Waddell & Reed

Quarterly Fund Commentary

Ivy Global Bond Fund (prospectus)
June 30, 2014

Mark G. Beischel, CFA

Market Sector Update

  • In the U.S., we expect the decline in unemployment and increase in inflation will spark speculation on when the Federal Reserve (Fed) will raise interest rates.
  • The Bank of England (BOE) could be the first central bank to raise interest rates this year as signs of a property bubble are a cause of concern for Gov. Mark Carney. The bank is going to try and slow down housing appreciation through different macro-prudential policie,s but we believe in the end it will need to adjust its policy rate.
  • The European Central Bank (ECB) confirmed market expectations by reducing interest rates and imposing a negative 10 basis-point interest rate on excess reserves held by the bank. It also announced another lending program and is examining an asset-backed purchase program.
  • The Bank of Japan (BOJ) will increase its asset-purchase program as a result of the slower growth from the value added tax (VAT) hike during April. We believe the BOJ will remain on the sidelines if the economy does rebound.If the economy does not improve, we expect the bank to be more stimulative.
  • We believe China will achieve its projected 7.5% growth rate this year. China continues to go through its structural changes that are depressing economic growth.

Portfolio Strategy

  • We continue to seek 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 because of structural changes in the capital markets. We will be opportunistic in allocating that capital when dislocations in the market arise.


  • The U.S. economy is growing at a rate close to its underlying trend, or about 2% to 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 the second half of 2014, we expect short-term interest rates to remain low overall as the Fed keeps the policy rate low for an extended period of time.
  • We believe that developed markets such as the United States, Japan, and the United Kingdom are likely to grow a little more in 2014 than they did in 2013. The eurozone’s growth looks to be stable.
  • We expect longer Treasury rates will be more volatile and subject to market emotions regarding fiscal and monetary policies. The Fed’s decision on reducing its pace of asset purchases was predicated on improving economic data. We are looking forward for the Fed to engage in further reductions over the remainder of 2014 as long as the economic data supports it.
  • The U.S. continues to be a safe haven globally, and will continue to attract funds from outside the U.S. In this scenario, there will be 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 manager and are current through June 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 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 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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