Waddell & Reed

Quarterly Fund Commentary

Ivy High Income Fund (prospectus)
March 31, 2014

William M. Nelson

Market Sector Update

  • Lower-quality credits continue to perform better than higher quality. Credits rated B and CCC generally outperformed the index while BB credits underperformed. However, this gap amongst ratings was much less pronounced than what we saw in 2013.
  • After ending 2013 with a yield above 3%, Treasury prices rallied in the first quarter, pushing yields lower.
  • Default rates continue to remain low.
  • Issuance is behind last year and it is expected that issuance this year may be down 20% to 25% from 2013.


Portfolio Strategy

  • We have a bias toward companies that would benefit – but are not reliant on – an improving economy. These companies do not need a lot of top-line growth and should continue to perform in a slow economy.
  • We seek good risk/reward characteristics when making investment decisions, particularly related to companies that we believe the market does not understand or which generate outsized yield related to their price.



  • We believe we are at a pause in major upswings in the Treasury. However, long-term we still believe the bias is in higher rates.
  • We continue to play in the lower quality bond space as we continue to prefer credit risk over the yield risk higher-quality credits may encounter related to rising Treasury yields.


The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 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. 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.

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