Waddell & Reed

Quarterly Fund Commentary

Ivy Global Equity Income Fund (prospectus)
September 30, 2014

Robert Nightingale

Market Sector Update

  • International markets underperformed during the quarter and returns were dampened by U.S. dollar appreciation relative to most currencies.
  • The European Central Bank (ECB) implemented aggressive policies, taking rates negative and introducing the targeted longer-term refinancing operation (TLTRO) in an effort to inject additional credit into Europe. The objective is to ultimately stimulate loan growth in hopes of restarting a generally moribund economy while preventing possible deflation.
  • The belief that Europe continues on the path to recovery faded as the quarter progressed as economic numbers out of Italy and France were poor, accompanied by signs of weakness from German manufacturing.
  • The U.S. economy rebounded in the second quarter after a slower-thanexpected start to the year and continued its momentum through the third quarter. The U.S. Federal Reserve (Fed) is exiting quantitative easing and looks to raising rates by next summer.
  • Asia has been impacted by continued concerns regarding a slowdown in Chinese GDP (Gross Domestic Product) and its impact on various industries across the globe.


Portfolio Strategy

  • The Fund posted negative performance but outperformed (before the effects of sales charges) relative to the benchmark. Solid stock selection, particularly in materials, consumer staples and financials benefitted performance and more than offset poor stock picking in energy and telecommunications. The Fund’s sector allocation hurt performance. An underweight allocation to health care, a top performing sector, was a main detractor. U.S. dollar currency hedges to select currencies were the largest contributor to absolute and relative performance.
  • As the quarter progressed, we became less confident of European economic stabilization and Asian growth. Over the quarter, the Fund increased its allocation to consumer staples and financials and reduced exposure to consumer discretionary and health care.
  • On a geographic basis, we added to northern Europe and trimmed perceived expensive, lower dividend-paying U.S. health care and utilities holdings. We continue to have an overweight allocation to French stocks as we feel investor sentiment will improve as government reforms roll out over the next 12 months.
  • The Fund’s largest sector overweights include consumer discretionary and financials, where we continue to find companies we believe provide good dividend yield and growth prospects.



  • We believe the U.S. is on a steady economic growth path, with an increase in confidence leading to capital expenditure and hiring growth. In Europe, consumer and investor confidence has fallen due to Russian intervention in Ukraine and Chinese economic slowdown. We think global economic growth is mixed and therefore monetary policy is likely to remain aggressive for the foreseeable future, but to a lesser extent in the U.S. and U.K.
  • Italy and France are currently implementing governmental and private sector reforms in an effort to competitively position their economies on a global scale. However, they are missing their government deficit targets, which will likely lead to a compromise with the European commission – leading to firmer reform targets.
  • We believe China’s multi-year rebalancing to a more consumerbased economy as well as its anticorruption efforts needs to be monitored. In our view, these changes will have lasting impacts throughout the global marketplace in shaping gross domestic product (GDP) growth, commodity prices and multinational profits.
  • In our view, the strongest long-term GDP growth will still occur in emerging markets and the U.S. due to better demographics.


Effective August 4, 2014, Robert Nightingale became the sole portfolio manager of the Ivy Global Equity Income Fund.

The opinions expressed in this commentary are those of the Fund’s managers and are current through Sept. 30, 2014. 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 share 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 fluctuations, political or economical conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. Dividendpaying companies may choose to not pay a dividend or the dividend may be less than expected. 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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