Waddell & Reed

Quarterly Fund Commentary

Ivy Global Real Estate Fund (prospectus)
March 31, 2015

Keith R Pauley, CFA
Stanley J Kraska, Jr
George J Noon, CFA
Matthew Sgrizzi, CFA

Market Sector Update

  • Gross domestic product growth remained at low levels around the globe and monetary stimulus actions have been taken in more than 20 countries. Interest rates turned negative in some instances and remain near historic lows in many countries and inflation remained low.
  • The U.S. and U.K. economies showed consistent economic growth and those in Continental Europe improved. Growth remained relatively weak in most of the Asia-Pacific region, with slowing growth in China a contributing factor.
  • Real estate fundamentals remained generally positive, with healthy demand in some markets and economic growth generally driving incremental demand. New supply was under control in most markets and the better real estate companies found external growth opportunities.
  • The acquisition environment remained difficult because of intense competition for quality assets, with interest in real estate from investors around the world. Property values in many markets were at or above pre-recession levels and capitalization rates continued to compress for prime properties.

Portfolio Strategy

  • The Fund had a positive return in the quarter (before the effect of sales charges) and outperformed its benchmark index. Performance was driven by stock selection in the U.S. and Europe, as well as an overweight position in Hong Kong relative to the benchmark and underweight position in Japan.
  • The Fund’s overweight position to Australia moved to an underweight during the quarter and the underweight to Continental Europe moved to overweight. The market weight positions to the U.S. and Japan moved to underweight, and the U.K. moved to overweight from market weight. Overweight positions to Hong Kong and Canada were increased, as was the underweight to Singapore, and we kept an overweight to Mexico.
  • The Fund’s includes companies we believe offer favorable stock prices relative to their intrinsic and net asset values. It remains well diversified by country, currency and property type. We believe the earnings of companies in the Fund are likely to grow at a somewhat faster rate than those in the benchmark index overall.
  • The Fund’s risk profile remains broadly similar to the global property company investment universe. However, the investments are tilted towards companies we believe have betterquality assets, management teams capable of adding shareholder value and somewhat less leverage.


  • The broad market landscape remains one of low growth, with some developed markets getting stronger and emerging markets slowing. We think lower oil prices support the majority of the world’s consumers.
  • Central banks policies have kept interest rate and inflation expectations low and stable. We think interest rates could increase somewhat later in the year as regional economies improve.
  • In our view, moderate growth is likely in property operating-level earnings of 3%-4% on average over the next few years. We think global real estate companies may produce earnings growth per share of about 7% per year on average through 2018. We also think dividend growth can increase in line with earnings growth, which may result in average earnings-plusdividend growth in the low double digits in the next few years.


The opinions expressed in this commentary are those of the Fund’s managers and are current through March 31, 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.

Risk factors. As with any mutual fund, the value of the Fund's shares will change and you could lose money on your investment. Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. Because the Fund invests more than 25% of its total assets in the real estate industry, it may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry. 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. The Fund is non-diversified, meaning that it may invest a significant portion of its total assets in a limited number of issuers, and a decline in value of those investments would cause the Fund's overall value to decline greater than that of a more diversified portfolio. 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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