Ivy Energy Fund

Ivy Energy Fund

Market Sector Update

  • Global equity markets posted positive returns on the broad indexes, with U.S. equity markets again leading the way.
  • The U.S. dollar maintained its strength versus most world currencies. Steady growth in the U.S. economy continued to support the dollar.
  • Global trade and economic activity continued to be strong. Markets generally shrugged off the growing trade tensions between the U.S. and China despite additional tariffs between the two countries. The Trump administration completed a revamp of the North American Free Trade Agreement with Mexico and Canada – named the U.S.-Mexico- Canada Agreement – but trade talks with China did not make similar progress.
  • Oil prices moved higher, with Brent crude oil moving above $80 per barrel, despite Saudi Arabia and Russia increasing their production near all-time highs to help offset lower production in Iran and Venezuela. The Organization of Petroleum Exporting Countries (OPEC) met late in the quarter and made no changes to its output quotas for member states.
  • The new sanctions put on Iran by the U.S. are having a major impact on Iranian oil production. Oil production out of Iran could be down by 1 million barrels per day.

Portfolio Strategy

  • The Fund posted a positive return for the quarter (based on Class I shares) and outperformed its benchmark index.
  • The Fund’s focus remains on investing in companies that can create value over the full course of the energy cycle. We believe those are companies that are low-cost operators, have strong balance sheets, have the ability to grow profitably and have strong return on capital.
  • The five greatest contributors to the Fund’s performance relative to its benchmark index in the quarter were WPX Energy Inc., Chevron Corp. (underweight an underperforming stock), Centennial Resource Development, Ensco PLC and Oasis Petroleum Inc.
  • The five greatest detractors to relative performance were Exxon Mobil Corp., ConocoPhillips, Forum Energy Technologies, Andeavor and FTS International Inc.


  • Our outlook has not changed in the quarter. We believe we are in the early stages of a cyclical recovery, as demand is outpacing supply of oil and inventories continue to fall.
  • Demand growth continues but the global economic recovery is more muted. We expect global economic growth to continue steadily for the remainder of this year and in 2019.
  • We believe the majority of oil production growth will come from U.S. shale oil areas. We estimate U.S. oil output will increase more than 1 million barrels per day in 2018 and 2019. However, we think supply growth outside North America will be modest.
  • We are seeing early signs of an international recovery, perhaps starting in the second half of 2019, as oil prices move higher and capital spending starts to increase. National oil companies are starting to deal with a reserve replacement challenge brought on by the under-investing of the last three years, which was a result of lower oil prices. Global oil discoveries are close to a historic low, replacing only about 15% of production last year.

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 Sept. 30, 2018, 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 09/30/2018: Concho Resources, Inc., 6.44%; Continental Resources, Inc., 5.33%; EOG Resources, Inc., 4.16%; WPX Energy, Inc., 4.10%; Diamondback Energy, Inc., 3.79%; Parsley Energy, Inc., Class A,3.76%; Whiting Petroleum Corp., 3.71%; Oasis Petroleum LLC, 3.60%; Halliburton Co., 3.57%; Pioneer Natural Resources Co., 3.57%.

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.