volatility by adding positions in strong structural growth companies throughout the world that we feel have sustainable competitive advantages. Despite the recent relative outperformance of U.S. equities, we continue to see opportunities for increased U.S. exposure as valuations for some U.S. growth stocks are relatively more attractive than international competitors.
  • We also see opportunities to add to positions in European and Japanese exporters with strong global brands that benefit from a weakening local market currency. We expect continued U.S. dollar strength and remain partially hedged against the euro and British pound.


  • We expect continued global growth weakness. While we believe global policy will remain very accommodative, a number of challenges remain that are likely to cause intermittent equity market volatility. This includes political uncertainty in certain regions across the globe, such as in the Middle East, Ukraine and Russia; currency pressures in emerging markets; and, most notably, the impact of lower energy prices on global GDP rates.
  • While we do not expect energy prices to remain at current levels indefinitely, the duration of weakness in commodity prices is uncertain and further pressure and timing of recovery is material to long-term global growth. Inflation across many markets is below target and we expect central bank policy to become easier rather than tighter, with additional easing from the European Central Bank and likely reluctance on the part of the U.S. Federal Reserve to raise rates too early.
  • We believe the likelihood of further price/earnings expansion is limited and expect market outperformers to be driven by earnings growth. Despite uncertainties in the market, we believe our portfolio of strong global growers with sustainable competitive advantages and unique products serving large end markets can continue to drive shareholder value over time.


Effective January 1, 2015, the Ivy International Growth Fund is broadening its investment mandate from international to global, gaining access to investment opportunities in any country or region across the globe. The Fund will be changing its name to acknowledge this new investment approach. Going forward, Ivy International Growth Fund will be known as Ivy Global Growth Fund.

Portfolio Manager Sarah Ross took over the management of the Ivy International Growth Fund on August 4, 2014.

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.

Risk factors. As with any fund, the value of the Fund’s shares will change, and you can 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 l economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.

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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