Ivy Energy Fund


Market Sector Update

  • In the quarter, oil prices moved to their highest level since early October 2018. Crude markets recent strength has been driven by optimism over the economic recovery from fiscal stimulus, vaccines and slowing infections, decreasing inventories, and demand recovery in China and India. COVID-19 trends remain a headwind facing the oil markets. The spread of new COVID-19 variants, new lockdowns worldwide, and continued concerns about the global vaccine rollout weigh negatively on demand.
  • OPEC+ decided on an unexpected two-month agreement for the group’s production in January. Saudi Arabia announced an unexpected and unilateral production cut of 1 million barrels per day in February and March as Russia and Kazakhstan will increase output modestly to meet seasonal demand while other OPEC producers remain at their January levels. OPEC compliance remains very high.
  • Unprecedented cold weather in the central U.S., especially in Texas, equally affected fossil fuels and renewable energy. Very cold temperatures froze production wells and pipelines, shuttered refineries, reduced wind and solar capacity and left millions without power for days. We learned that utilities must work with both hydrocarbon fuels and renewable energy as we move toward greener energy.
  • We have seen geopolitical risk increase amid high tensions between Tehran and Washington. The Houthis launched a series of ballistic missile and drone strikes throughout Saudi Arabia focused on oil infrastructure and military targets. Attacks by Iranian-backed Shiite militias on bases hosting American troops in Iraq prompted President Biden to conduct the first military operation of his administration by launching air strikes in Syria. Also, Iran wants the removal of sanctions before it scales back nuclear activities. Recent activities show just how dangerous the security environment remains in the region.

Portfolio Strategy

  • While both the Fund and its benchmark, the S&P 1500 Energy Sector Index, experienced strong positive returns for the quarter, the index ended up outperforming the Fund. During the period, the Fund’s allocation to the energy sectors was slightly changed as we decreased our alternative energy position due to valuation in the quarter.
  • Key contributors to the Fund’s relative performance included holdings in Continental Resources, Inc., ChampionX Corp., Diamondback Energy, Inc., Parsley Energy, Inc. and Pioneer Natural Resources.
  • Industry allocations changed slightly when compared to those of the prior quarter. Approximately 38% of the equity holdings in the Fund were allocated to the oil and gas exploration and production industry segment, followed by 24% to oil and gas equipment and services and 14% to oil and gas refining and marketing.
  • The core 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, capital discipline, ability to grow profitably and have strong return on capital.


  • Our outlook on energy is largely unchanged in the quarter. We plan to stay the course as demand continues to improve led by synchronized global growth, vaccine optimism and fiscal stimulus. Demand should overcome concerns about the virus’ resurgence, COVID-19 variants, additional lockdowns in Europe and any possible impacts on global demand.
  • OPEC+ will continue to draw down inventory surpluses and will gradually increase production allowing spare capacity to be fully absorbed by the end of 2021. We think U.S. shale is unlikely to grow much at all in 2021 due to capital discipline and a focus on improving balance sheets. The world will need U.S. shale to grow again at a moderate pace in 2022 to meet worldwide demand growth as OPEC’s spare capacity will be eroded by that time.

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, 2021, 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 03/31/2021: Pioneer Natural Resources Co. 6.7, ConocoPhillips 6.5, Marathon Petroleum Corp. 5.1, Exxon Mobil Corp. 4.9, Valero Energy Corp. 4.2, Cactus, Inc. 4.1, ChampionX Corp. 4.0, Phillips 66 4.0, Hess Corp. 4.0 and WEX, Inc. 4.0.

The S&P 1500 Energy Sector Index is an unmanaged index comprised of securities that represent the energy sector of the stock market. It is not possible to invest directly in an index.

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. Because the Fund invests more than 25% of its total assets in the energy related industry, the Fund may be more susceptible to a single economic, regulatory, or technological occurrence than a fund that does not concentrate its investments in this industry. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. The Fund typically holds a limited number of stocks (generally 35 to 55). As a result, the appreciation or depreciation of any one security held by the Fund may have a greater impact on the Fund’s NAV than it would if the Fund invested in a larger number of securities. 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. The Fund may invest in Initial Public Offerings (IPOs), which can have a significant positive impact on the Fund’s performance that may not be replicated in the future. These and other risks are more fully described in the Fund’s prospectus.