Ivy Focused Energy NextShares

Market Sector Update

  • Global equity markets posted positive returns on the broad indexes. The energy and materials sectors also posted positive returns during the quarter, with energy outperforming and materials underperforming the broader equity market.
  • Volatility continued in the oil markets. Crude oil prices rebounded significantly higher in the quarter. West Texas Intermediate, the U.S. benchmark, was up about 30% after falling 45% in the fourth quarter and Brent, the global benchmark, was up slightly more.
  • The OPEC supply reduction announced in December 2018 provided a positive stimulus for the oil market. OPEC’s policy change was in response to waivers granted by the U.S. that allowed Iran to continue exporting oil to approved nations. As a result of the decreased supply from OPEC, global oil inventories declined in the quarter. Political disruptions and geopolitical issues led to lower production from Venezuela and Libya.
  • The Trump Administration is set to decide by early May if waivers that allowed countries to buy crude oil from Iran – despite U.S. sanctions – will be extended. The waivers were the initial reason the oil market became oversupplied.
  • The U.S. continued to grow oil production in the quarter, even as the rig count declined slightly. Lower rig count was driven by lower oil prices in the prior quarter as well as lower capital expenditures as producers aimed to generate more free cash flow.

Portfolio Strategy

  • The Fund posted a positive return for the quarter but trailed the positive return of its benchmark index.
  • The five greatest equity contributors to performance relative to the benchmark were Propeto Holdings Corp., Enterprise Products Partners, Parsley Energy, Inc., Patterson UTI Energy, Inc. and Contiental Resources, Inc.
  • The five greatest detractors to relative performance were Exxon Mobil Corp., Chevron Corp., Kinder Morgan, Inc.- Class P, Williams Companies, Inc. and Oneok, Inc.
  • About 41% of the equity holdings in the Fund were allocated to the Oil & Gas Exploration & Production industry segment, followed by about 23% to Oil & Gas Equipment & Services and 12% to Oil & Gas Refining & Marketing. The Fund’s allocation to domestic equity was about 83% of net assets.
  • The focus of the energy strategy remains on investing in companies that can create value over the full course of the energy cycle. We identify those as companies that are low-cost operators, have strong balance sheets, have the ability to grow profitably and have strong return on capital.

Outlook

  • We expect the oil market price rebalancing that occurred in the quarter to continue, with OPEC expected to maintain production cuts into the summer. U.S. production growth is expected to decelerate but still grow in excess of 1 million barrels per day in 2019. U.S. supply growth is expected to be roughly in-line with global oil demand.
  • U.S. rig count, after declining in the quarter, is likely to remain flat as producers show spending discipline even with higher oil prices. Exploration and production companies are seeing more pressure from investors to be more prudent in allocating capital in order to generate better investor returns. This discipline could be tested in the second half of 2019 if oil prices remain in the current range or higher.
  • We believe the worldwide demand growth rate continues to be the greatest risk to oil prices going forward. Demand growth for this year has been better than expected, despite a synchronized global economic slowdown.
  • Infrastructure constraints continue in the Permian Basin for crude oil and natural gas, with some relief forecast for the fourth quarter, based on an expected increase in pipeline capacity.
  • Energy equities have lagged the appreciation in oil prices this year, but we think that gap will be reduced throughout the year as equities gain back some ground versus the commodity.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March 31, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Top 10 equity holdings as a percent of net assets as of 03/31/2019: Concho Resources, Inc., 5.41%; Continental Resources, Inc., 4.26%; Pioneer Natural Resources Co., 4.00%; Valero Energy Corp., 3.63%; Diamondback Energy, Inc., 3.63%; Phillips 66, 3.61%; EOG Resources, Inc., 3.44%; WPX Energy, Inc., 3.41%; Marathon Petroleum Corp., 3.37%; Halliburton Co., 3.29%.

IVY000228 07/31/2019

Risk factors: The value of the Fund’s shares 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. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. 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 Nextshares are a new type of fund. NextShares funds have a limited operating history and may not be available at all broker/dealers. There is no guarantee that an active trading market for NextShares funds will develop or be maintained, or that their listings will continue or remain unchanged.

