Ivy Cundill Global Value Fund


Market Sector Update

  • U.S. stocks performed well during the quarter with the major U.S. equity market indices breaking through their all-time high closing marks. The positive trend brings up an interesting debate: When will the Fed begin to ease off its unprecedented accommodative stance? When it does, how quickly will it happen?
  • Most of Europe remained in recession stemming from a number of negative risk events, including renewed concerns late in the quarter regarding European sovereign debt. We believe the European sovereign debt crisis will continue for some time. That said, market uncertainty and a general pessimism periodically leave certain stocks significantly undervalued.
  • During the quarter, Japanese stocks surged upward with the election of Prime Minister Shinzo Abe on promises of targeted inflation and a weaker currency. Some of the initial gains experienced in the country have retracted on the realization that nothing concrete has transpired, creating market volatility. Heightened tensions on the Korean peninsula have not augured well for South Korean stocks, the worst performing major Asian market year to date, despite being a country that is home to some of the world’s leading companies.

Portfolio Strategy

  • The Fund slightly outperformed the benchmark (before the effect of sales charges) for the period. Relative outperformance was led by strong stock selection, particularly in the information technology sector. Consumer discretionary stocks ranging from Japanese pachinko companies to U.S. specialty retail firms provided uplift to performance for the period. Additionally, financials – chiefly major banks and insurance companies – contributed to relative outperformance.
  • The utilization of currency-forward contracts to hedge elements of currency risk helped as well. In particular, the Fund was aggressively hedged to the Japanese yen, which resulted in outperformance as the Japanese yen weakened due to the implementation of aggressive monetary policy reforms initiated by the Bank of Japan.
  • Absolute losses were minor, with a Dutch industrial company having the largest singular negative impact. Additionally, the Fund’s relatively large cash position hindered performance.
  • As we’ve said before, we think there are few absolutely inexpensive large-cap deep-value stocks today in the U.S. As a result, the Fund has seen an increased focus on mid-cap companies.


  • With sovereign issues continuing to simmer in Europe, including the lack of leadership in Italy as a result of inconclusive election results in February, we believe markets will continue to be volatile as news from the eurozone has a large impact on global markets.
  • Going forward, the strategy in Europe is to employ conservative company evaluations and utilize extremely disciplined margin-of-safety techniques and disciplined trading. Research in Europe continues though it’s important to be mindful of unintended consequences as a result of macro events. In Asia, our focus continues to be on Japan and Korea, more so on export-oriented than domestic-focused companies.
  • Domestically, disagreements over the deficit, debt and political wrangling have all taken a bit of a backseat. If the economy continues to improve, we hope to see companies reevaluate cash flow and assets, resulting in either accretive acquisitions or a return of surplus capital to investors where they can.
  • The dichotomy between the globe’s sovereign issues and corporate success, while somewhat connected, likely will continue as long as governments and central banks continue current policy. At the end of the day, it’s accretive to end investors.

The opinions expressed in this commentary are those of the Fund's manager and are current through March 31, 2013. 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. As with any mutual fund, 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. International investing involves additional risks including currency f uctuations, political l or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The value of a security believed by the Fund’s manager to be undervalued may never reach what the manager believes to be its full value, or such security’s value may decrease. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.

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.