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    Quarterly Fund Commentary

    Ivy Asset Strategy Fund (prospectus)
    December 31, 2015

    Cynthia P. Prince-Fox
    Chace Brundige, CFA

    Market Sector Update

    • The S&P 500 Index recorded its first annual decline since 2008. The U.S. Treasury 20-year yield reached 2.27% by quarter end.
    • The U.S. Federal Reserve (Fed) increased short-term rates in December and stated its intent for more rate hikes in 2016 if economic data allow. Many other central banks remained in an easing, economic-stimulus mode as the year ended. We remain concerned about the market and economic impact when central bankers face the possibility that the policy tools relied upon historically to support and stimulate growth have lost their potency.
    • China’s currency was granted Special Drawing Rights status by the International Monetary Fund. China also announced it will adjust its currency from a dollar peg to a trade-weighted “basket” of currencies, believing it was a better reflection of the yuan’s valuation. The government also gradually weakened the currency further throughout December.
    • Commodity prices fell again, with oil unable to hold brief moves higher.

    Portfolio Strategy

    • The Fund had a positive return for the quarter (before the effect of sales charges) but trailed the positive return of its all-equities benchmark index.
    • The largest allocation was to equities at about 64%. The Fund had about 11.2% in fixed-income securities, about 3.4% in gold bullion and about 21% in cash. Top sectors were consumer discretionary, information technology and health care.
    • Microsoft was the largest contributor to performance followed by Galaxy Entertainment and AIA Group. We exited Galaxy Entertainment in the quarter. The largest detractor was our total investment in Formula One (parent company listed as Delta Topco Ltd.), based on updated forecasts; followed by Media Group Holdings (lower valuation for boxing investment); and Plains Group Holdings (energy).
    • We increased the cash allocation and maintained the fixed-income allocation. We still believe a more defensive position and additional liquidity are prudent. We kept exposure to companies we think have stronger prospects for growth and increased it to those tied to the U.S. economy.


    • We think the unintended consequences of global central bank policies are a primary risk and expect increased market volatility as a result. The headwinds include a relatively stronger U.S. economy, tighter Fed and stronger U.S. dollar; increasing leverage; slowing growth in China and the government’s market intervention; geopolitical events; low inflation; and questions around fixed-income liquidity, particularly in high yield.
    • We think corporate growth will be challenged and are focused where we think growth will occur. Many 2015 holdings remain core holdings in 2016. Our highest conviction names are in secular growth, with strong balance sheets and the option of share repurchases, dividends or acquisitions.


    The opinions expressed in this commentary are those of the Fund's managers and are current through Dec. 31, 2015. 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.

    Top 10 Equity Holdings as a percent of net assets as of 12/31/2015: AIA Group Ltd., 2.29%; Microsoft Corp., 2,23%; Home Depot, Inc., 2.18%; Citigroup, Inc., 2.12%; Actavis plc, 2.11%; Coca-Cola Co., 2.05%; Kraft Foods Group, Inc., 1.84%; Cognizant Technology Solutions Corp., Class A, 1.81%; JPMorgan Chase & Co., 1.75%; Delta Topco Ltd., 1.74%

    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. The Fund may allocate from 0 to 100% of its assets between stocks, bonds and short-term instruments of issuers around the globe, as well as investments in precious metals and investments with exposure to various foreign securities. International investing involves additional risks, including currency f uctuations, l political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Fixed-income securities are subject to interestrate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. The Fund may focus its investments in certain regions or industries, thereby increasing its potential vulnerability to market volatility. The Fund may seek to hedge market risk on various securities, increase exposure to various markets, manage exposure to various foreign currencies, precious metals and various markets, and seek to hedge certain event risks on positions held by the Fund via the use of derivative instruments. Such investments involve additional risks, as the fluctuations in the values of the derivatives may not correlate perfectly with the overall securities markets or with the underlying asset from which the derivative’s value is derived. Investing in commodities is generally considered speculative because of the significant potential for investment loss due to cyclical economic conditions, sudden political events, and adverse international monetary policies. Markets for commodities are likely to be volatile and the Fund may pay more to store and accurately value its commodity holdings than it does with the Fund’s other holdings. 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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