Waddell & Reed

Quarterly Fund Commentary

Ivy Global Income Allocation Fund (prospectus)
March 31, 2015

W. Jeffery Surles, CFA

Market Sector Update

  • The European Central Bank decided to embark on a full-scale quantitative easing program, implementing a broad-scale asset purchase program.
  • Quantitative easing expectations drove higher equity returns in foreign markets, particularly in Europe. Interest rates dropped further around the globe, and a record amount of sovereign debt now trades with negative interest rates.
  • The U.S. dollar appreciated sharply as the potential divergences in central bank policies became more apparent. While the U.S. is looking to exit quantitative easing programs and lift interest rates from the zero bound, central banks globally continue to increase stimulus measures.

Portfolio Strategy

  • Performance during the quarter was strong, with both the equity and fixedincome portfolios outperforming their respective benchmarks (before the effects of sales charges) for the quarter. Currency hedging provided an additional benefit to performance as the U.S. dollar remained strong.
  • While we continue to currency hedge, the strategy has been reduced given the magnitude of the U.S. dollar move. We also think it is becoming increasingly difficult for the U.S. Federal Reserve (Fed) to raise rates significantly given the divergences in central bank policy globally.
  • Our overweight in equities is being increased slightly. Monetary policy remains favorable globally for rising asset prices, while interest rates continue to fall, making the return prospect for fixed-income instruments more challenging. Dividend yields of most global equity indexes exceed the corresponding 10-year government bond yield, making a compelling yield case for equities.
  • We continue to maintain the Fund’s overweight to international equities – the largest relative overweight in the portfolio. This exposure is led by Europe, where leading economic indicators are showing improvement; the euro has depreciated significantly; and the economy is benefiting from lower energy prices.


  • We expect Gross Domestic Product (GDP) growth in Europe to be revised upward over the first half of 2015. We think this will continue to be supportive of the ongoing European recovery, which is being further fueled by an aggressive central bank. If growth does improve, we think material earnings surprises among European companies are to be expected. The economy has been mired in recessionary conditions for years, and margins are still well below peak.
  • We are slightly more constructive on our stance towards emerging markets. While we think it is still early to add material exposure to the asset class, we are no longer looking to actively reduce current portfolio positions. Emerging-market assets look more appropriately priced for a challenging economic scenario. Some emergingmarket economies, particularly China, have shown signs they may be willing to start re-stimulating their economies.


The opinions expressed in this commentary are those of the Fund’s manager and are current through March 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. International investing involves additional risks including currency f uctuations, political or economic conditions l 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 interest-rate risks 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 non-dividend-paying instruments. Dividend-paying companies may choose not to pay a dividend, or dividends may be less than was anticipated. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Not all funds or fund classes may be offered at all broker/dealers. 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.

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