Waddell & Reed

Quarterly Fund Commentary

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

Robert Nightingale

Market Sector Update

  • Across the globe, markets sold off heavily in August as fears of a hard landing in China and uncertainty regarding a U.S. Federal Reserve (Fed) rate increase spiked. The broad European and U.S. markets posted negative performance, down more than 5%. In Europe, the energy and materials sectors performed poorly, primarily due to the downturn in Chinese economic growth.
  • The strong dollar and weak emergingmarket growth are dampening reported earnings for large cap U.S. multinationals and hurting stock performance.
  • The European Central Bank (ECB) continues to implement aggressive policies and has stated it will increase quantitative measures if inflation remains below target levels. The objective is to stimulate business and consumer confidence in hopes of accelerating a slow-growth economy. In our opinion, the ECB’s monetary posturing is the glue stabilizing the European Union (EU) markets. We believe the Bank of England will raise rates shortly after the Fed increases its key interest rate in an effort to combat building wage pressures.
  • In August, China surprised the markets and devalued its currency by a little more than 4% over three days.

Portfolio Strategy

  • The Fund outperformed the benchmark (before the effects of sales charges) for the quarter. Strong stock selection – particularly in industrials, materials, and telecommunication services – aided performance and more than offset poor stock selection in utilities and financials. U.S. dollar currency hedges to the Australian dollar helped performance as that currency weakened relative to the U.S. dollar.
  • As the quarter progressed, we became more defensive in our positioning due to hard landing concerns in China. The Fund increased its allocation to health care, utilities and reduced exposure to industrials, materials and consumer discretionary. The Fund also increased its exposure to the U.S. and lowered exposure to France and Switzerland.
  • 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 slowing as steady developed-market growth is being offset by 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 Fed will and should begin to raise interest rates by 2016, 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. We believe the May U.K. election resulting in a conservative government will produce needed longterm reforms to reduce the structural deficit. We also believe it will likely create some uncertainty until new government policies are stated and implemented. Investors will watch the upcoming Spanish election closely, wanting to see the continued economic recovery be unharmed by election results.
  • We believe China is in a hard landing and its multi-year rebalancing to a more consumer-based 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.


The opinions expressed in this commentary are those of the Fund's managers and are current through September 30, 2015. 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. Dividend-paying investments may not experience the same price appreciation as non-dividendpaying instruments. Dividend-paying companies may choose to not pay dividends, or dividends may be less than was anticipated.

Risk factors. 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, political or economical conditions affecting the foreign l country, and differences in accounting standards and foreign regulations. These risks are magnif ed in emerging markets. Investing in high-income securities may carry a greater risk of nonpayment of i 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. .

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 f nancial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully before investing.

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