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    Quarterly Fund Commentary

    Ivy Global Income Allocation Fund (prospectus)
    June 30, 2016

    W. Jeffery Surles, CFA

    Market Sector Update

    • A weak May jobs report caused fixed income markets to price at a point where there is an almost zero chance of the Federal Reserve (Fed) hiking interest rates by year-end.
    • The British referendum on European Union (EU) membership caused significant market volatility during the month of June. Financial stocks in Europe were particularly hard hit as lower interest rates, growth prospects and political uncertainty challenged fundamentals.
    • Both the repricing of Fed rate hikes and the British referendum sparked a large rally in global interest rates, which caused most yield curves to flatten significantly. Approximately $ 11.7 trillion of debt had negative yields as of quarter-end.
    • While the U.S. dollar resumed its rise vs developed market currencies during the quarter many emerging market (EM) currencies bucked the trend and performed well during the quarter.

    Portfolio Strategy

    • We were not expecting a ‘leave’ vote to result from the British referendum and as a result the fund significantly underperformed its blended benchmark during the quarter. The fund was overexposed to domestic United Kingdom (U.K.) names, given U.K. gross domestic product growth had been among the strongest-growing developed market economies. We also had particularly poor stock selection in the European financial space during the quarter.
    • All of the underperformance came from the equity portfolio. The fixed income portion of the fund outperformed its benchmark, and asset allocation was largely neutral to performance, which speaks to the magnitude of which the equity portion of the fund underperformed.
    • We remain slightly overweight fixed income to the blended benchmark and are biased towards slightly increasing that weight. We continue to be focused on increasing credit quality within the fixed income portfolio. On the equity side, we have added to names in the technology space and slightly taken down European exposure, given the increased uncertainty around growth and political stability in the region following the U.K. referendum.


    • We are expecting the major developed market central banks outside the U.S. (Bank of Japan, European Central Bank, Bank of England) to embark on additional unconventional monetary policy measures as the global growth outlook looks increasingly challenged.
    • Emerging markets have regained footing as commodities stabilized and depreciated currencies helped to restore competitiveness. We are no longer actively reducing EM exposure and have selectively added a few U.S. dollardenominated EM fixed income securities.
    • We would expect interest rates to stay low for some time given the global backdrop and are increasingly concerned about the challenging global growth outlook being a risk to equity market multiples.


    The opinions expressed in this commentary are those of the Fund’s manager and are current through June 30, 2016. 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.

    Diversification and asset allocation are investment strategies that attempt to manage risk within your portfolio but they does not guarantee profits or protect against loss in declining markets.

    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 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.

    IVY INVESTMENTS? refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

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