About NextShares: Shares of NextShares funds are normally bought and sold in the secondary market through a broker, and may not be individually purchased or redeemed from the fund. In the secondary market, buyers and sellers transact with each other, rather than with the fund. NextShares funds issue and redeem shares only in specified creation unit quantities in transactions by or through Authorized Participants. In such transactions, a fund issues and redeems shares in exchange for the basket of securities, other instruments and/or cash that the fund specifies each business day. By transacting in kind, a NextShares fund can lower its trading costs and enhance fund tax efficiency by avoiding forced sales of securities to meet redemptions. Redemptions may be effected partially or entirely in cash when in-kind delivery is not practicable or deemed not in the best interests of shareholders. A fund’s basket is not intended to be representative of the fund’s current portfolio positions and may vary significantly from current positions. As exchange-traded securities, NextShares can operate with low transfer agency expenses by utilizing the same highly efficient share processing system as used for exchange-listed stocks and ETFs. Trading prices are linked to the NextShares next-computed NAV and will vary by a market-determined premium or discount, which may be zero; may be above, at or below NAV; and may vary significantly from anticipated levels. Purchase and sale prices will not be known until the NextShares NAV is determined at the end of the trading day. NextShares do not offer the opportunity to transact intraday based on current (versus end-of-day) determinations of a fund’s value. Limit orders can be used to control differences in trade prices versus NAV (cost of trade execution), but cannot be used to control or limit execution price. Buying and selling NextShares may require payment of brokerage commissions and expose transacting shareholders to other trading costs. Frequent trading may detract from realized investment returns. The return on a shareholder’s NextShares investment will be reduced if the shareholder sells shares at a greater discount or narrower premium to NAV than he or she acquired the shares.

NextSharesTM is a trademark of NextShares Solutions LLC. All rights reserved. Used with permission.

Ivy NextShares funds are managed by Ivy Investment Management Company and are distributed by ALPS Distributors, Inc.

ALPS Distributors, Inc., NextShares Solutions LLC, and Ivy Investment Management Company or Ivy Distributors, Inc. (or their affiliates) are all unaffiliated companies.

Article Related Management: 

David P. Ginther, CPA
Michael T. Wolverton, CFA

Article Type: 

Quarterly Fund Commentary

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Mid-cap madness: Bracketing a better portfolio

U.S. mid caps are one of the most dynamic investment types in the market. Mid caps’ spot in the center of the range means they often bring strong risk/return potential for today’s nervous investor. In a time when the right portfolio construction matters more than ever, explore the opportunity to win with mid caps.

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Kim Scott, CFA
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Ivy Investment Management Company
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Nathan Brown, CFA
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David Borberg, CFA
Client Portfolio Manager
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Article Short Summary: 

U.S. mid caps are one of the most dynamic investment types in the market. Mid caps’ spot in the center of the range means they often bring strong risk/return potential for today’s nervous investor. In a time when the right portfolio construction matters more than ever, explore the opportunity to win with mid caps.

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Wednesday, October 16, 2019 - 02:00

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929

Name: 

Small Cap Growth

Family: 

Ivy VIP

Share Class: 

I

Ticker: 

CUSIP: 

46600H570

InvestOneId: 

97

Fund Type: 

Domestic Equity

Fund Sub Type: 

Domestic Equity Funds

Lipper Category: 

Small-Cap Growth Funds

MorningStar Category: 

Small Growth

Our Approach: 

<dl> <dt>Sound philosophy</dt> <dd>Seeks small-cap growth companies that are industry leaders, serving markets that are growing substantially and producing solid financial returns.</dd> <dt>Experience & vision</dt> <dd>Combined, the team has 75+ years of industry experience and 20+ years of experience working with small-cap strategies.</dd> <dt>Consistent process</dt> <dd>Since lead portfolio manager Tim Miller assumed management duties in April 2010, the Fund has had competitive performance versus its Morningstar Small Growth peers.</dd> </dl>

Fund: 

Fund Real Title: 

Ivy VIP Small Cap Growth

Fund Documents: 

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Fund Inception Date: 

5/3/1994

Fund Class Inception Date: 

11/5/2018

Fund Last Regeneration: 

2019-09-18 02:50:01

Fund ID: 

74

NAV Ticker: 

<div class='ticker-data'><span class='callout-value'>$8.94</span> <span class='callout-label'>NAV as of 9/17/2019 </span></div><div class='ticker-data'><span class='callout-value'><span class='positive-value'>$0.03</span> / <span class='positive-value'>0.35%</span></span> <span class='callout-label'>Daily NAV Change </span></div><div class='ticker-data'><span class='callout-value'><span class='positive-value'>18.04%</span></span> <span class='callout-label'>YTD (NAV) as of 9/17/2019 <sup><a style='' title='Data quoted is past performance and current performance may be lower or higher. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, and shares, when redeemed, may be worth more or less than their original cost.' discribedby='ui-tooltip-1'>i</a></sup></span></div>

Fund Objective: 

Seeking small companies with significant growth potential

FundFactSheetUrl: 

https://documentdownload.hartehanks.com/AssetDisplay?acc=WRSC&itemCode=MFA0068

QuarterlyCommentaryUrl: 

https://documentdownload.hartehanks.com/AssetDisplay?acc=WRSC&itemCode=MFA0068C

Citywire magazine: Ivy Emerging Markets Equity Fund

Citywire magazine recently featured Ivy Emerging Markets Equity Fund in a special supplement. The new article describes the evolving landscape of emerging markets and key issues our investment team believes are affecting those markets.

Document Type: 

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