Market Sector Update
- The quarter was marked by two extremes driven predominately by investor attitudes toward monetary policy.
- The Federal Reserve's (Fed) decision to not taper its monthly bond purchases, after leading the market to believe the reduction was going to begin in September, fueled volatility.
- This is a credit fund and our tenets about the type of companies in which we invest remain consistent.
- We use a bottoms-up approach with an emphasis on security selection. We continue to seek out investments in companies that we believe have strong business models, and we believe the strong fundamentals will result in improved credit. When making our investment in companies we look to invest in the part of the capital structure that we believe has the most favorable risk-adjusted returns and attractive relative value.
- We strive to be opportunistic and deploy capital when it is the most advantageous. In this past quarter we saw more dislocation in the bond market, than we did in the loan market so we incrementally adjusted our allocations to take advantage of the weaker pricing in the bond market.
- We view the increased yield from both the underlying Treasury increasing as well as the spread widening, as increasing compensation for similar risk compared with what investors were receiving just months ago.
- We expect the uncertainty from Washington D.C., including both the political fighting and any Fed activity related to monetary policy, to continue to create volatility in the fixed income market.
- We continue to believe an improving economic environment bodes well for credit investing and are seeing signs of the overall credit improvement of companies that are able to reduce leverage and risk.
The opinions expressed in this commentary are those of the Fund’s manager and are current through Sept. 30, 2013. 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. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Loans (including loan assignments, loan participations and other loan instruments) carry other risks, including the risk of insolvency of the lending bank or other intermediary. Loans may be unsecured or not fully collateralized may be subject to restrictions on resale and sometimes trade infrequently on the secondary market. 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.