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    Quarterly Fund Commentary


    Ivy Global Equity Income Fund (prospectus)
    March 31, 2016


    Manager(s):
    Robert Nightingale

    Market Sector Update

    • Across the globe, markets were turbulent. Largely, markets receded until mid- February, but then proceeded to climb steadily through quarter end. The U.S. market was a top performer and, within Europe, France and the Netherlands led the way. On the other hand, Italy performed poorly. From a global sector standpoint, energy, utilities and industrials performed the best, while financials and health care performed the worst.
    • Over the quarter, the U.S. dollar weakened approximately 4% versus a basket of other currencies.
    • The U.S. Federal Reserve (Fed) lowered expectations of a March or June rate hike. The Fed seems worried about additional slowing growth in China, Britain leaving the European Union (Brexit), emergingmarket growth and deflationary forces.
    • China’s currency was granted SDR (Special Drawing Rights) status by the IMF. The country also announced it would be adjusting its currency from a dollar peg to a “basket” peg, which should help its competiveness as the U.S. dollar strengthens with rising rates.
    • Amid growing fears of worsening economic conditions, the ECB surprised financial markets and cut interest rates to an all-time low, expanded its moneyprinting program and reduced a key bank deposit rate further into negative territory.
    • As the quarter developed, fears of a global recession slightly faded as stronger economic numbers stabilized global GDP at approximately 3%.

    Portfolio Strategy

    • The Fund underperformed the benchmark for the quarter. Poor stock selection was the main driver of underperformance, though an underweight allocation to the U.S., a relatively strong-performing market, detracted as well. From a stock selection standpoint, financials and utilities were the largest detractors.
    • Partial U.S. dollar currency hedges to the euro, British pound and Australian dollar hurt performance as those currencies strengthened relative to the U.S. dollar.
    • As the quarter progressed, we slightly increased our weighting to more defensive sectors versus the benchmark due to hard landing concerns in China and volatility in credit markets. The Fund increased its allocation to consumer staples and telecommunication services at the expense of industrials and financials. The Fund also lowered its exposure to the U.K., while increasing exposure to the U.S.
    • The Fund’s largest sector overweights include consumer discretionary and telecommunication services, where we continue to find companies we believe provide good dividend yield and growth prospects. In our view, our underweight allocations to energy, information technology and consumer staples tend to have poor fundamentals and high relative valuations as the emerging-market growth engine sputters.

    Outlook

    • We think global economic growth will remain slow and face additional headwinds by slower-than-anticipated emergingmarket growth. We believe monetary policy is likely to remain aggressive for the foreseeable future, but to a lesser extent in the U.S. We think the Fed will continue to raise interest rates in 2016, which will keep the markets on edge.
    • We are concerned about the recent terrorist attacks in Europe and the effects the large refugee influx will have on European politics and the economy.
    • We continue to follow policies stemming from Europe, including reforms and regulation measures from foreign governments and the ECB. We believe the U.K. referendum on remaining in the EU will be close and will put pressure on the currency as the U.K. is running current account and government deficits.
    • We believe China is in a hard landing and its multi-year rebalancing to a more consumer-based economy as well as its anti-corruption 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.

     


    The opinions expressed in this commentary are those of the Fund’s manager and are current through March 31, 2016. 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 not a guarantee of future results.

    Risk factors. The value of the Fund’s shares will change, and you could lose money on your investment. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. 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 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. Dividend-paying 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.

    IVY INVESTMENTS? refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates.

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