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11.18.20
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Ivy Investments
We stand for a legacy of expertise, focused on delivering strong, long-term results. Our name reflects our progressive product offerings and growing global presence as we continue to adapt to the needs of investors.
Quarterly Commentary
Ivy Emerging Markets Equity Fund
12.31.20
Market Sector Update
To close an unprecedented and historic year, emerging markets were up sharply in the final quarter. Despite the
challenges presented throughout 2020, with the support of strong underlying fundamentals, emerging markets
showed resiliency and persevered. The pandemic that shined a light on the value of innovation and forward-thinking
business models proved to be the driving force behind markets and emerging market’s leadership in these areas was
further brought to light.
The prospects of “reopening” coupled with more clarity surrounding the U.S. elections and future stimulus drove a
recovery in cyclical areas of the global economy and in countries that had lagged for much of the year. Latin American
countries, particularly Brazil, posted significant gains during the quarter. South Africa and Russia, both with commoditylinked
economies, also did well. The best performing major emerging market was South Korea. Performance was
largely driven by the country’s technology and health care companies, but also benefitted from some of the more
cyclical commodity-based businesses that operate there.
China, which had led emerging markets this year, was positive in the quarter, but lagged other major markets. The
rally in Chinese equities slowed as several developments on the regulatory front caused investors to pause. As the
market digested this news, certain stocks found their footing, but many saw relatively minor gains in the sharp
November/December emerging-markets rally.
Commodities were up sharply during the quarter, which sparked healthy performance from materials. Cyclical
companies within other sectors, namely information technology and financials, also did well. Communication services
and consumer discretionary stocks lagged as several of the large benchmark names within those sectors were down
or had small gains over the period.
Major emerging-market currencies continued to appreciate relative to the U.S. dollar which also helped U.S. dollarbased
returns.
Portfolio Strategy
The Fund posted strong double-digit gains and outperformed its benchmark. Performance was driven by strong stock
selection, primarily in consumer discretionary, financials and materials while stock selection in health care was a drag
on relative returns. From a country standpoint, stock selection in several U.S. listed companies as well as Brazil and
Taiwan contributed. Holdings in China were relatively weak during the quarter.
The top relative contributors to performance were Samsung Electronics Co. Ltd., a global leader in memory chips
and electronics, including handsets; MercadoLibre, Inc., a South American ecommerce and financial technology
company; and Freeport-McMoRan Copper & Gold, Inc., a U.S. based natural resources (primarily copper) company with
significant operations in emerging-market countries. Overall, unlike most of the year, this quarter’s performance had
significant contribution from a diverse group of cyclical companies.
The three greatest individual detractors were BeiGene, Ltd. ADR, a China-based biologics company; Reliance
Industries, Ltd., an Indian conglomerate with market leading operations in petrochemicals, telecom and retail; and
Tencent Holdings Ltd., a leading Chinese communication services company. While all three companies were a drag on
relative performance this quarter, they have contributed on a year-to-date basis.
We made few changes to the portfolio. The Fund has two new holdings and sold three. For instance, EOFlow Co.
Ltd., a Korean medical device company that specializes in diabetes pumps, is a new position. We believe the company’s innovative technology has strong long-term prospects locally and on a global basis. We sold Meituan
Dianping as the stock had reached the higher end of our valuation range and at the same time, we believe, may face
more near-term regulatory related challenges than many peers.
Outlook
In the face of all odds, 2020 sparked a major rally in global markets. Much of the emerging world participated as
innovative companies, clear beneficiaries of the pandemic, continued to grow, pick up market share and, as a result,
attracted a high level of investment from around the world. Where does that leave the prospects for 2021?
As emerging markets continue to come into their own, we expect many trends to remain. We believe our newer
investments in more cyclical companies, including copper, our airline holding, as well as some energy related
companies, will benefit as global growth accelerates and normalcy begins to return to individuals’ everyday lives. While
we approach cyclicals with tighter valuation limits, we believe there is runway.
Innovation and companies benefitting from the powerful long-term themes in emerging markets is still core to the
portfolio. While many of those stocks had sharp rallies since the March 2020 bottoms, we believe the long-term
durability of their business models and competitive advantages puts them in position to add shareholder value over
time. In addition to the “blue chips” of innovation in emerging markets, we continue to find new opportunities as they
emerge. Technology, consumer and, particularly, health care are areas that we expect to produce new market leaders.
