Waddell & Reed

Quarterly Fund Commentary

Ivy Global Bond Fund (prospectus)
June 30, 2015

Mark G. Beischel, CFA

Market Sector Update

  • We believe that the U.S. economy is continuing to rebound from the first quarter slowdown. We expect consumption growth, equipment investment, and residential construction will continue their upward trends.
  • Inflation has generally continued to surprise on the downside. Although wage growth is still generally subdued in the U.S., we believe inflation and market developments remain on track for a first Federal Reserve (Fed) rate hike in September 2015.
  • We believe that, for now, contagion to the rest of Europe from the Greek crisis is likely to be contained. The longer-term viability of the common currency will depend on how the creditors deal with the rogue country.
  • The Chinese economy has weakened because of a downturn in the residential real estate sector and slower growth of capital spending. Concerns with the use of leverage in the Chinese stock market have created tremendous volatility that could impact consumption and growth going forward. Officials now speak about a “new normal” of slower growth, but they would like to hold growth close to 7%.

Portfolio Strategy

  • We continue seeking opportunities to reduce the volatility in the Fund.
  • We are maintaining a low-duration strategy for the Fund as it allows us a higher degree of certainty involving those companies in which we can invest.
  • We continue to focus on maintaining proper diversification for the Fund.
  • We look for opportunities to make longterm investments in foreign currencies in certain emerging markets should they weaken versus the dollar.
  • We continue to hold a higher level of liquidity (patient capital) because of structural changes in the capital markets. We will be opportunistic in allocating that capital when dislocations in market arise.


  • The U.S. economy is growing at a rate close to its underlying trend, or about 2.5%. Unfortunately, it is not growing quickly enough to use up excess capacity that has accumulated since the beginning of the crisis several years ago.
  • Given our expectation of slow growth in the developed world in 2015, we expect short-term interest rates to remain low overall as the Fed keeps the policy rate low for an extended period of time. Developed markets such as the U.S., Japan, and the United Kingdom are likely to grow a little more in 2015 than they did in 2014. The market is expecting growth on the margin in Europe.
  • However, we believe longer Treasury rates will be more volatile and subject to market emotions regarding fiscal and monetary policies.
  • Wall Street dealer incentives to carry high inventory levels of corporate bonds have been reduced by higher capital requirements; therefore making the bonds more expensive to hold. As a result, market liquidity has been reduced and there are more opportunities for dislocations in the corporate bond going further.
  • The U.S. continues to be a safe haven globally, and we believe will continue attracting funds from outside the U.S. In this scenario, we expect opportunities to make long-term investments in foreign currencies in certain emerging markets should they weaken versus the dollar.


The opinions expressed in this commentary are those of the Fund’s managers and are current through June 30, 2015. The managers’ 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 f uctuations, l political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. 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. 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 mutual funds offered by Waddell & Reed, call your financial advisor or visit us online at www.waddell.com. Please read the prospectus or summary prospectus carefully before investing.

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