Waddell & Reed

Quarterly Fund Commentary

Ivy High Income Fund (prospectus)
September 30, 2014

Chad Gunther

Market Sector Update

  • Spreads between high-yield bonds and Treasuries widened around 90 basis points during the quarter. It is our view that the widening was not due to market fundamentals, but instead related to numerous factors including geopolitical events, technical factors, the macroeconomic outlook and Federal Reserve comments.
  • Issuance picked up significantly after Labor Day, with $25 billion in new issuance priced into the market during the first two weeks after the holiday, according to Wells Fargo data. Conversely, a total of only $4.5 billion was priced into the market during the entire month of August.

Portfolio Strategy

  • Our investment process is based on research of the individual opportunities. We seek good risk/reward characteristics, particularly related to companies that we believe the market does not understand or which generate outsize yield related to their price.
  • We believe that credit selection is the basis for above-average performance through a credit cycle and believe it to be preferable versus attempting to time the market or place macro bets.


  • We believe that the high-yield space has become more attractive from a valuation perspective. Wider spreads have created an opportunity to put new money to work in high-yield, which we believe offers the best value in the credit space.
  • We will look to reduce our first lien loan exposure and move into what we perceive to be better opportunities as they become available in the market.
  • We expect there may be more volatility in the market due to interest rate speculation as the Federal Reserve concludes its stimulus program known as quantitative easing.


The opinions expressed in this commentary are those of the Fund’s manager and are current through September 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. 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 f nancial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully i before investing.

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