Waddell & Reed

Quarterly Fund Commentary

Ivy Global Income Allocation Fund (prospectus)
September 30, 2014

W. Jeffery Surles, CFA

Market Sector Update

  • International markets underperformed during the quarter and returns were dampened by U.S. dollar appreciation relative to most currencies. In particular, the U.S. dollar impacted performance of the Fund’s global fixed-income benchmark, which was down more than 300 basis points during the quarter despite a global rally in interest rates.
  • Markets have become more volatile as the certainty of U.S. monetary policy comes to an end as the Federal Reserve (Fed) ends asset purchases and eventually contemplates when to hike interest rates.

Portfolio Strategy

  • The Fund slightly outperformed (before the effects of sales charges) its blended benchmark during the quarter, driven by outperformance of the Fund’s fixedincome portfolio. Both of the Fund’s global benchmarks materially underperformed common broad-based U.S. indices.
  • We view the pullback in international markets as an opportunity, and therefore, have incrementally been increasing our international equity exposure. We recognize growth in many international markets to likely be challenging, but we believe valuations are currently at a significant discount and global central banks (outside the U.S.) are likely to become the incremental drivers of liquidity.
  • Recently, the Fund has been holding higher levels of cash in an effort to take advantage of dislocations presented by volatility in credit markets, both in the U.S. and within the European high yield sector.
  • The Fund has become more focused on individual security selection, which is likely to become more important in a slow growth, low-inflation environment.


  • We expect both growth and inflation to stay low for the remainder of 2014 and into 2015. Because of this outlook, we believe central banks globally will remain accommodative. As a result, we remain confident to position the Fund to be near fully invested, though we admit the return profile going forward is likely lower.
  • Fixed-income markets are likely to experience heightened volatility, given uncertainty regarding Fed policy. While interest rate hikes are on the way, in our view it is unlikely the Fed increases rates before the middle of 2015. When the Fed does begin to normalize policy, we expect it to do so gradually. We expect longer-term interest rates to remain at fairly low levels, given subdued inflation levels and low growth.


The opinions expressed in this commentary are those of the Fund’s manager and are current through Sept. 30, 2014. 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. 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 interestrate 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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