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    Quarterly Fund Commentary


    Ivy Managed International Opportunities Fund (prospectus)
    March 31, 2016


    Manager(s):
    Michael L. Avery

    Market Sector Update

    • The year and quarter got off to a volatile start, with the S&P 500 Index correcting by over 10% and then ending the first quarter up 1.35%. The U.S. Treasury 10-year yield also was choppy, at one point rallying to yield 1.67% before ending the quarter at 1.98%, below where it started the year.
    • The gyrations in markets may in part be a response to the U.S. Federal Reserve (Fed)’s increase of short-term interest rates by 0.25% in December 2015 after seven years at zero, along with stimulative changes in China’s policy. Fed Chair Janet Yellen acknowledged the risks to the global economy, despite the Fed’s desire to normalize rates. Japan embarked on negative rates in January and the European Central Bank further cut interest rates and expanded its quantitative easing program again.
    • The world’s currency markets were unsteady as the U.S. dollar was broadly lower during the quarter versus its major trading partners and many emerging market currencies after Yellen’s comments. The weaker dollar is likely to reduce the currency headwind for U.S. multinational companies and allow emerging markets a respite from sustained weakness.

    Portfolio Strategy

    • The Fund had a negative return for the quarter, as did its benchmark index. The Fund's performance largely reflected the negative returns of four of the underlying funds during the quarter and the allocation weighting to them.
    • The Fund allocated the largest percentage of assets to the underlying Ivy International Core Equity Fund at about 29%, nearly unchanged from the prior quarter, for its exposure to international markets. The allocation to Ivy Global Growth Fund also was nearly unchanged at about 26%, maintaining wide exposure to global markets overall. The allocation to Ivy European Opportunities Fund was about 19%, down from 20% in the prior quarter, and Ivy Global Income Allocation Fund was about 16% from 15% in the prior quarter. The allocation to Ivy Emerging Markets Equity Fund was unchanged at about 10%.
    • Allocations in general reflected the slowing economic growth across emerging markets, led primarily by China, along with a theme focused on the rising discretionary incomes of consumers in many of these countries.
    • About 69% of the portfolio was invested in foreign equities at quarter end and 19% was invested in domestic equities, based on the holdings in the underlying funds.

    Outlook

    • We remain concerned about the fading effects of easier monetary policy combined with slow growth and mounting global leverage.
    • We think the unintended consequences associated with global central bank policies are a primary risk and expect increased volatility as markets attempt to reconcile uncertainties. Headwinds include a relatively stronger U.S. economy, but uncertainty on the timing of additional rate hikes as well as growing global debt.
    • Questions around China's growth prospects remain, although the country's economic data have strengthened recently in response to policy changes to stimulate investment in housing and certain areas within infrastructure.
    • We continue to believe in the long-term growth potential of emerging market consumers. We think the increase in their discretionary income is likely to continue to surpass that of their developed market counterparts. However, we believe the growth rate for consumption will be slower and more dependent on structural reforms.

    The opinions expressed in this commentary are those of the Fund's manager and are current through March 31, 2016. The manager's views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Holdings and weightings are subject to change. Past performance is no guarantee of future results. Past performance is not a guarantee of future results.

    The S&P 500 Index is an unmanaged index of common stocks that generally represents the U.S. stock market. 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. 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 risks are magnified in emerging markets. Investing in a single region involves greater risk and potential reward than investing in a more diversified fund. Fixedincome securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Dividend-paying investments may not experience the same price appreciation as nondividend paying instruments. Dividend-paying companies may choose to not pay a dividend or the dividend may be less than expected. The performance of the Fund will depend on the success of the allocations among the chosen underlying funds. 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.

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