Waddell & Reed

Quarterly Fund Commentary

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

Chad Gunther

Market Sector Update

  • The bond rally that drove yields lower through the first quarter of the year continued in the second quarter, with yields continuing to decline after some mixed economic signals from the first quarter.
  • Within the high-yield sector, we have seen stronger performance from the higher-rated non-investment-grade credits than on the lower rated securities. This is a reversal from what we saw last year.

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.


  • With the Federal Reserve indicating it plans to complete the tapering of its stimulus program known as quantitative easing (QE), fixed income markets are heading into a period where one of the key questions will be when and how quickly will rates rise and if a rate move will be sustained.
  • The markets are heavily reliant on the economic data. It is our view that if the data signals a robust economy, then the markets will begin to move interest rates before Fed policymakers implement a rate hike.
  • However, we continue to believe the most likely course for interest rates is a gradual rise and not an abrupt and rapid climb.
  • We believe high-yield can still perform well in a rising rate environment compared with other fixed income categories.

The opinions expressed in this commentary are those of the Fund’s manager and are current through June 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. 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.

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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