Waddell & Reed

Quarterly Fund Commentary

Ivy Global Income Allocation Fund (prospectus)
December 31, 2013

John C. Maxwell, CFA
W. Jeffery Surles, CFA

Market Sector Update

  • Equities continued to provide superior returns during the quarter, with the Fund’s equity benchmark, the MSCI World High Dividend Yield Index, rising more than 6%. On the other hand, most broadmarket bond indices posted flat or slightly negative performance.
  • The Federal Reserve (Fed) made its long-awaited decision in December to begin tapering asset purchases. As long as economic data doesn’t disappoint, we expect further tapering of the large scale asset purchase program.
  • The Fed was not the only central bank to take policy action during the quarter. The European Central Bank (ECB) cut its policy rate in November, and we expect the ECB to eventually be forced to take additional monetary policy action in an effort to support the ongoing recovery in Europe.

Portfolio Strategy

  • The Fund outperformed its blended benchmark (before the effects of sales charges) for the quarter. Asset allocation (the Fund’s overweight position to the relatively strong performing equity market) and outperformance in the fixed-income portfolio were the main drivers of performance. Within the fixedincome portfolio, further overweighting credit and mitigating interest rate volatility were relative contributors.
  • The fixed-income portfolio remains credit heavy in an effort to mitigate the potential effects of rising rates on returns. We have established a large position in subordinated bank capital, mainly among the European banks, as we try to benefit from accelerating growth in Europe.
  • Our commitment to overweight equities remains. At this point, our asset allocation is driven primarily by our dislike for fixed-income markets rather than our enthusiasm for equity markets. In our view, bond markets remain relatively expensive and aspects of the fixed-income market look particularly vulnerable.
  • In the equity portfolio we are overweight financials and underweight consumer staples, healthcare and materials. Geographically, we continue to be overweight Europe and Japan at the expense of the U.S. and Canada. The implementation of currency hedging continues mainly as a way to reduce volatility within the Fund.


  • We maintain our long-standing preference towards the equity markets in the U.K. and Europe within the highdividend- yield area. Valuations and yields in both markets are more compelling than what we can find in other developed markets, such as in the U.S. Our overweight position in Japan is driven by the Bank of Japan’s aggressive monetary policies, which we believe will continue to buoy Japan’s equity markets.
  • We remain relatively cautious on emerging markets, especially within the fixed-income space. In our view, emerging-market fixed income remains relatively expensive and vulnerable to the effects of Fed tapering. While emerging-market equities have significantly underperformed their developed market counterparts, we are still hesitant at this point to add exposure in countries with negative current accounts and dwindling foreign investment flows.


The opinions expressed in this commentary are those of the Fund’s managers and are current through December 31, 2013. 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.

MSCI World High Dividend Yield Index is designed to reflect the performance of equities excluding higher than average dividend yields with higher-than-average dividend yields that are both sustainable and persistent.

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. 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. 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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