Waddell & Reed

    Find an Office or a Financial Advisor

    Check the background of any investment professional or this firm on FINRA's BrokerCheck

    AdvRecruit

    Quarterly Fund Commentary


    Ivy Large Cap Growth Fund (prospectus)
    June 30, 2016


    Manager(s):
    Daniel P. Becker, CFA
    Bradley M. Klapmeyer, CFA

    Market Sector Update

    • Financial markets continued their recent trend of swift and volatile intra-quarter moves during 2Q 2016. Coming off 1Q 2016 where the Federal Reserve signaled a much more gradual move upward in short-term interest rates, it seemed like global currency and fixed-income markets were set to improve, which would have provided a calming effect on the equity markets.
    • The potential for a reduction in capital market volatility came to an abrupt end in late June with the surprise negative U.K. referendum result, which will likely result in the country leaving the European Union. This event, commonly referred to as “Brexit,” produced a huge performance shock to almost all equity market participants.
    • Perhaps the most significant experience of the quarter was the degree of investor panic and movement into assets perceived as safe. Government bond yield curves moved further into negative interest rate territory throughout Europe and Asia, and at the end of the period, almost $14 trillion of government bond principal value had negative interest rates, a very astounding and anomalous figure.
    • Active managers have not performed well given current market anomalies, with less than 10% of large-cap growth managers outperforming year-to-date.

    Portfolio Strategy*

    • Financial markets continued their recent trend of swift and volatile intra-quarter moves during 2Q 2016. Coming off 1Q 2016 where the Federal Reserve signaled a much more gradual move upward in short-term interest rates, it seemed like global currency and fixed-income markets were set to improve, which would have provided a calming effect on the equity markets.
    • The potential for a reduction in capital market volatility came to an abrupt end in late June with the surprise negative U.K. referendum result, which will likely result in the country leaving the European Union. This event, commonly referred to as “Brexit,” produced a huge performance shock to almost all equity market participants.
    • Perhaps the most significant experience of the quarter was the degree of investor panic and movement into assets perceived as safe. Government bond yield curves moved further into negative interest rate territory throughout Europe and Asia, and at the end of the period, almost $14 trillion of government bond principal value had negative interest rates, a very astounding and anomalous figure.
    • Active managers have not performed well given current market anomalies, with less than 10% of large-cap growth managers outperforming year-to-date.

    Outlook

    • We see a large disconnect between global government yield curves and forecasts for economic growth and corporate profits. We expect continued slow, uninspiring gross domestic product growth but nowhere near recession levels.
    • Economic bright spots include low inflation, a peak in the U.S. dollar, and stable or improving conditions in housing, employment and wages. The flight to safety and global search for yield is stronger and more enduring than anticipated, resulting in valuation distortions not seen since 2000. The valuations of yield, low beta and low volatility are all excessive in our view.
    • Conversely, we see opportunities in the characteristics of beta, high growth, value, and dividend growth. We have used the current conditions to add to Fund positions in Allergan, Lam Research Corp., Microchip Technology and FleetCor. The prospect of buying low-growth stocks at lofty valuations does not appeal to us as long as the economy stays out of recession.
    • We continue to pursue a strategy that focuses on the smaller subset of companies with strong business models that originate and are maintained by a high and sustainable level of competitive advantage within their served addressable markets.

    The opinions expressed in this commentary are those of the Fund’s managers and are current through June 30, 2016. The managers' views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Past performance is not a guarantee of future results.

    The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It is not possible to invest directly in an index.

    Risk factors. The value of the Fund’s shares will change, and you could lose money on your investment. Investing in companies involved primarily in a single asset class (large cap) may be more risky and volatile than an investment with greater diversification. 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. 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.

    IVY INVESTMENTS? refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

    Financial Advisor Opportunities
    Corporate Careers