Waddell & Reed

Quarterly Fund Commentary

Ivy Global Growth Fund (prospectus)
September 30, 2015

Sarah C. Ross, CFA

Market Sector Update

  • While developed markets, including the U.S. and parts of Europe were outperformers, returns were still solidly in negative territory as global growth concerns increased during the period. Emerging-market economies were particularly hard hit.
  • Energy and materials were two of the weakest sectors on deteriorating commodity prices, while consumer staples, information technology and consumer discretionary outperformed.
  • China is arguably one of the most important end markets for many global growth companies regardless of country of domicile. For many multinationals, China has been one of the largest contributors to growth over the past three years, even in cases where the U.S. and Europe are a significant portion of base revenues and earnings. As China growth continues to slow, the impact is felt across many industries around the globe. The negative impact on industrials has been pronounced as fixed-asset investment remains weak.
  • Growth in the U.S. remains slow but with enough risks that the U.S. Federal Reserve has held back on its plan to raise rates. The environment is murkier than a few months ago, as evidenced by weakening jobs data as well as continued negative data points surrounding industrial production.

Portfolio Strategy

  • The Fund outperformed the benchmark (before the effects of sales charges) for the quarter. The decision to underweight energy and materials, which both materially underperformed in the period, was a positive contributor. The Fund’s underweight allocation to consumer staples and utilities negatively impacted performance during the period as these two defensive sectors outperformed in a down market.
  • Stock selection was a negative contributor to performance with weakness in health care, financials and information technology. This was partially offset by strong stock selection in consumer discretionary.
  • We continue to focus on companies with quality earnings we believe can sustain strong growth even in a slowing macro environment. We have added to positions in areas that have been under pressure due to the market pull back that we have continued high conviction in earnings growth. Some of these include secular growth companies benefitting from the shift to global payments, increased demand for online retailing and productivity enhancing technology.
  • We have trimmed some health care names given increased political rhetoric around drug pricing but still remain overweight consumer discretionary, information technology and health care. Our trimming in health care is more focused on multiple compression versus earnings risk.


  • The macroeconomic environment remains challenging. We believe industrial production is likely to remain weak, with more opportunities in the portfolio on the consumer side in pockets that can outperform even in a slowing environment.
  • While China growth fears are real, we believe non-luxury spending by the Chinese consumer may hold up better than markets expect. Our China exposure is contained to U.S. ADRs and Hong Kong-listed companies with open markets and stable regulatory environments.
  • Our largest portfolio weight remains the U.S. as we find a greater percentage of global growth in this market today. We are cautious on the prospects for Japan given anemic growth and unwillingness on the part of the government to take more aggressive tactics on immigration and employment reform.
  • We expect continued slow economic global growth going forward and believe the market will favor highquality sustainable growers as fewer parts of the global economy are expanding.

In November of 2014, the Ivy International Growth Fund expanded its investment strategy to include stocks of U.S. companies. Effective January 1, 2015, the Fund changed its name to the Ivy Global Growth Fund to ref ect its global focus. Performance prior to November 2014 ref ects the Fund’s former international strategy and may have differed if the Fund’s current strategy l l that includes investing globally had been in place. 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 September 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 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 fluctuations, political or 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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