With new regulatory developments in China, we will monitor and adjust to material shifts as we recognize them. The
initial stock reaction to news out of China is often quite harsh, but typically normalizes. In our opinion, the current
proposed regulation does not change the investment case. Our approach is not impacted.
Even with emerging markets up considerably in 2020, we believe they are still an attractive area to invest. Virus
management in much of the emerging market market cap has been the best in the world. China, South Korea and
Taiwan have been operating closer to normal levels of economic activity and, therefore, in many ways represent a more
visible investment case than other areas of the globe. Additionally, a return of global economic activity should, like it
has in past cycles, benefit emerging markets.
Most importantly, industries in the emerging world continue to develop and companies are flourishing. We expect
the opportunity set of investments to give investors the ability to generate strong risk-adjusted returns for many years
to come.
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
December 31, 2020, 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 12/31/2020: Taiwan Semiconductor Manufacturing Co. Ltd., 9.4%; Samsung Electronics Co. Ltd. 8.4%; Tencent Holdings Ltd., 7.1%; Alibaba Group Holding Ltd.
ADR, 5.4%; Midea Group Co. Ltd., Class A 3.2%; MercadoLibre, Inc. 3.2%; Ling Ning Co. Ltd. 3.0%; Yandex N.V., Class A, 2.5%; ICICI Bank Ltd. 2.5%; and Hyundai Motor Co. 2.4%.
All information is based on Class I shares. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy,
individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established
healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak
and its effects cannot be determined with certainty.
Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. 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. To the extent the Fund invests a significant portion of its assets in a
particular geographical region or country, conditions in that region or country will have a greater effect on Fund performance than they would in a more geographically diversified fund. 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.
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Ivy offers model delivery for nine equity strategies
Nine strategies are available in a model-delivery format, to be available in SMA and UMA accounts, providing advisors and investors a new way to access Ivy’s strategies.
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A flexible, tax-advantaged 529 plan that allows you to invest for future education goals.
Ivy Investments Forum
We recently gathered a number of thought-provoking experts who shared their latest views on an array of critical issues impacting today’s investing landscape. Watch the session replays to get our panelists’ insights.
Turning the page on 2020
As we move past the challenges of 2020, we are optimistic about the global economy and markets for 2021.
This Trend is Your Friend
We believe pressure on the U.S. dollar may provide a boost for investors in foreign assets.
Not your Grandma’s Nutrition Lesson
Learn how to read the new USDA nutrition label, why sugar is detrimental to your health and to get some healthy breakfast, lunch, dinner and snack ideas.
Raising financially smart kids
Passing on life lessons from generation to generation is important, especially when it comes to topics like money. Discover strategies to raising financially smart kids.
Three plans every Gen Xer needs to consider before they turn 50
Xers - hitting the big 5-0 is a big milestone. Uncover the three essential plans you may want to consider to protect your family and yourself.
Ivy Investments
We stand for a legacy of expertise, focused on delivering strong, long-term results. Our name reflects our progressive product offerings and growing global presence as we continue to adapt to the needs of investors.
Quarterly Commentary
Ivy Emerging Markets Equity Fund
Market Sector Update
Portfolio Strategy
Outlook
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 December 31, 2020, 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 12/31/2020: Taiwan Semiconductor Manufacturing Co. Ltd., 9.4%; Samsung Electronics Co. Ltd. 8.4%; Tencent Holdings Ltd., 7.1%; Alibaba Group Holding Ltd. ADR, 5.4%; Midea Group Co. Ltd., Class A 3.2%; MercadoLibre, Inc. 3.2%; Ling Ning Co. Ltd. 3.0%; Yandex N.V., Class A, 2.5%; ICICI Bank Ltd. 2.5%; and Hyundai Motor Co. 2.4%.
All information is based on Class I shares. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.
Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. 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. To the extent the Fund invests a significant portion of its assets in a particular geographical region or country, conditions in that region or country will have a greater effect on Fund performance than they would in a more geographically diversified fund. 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.