Waddell & Reed

Quarterly Fund Commentary

Ivy Global Equity Income Fund (prospectus)
June 30, 2015

Robert Nightingale

Market Sector Update

  • In general, international markets underperformed during the quarter in local currency but were aided in U.S. dollar terms by the rebound of the euro and British pound.
  • While confidence in a steady European recovery began to take shape during the first quarter, it subsided in the second quarter, as Greece became a political mess. An agreement between Greece and the European Union (its creditors) was reached just after the quarter ended, which appears to have established a framework for what needs to be done to secure a roughly 85 billion euro bailout.
  • Asian markets had mixed performance versus the U.S. in local currency. The Australia market fell due to perceived slower gross domestic product (GDP) growth due to weaker Chinese commodity demand. On the other hand, Japan rallied on further evidence of better corporate governance pushed by Abenomics and a stronger economy. The Chinese market jumped due to money flowing to stocks versus real estate as well as margin borrowing to leverage stock bets on the local market.
  • In the second quarter, U.S. growth looks to have rebounded as expected. The strong dollar is dampening reported earnings for large-cap U.S. multinationals, hurting stock performance.

Portfolio Strategy

  • The Fund underperformed the benchmark for the quarter. U.S. dollar currency hedges to the euro and the British pound hurt performance as those currencies strengthened relative to the dollar. This offset solid stock selection – particularly in financials and consumer discretionary – that aided performance. The Fund’s overweight allocations to the poor-performing industrials sector hurt performance as recovery hopes faded.
  • From a country allocation standpoint, the Fund’s large underweight position to the relatively better-performing U.S. hurt performance. Solid stock selection outside the U.S., specifically in the U.K. and Australia, offset poor selection in the U.S.
  • Over the quarter, the Fund increased its allocation to consumer staples and consumer discretionary, and reduced exposure to industrials. The Fund also increased its exposure to the U.K. and lowered exposure to Japan after a strong run.
  • The Fund’s largest sector overweights include consumer discretionary and industrials, where we continue to find companies we believe provide good dividend yield and growth prospects. In our view, our underweight allocations to energy and consumer staples tend to have high relative valuations and poor fundamentals as the emerging-market growth engine sputters.


  • We think global economic growth is steady with developed market growth offsetting slowing growth in emerging markets. We also believe monetary policy is likely to remain aggressive for the foreseeable future, but to a lesser extent in the U.S. and the U.K. We think the U.S. Federal Reserve will and should begin to raise interest rates by fall 2015, which will keep the markets on edge.
  • We continue to follow policies stemming from Europe, including stimulation, reforms and regulation measures from foreign governments and the ECB. It is our belief that the May U.K. election resulting in a conservative government will produce needed long-term reforms, but will also likely continue to create uncertainty until new government policies are stated and implemented.
  • We believe China’s multi-year rebalancing to a more consumerbased economy as well as its anticorruption efforts need to be monitored. In our view, these changes will have lasting impacts throughout the global marketplace in shaping GDP growth, commodity prices and multinational profits based in Europe and the U.S.
  • We will continue to target economic recovery sectors around the world and stocks that we believe best capture our economic outlook. We remain cautious on commodity-sensitive areas until we see emerging markets reaccelerate.


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. Dividend-paying investments may not experience the same price appreciation as non-dividend-paying instruments. Dividend-paying companies may choose to not pay dividends, or dividends may be less than was anticipated.

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 f uctuations, l 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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