Waddell & Reed

Quarterly Fund Commentary

Ivy High Income Opportunities Fund (prospectus)
September 30, 2014

Chad Gunther

Market Sector Update

  • Spreads between high-yield bonds and Treasuries widened around 90 basis points during the quarter. It is our view that the widening was not due to market fundamentals, but instead related to numerous factors including geopolitical events, technical factors, the macroeconomic outlook and Federal Reserve comments.
  • Issuance picked up significantly after Labor Day, with $25 billion in new issuance priced into the market during the first two weeks after the holiday, according to Wells Fargo data. Conversely, a total of only $4.5 billion was priced into the market during the entire month of August.


Portfolio Strategy

  • Our investment process is based on research of the individual opportunities. We seek good risk/reward characteristics, particularly related to companies that we believe the market does not understand or which generate outsize yield related to their price.
  • We believe that credit selection is the basis for above-average performance through a credit cycle and believe it to be preferable versus attempting to time the market or place macro bets.



  • We believe that the high-yield space has become more attractive from a valuation perspective. Wider spreads have created an opportunity to put new money to work in high-yield, which we believe offers the best value in the credit space.
  • We will look to reduce our first lien loan exposure and move into what we perceive to be better opportunities as they become available in the market.
  • We expect there may be more volatility in the market due to interest rate speculation as the Federal Reserve concludes its stimulus program known as quantitative easing.


The opinions expressed in this commentary are those of the Fund’s manager and are current through September 30, 2014. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Any securities or sectors mentioned are based on what the managers feel may be newsworthy and may or may not reflect holdings in this portfolio. It is not intended to represent that an investment in these securities or sectors was or will be profitable. Past performance is no guarantee of future results.

Risk factors. The price of the Fund’s shares will fluctuate with market conditions and other factors. Fund shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation. Closed-end funds frequently trade at a discount from their net asset values (NAVs), which may increase an investor’s risk of loss. At the time of sale, shares may have a market price that is below NAV, and may be worth less than the original investment. There is no assurance that the Fund will meet its investment objective.

An investment in the Fund is not appropriate for all investors and is not intended to be a complete investment program. The Fund is designed as a long-term investment and not as a trading vehicle.

Ivy Investment Management Company (IICO) serves as the Fund’s investment adviser. IICO is a wholly-owned subsidiary of Waddell & Reed Financial, Inc.

The Fund is a closed-end exchange traded investment company. This material is presented only to provide information and is not intended as investment advice or recommendations for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. After the initial public offering, shares of closed-end funds are sold on the open market through a stock exchange. Investment policies, management fees, risks other than those mentioned above, and other matters of interest to prospective investors may be found in the closed-end fund prospectus used in its initial public offering. For additional information, contact the Ivy Funds Sales Desk at 866.263.1985.

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