Waddell & Reed

Quarterly Fund Commentary

Ivy Science and Technology Fund (prospectus)
December 31, 2015

Zachary H. Shafran

Market Sector Update

  • The U.S. Federal Reserve raised rates for the first time this cycle despite lackluster economic data. Monetary policy in Europe and Japan remain aggressive, and policy heads suggest they are prepared to do more, though the market was disappointed with European Central Bank (ECB) President Mario Draghi’s tempered announcement during December’s ECB meeting. Expectations were high for a more aggressive response to the current conditions.
  • U.S. technology stocks performed well over the quarter and performed in the top half of all Standard & Poor’s sectors. Internet software and services performed well, while technology hardware storage and peripherals dragged down overall sector performance.
  • China’s currency was granted Special Drawing Rights status by the International Monetary Fund. China changed from a U.S. dollar base for its currency to a “basket” of currencies, which is likely to help its competiveness against the dollar.
  • From a market standpoint, the continued decline in commodity prices is concerning and has materially detracted to our growth outlook for emergingmarket economies.

Portfolio Strategy

  • The Fund underperformed its benchmark primarily due to poor stock selection in the information technology and consumer discretionary sectors as well as an allocation to the poorperforming industrials sector. Additionally, the Fund’s cash position (averaging approximately 5%) detracted in a rising market. The market was notably narrow with the top five companies in the benchmark accounting for the vast majority of the benchmark’s return. Lack of exposure to those holdings or relative underweights negatively impacted Fund performance.
  • The Fund’s allocation to health care was a top contributor to performance for the period. Health care holding Ionis Pharmaceuticals (3.5% of Fund net assets) posted large gains over the quarter and significantly contributed to Fund performance.
  • At quarter-end, the Fund had approximately 77% of assets in U.S. equities, 18% of assets in international stocks, and the residual in cash.


  • For the upcoming year, lingering fiscal concerns and other geopolitical risks have resulted in a rather muted growth outlook. That said, in mixed economic environments, we believe there are many potential investment opportunities – especially in scarce resources, data, mobility and health care – around the world.
  • We believe there will be a modest improvement in capital spending trends, and we are looking for a continuation of an active mergersand- acquisition environment.
  • As always, we will carefully monitor the macroeconomic environment, but our focus remains primarily on security-specific fundamental research. Going forward, we believe this attention to bottom-up research, coupled with the innovation and transformation under way across the globe, will continue to provide investment opportunities for the Fund.



The opinions expressed in this commentary are those of the Fund’s manager and are current through December 31, 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 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. Because the Fund invests more than 25% of its total assets in the science and technology industry, the Fund’s performance may be more susceptible to a single economic, regulatory or technological occurrence than a fund that does not concentrate its investments in this industry. Securities of companies within specific industries or sectors of the economy may periodically perform differently than the overall market. In addition, the Fund’s performance may be more volatile than an investment in a portfolio of broad market securities and may underperform the market as a whole, due to the relatively limited number of issuers of science and technology related securities. Investment risks associated with investing in science and technology securities, in addition to other risks, include: operating in rapidly changing fields, abrupt or erratic market movements, limited product lines, markets or financial resources, management that is dependent on a limited number of people, short product cycles, aggressive pricing of products and services, new market entrants and obsolescence of existing technology. 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.

Financial Advisor Opportunities
Corporate Careers