Quarterly Fund Commentary
Ivy Science and Technology Fund
September 30, 2014
Zachary H. Shafran
Market Sector Update
- U.S. technology stocks performed
relatively well for the period and in the top
quarter of all Standard & Poor’s sectors.
Internet software and services, followed
by technology hardware storage and
peripherals, led the tech sector, while
semiconductors and application software
dragged down overall sector
- The U.S. economy continues to exhibit
stable growth, albeit at low levels, with
persistently encouraging trends in
employment and growth in the housing
- International markets underperformed
during the quarter and returns were
dampened by U.S. dollar appreciation
relative to most currencies.
- From a central bank standpoint, the
European Central Bank (ECB)
committed to further aggressive actions
– this time to expand their balance sheet
by 1 trillion Euros. This, coupled with the
U.S. Federal Reserve’s continued
tapering and marginally more
aggressive posture to raising rates,
fueled the stronger U.S. dollar.
- The Fund posted negative absolute
returns and underperformed relative to
the benchmark for the period. Poor stock
selection in information technology was
the main detractor to performance for
the period, with holdings Cree Inc. and
Aspen Technology Inc. (3.4% and 3.0%
of Fund net assets, respectively) posting
the largest losses.
- The Fund’s “applied science and
technology” investment approach
benefitted performance as the Fund’s
allocation to health care, a sector not
included in the benchmark, was the top
contributor to performance. Health
care holding Vertex Pharmaceuticals
(4.2% of Fund net assets) enjoyed
substantial stock appreciation resulting
from positive results from a late-stage
cystic fibrosis treatment shown to
significantly improve patient lung
function and, as a result, was the top
contributor to Fund performance for the
- The Fund maintains its broad allocation
across sectors – approximately 69% in
information technology, 16% in health
care, 8% in industrials, 3% in consumer
discretionary, and smaller amounts in
materials, telecommunication services,
financials and utilities.
- At quarter-end, the Fund had
approximately 74% of assets in U.S.
equities, 20% of assets in international
stocks, and the residual in cash.
- Despite remaining risks around the
globe, we are generally positive about
the path of economic growth. We
broadly expect science and technology
stocks to perform well through the
remainder of 2014.
- In mixed economic environments, we
believe there are many potential
investment opportunities – especially
in scarce resources, data, mobility and
biotechnology – around the world that
we will be able to take advantage of
given our geographic, sector and
market cap flexibility.
- As always, we will carefully monitor
the macroeconomic environment, but
we continue to focus on bottom-up
fundamental security analysis when
seeking investment opportunities.
The opinions expressed in this commentary are those of the Fund’s managers and are current through Sept. 30, 2014. 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 no guarantee of future results.
Risk factors. As with any mutual fund, 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 specified sector may be more risky and volatile than an investment
with greater diversification. These and other risks are more fully described in the Fund's 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.