Ivy Energy NextShares

Ivy Energy NextShares

Market Sector Update

  • The U.S. Federal Reserve (Fed) raised interest rates in June, the second hike this year. Oil prices weakened on concerns about inventory levels and optimism waned for stimulus or legislative progress from the Trump Administration.
  • Equity and fixed income markets generally moved higher around the globe. In U.S. equities, growth indexes again outperformed value.
  • The U.S. dollar weakened against the currencies of most trading partners, including the Mexican peso which is showing strength after a battering in 2016 following the U.S. presidential election.
  • U.S. economic data showed improvement, Europe’s economy continued its positive trajectory and economic growth moderated in China.

Portfolio Strategy

  • The Fund posted a negative return for the quarter that was greater than the negative return of its benchmark index.
  • The five greatest contributors to the Fund’s performance relative to its benchmark index in the quarter were RPC, Inc., Schlumberger Ltd. (because of an underweight versus the benchmark to an underperforming stock), Keane Group, Inc., Wex, Inc. and Enterprise Products Partners L.P.
  • The five greatest detractors to relative performance were Oasis Petroleum LLC, Continental Resources, Inc., Weatherford International Ltd., U.S. Silica Holdings, Inc. and Whiting Petroleum Corp.
  • If oil and other commodity prices are not rapidly rising, high-quality companies with the lowest cost resources, strong balance sheets and highest returns should benefit the most. Therefore, we continue to focus on these types of companies in the portfolio.


  • We estimate global oil demand is growing steadily this year at a pace of 1.2-1.4 million barrels per day, about 20- 40% above its recent historical average.
  • After two years of slowing supply growth, we believe we are in the beginning stages of supply reacceleration in certain areas of the world, with the U.S. showing the fastest move. We think the pace of supply growth in the U.S. could reach 1 million bpd by the end of 2017.
  • We believe an oil price of $55 to $65 per barrel would provide sufficient cash flow to allow continued supply growth from the U.S. for the next couple years and make it the largest contributor to growth for the near future. That leads us to believe U.S.-focused production companies are likely to have the highest growth rates and offer potential opportunities to reduce costs through productivity gains. Higher prices will be needed in the coming years in order to balance global supply and demand.
  • We still think global economic growth will steadily improve in the remainder of 2017 and 2018.

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 June 30, 2017, 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.

IVY000149 12/31/2017F

Top 10 Equity Holdings as a percent of net assets as of 06/30/2017: Halliburton Co., 4.74%, U.S. Silica Holdings, Inc., 4.51%; Schlumberger Ltd., 4.49%; EOG Resources, Inc., 4.39%; Parsley Energy, Inc., 4.05%; RPC, Inc., 4.01%; Pioneer Natural Resources Co., 3.87%; Continental Resources, Inc., 3.78%; Baker Hughes, Inc., 3.71%; Concho Resources, Inc., 3.22%.

Risk factors: Top 10 Equity Holdings as a percent of net assets as of 06/30/2017: Halliburton Co., 4.74%, U.S. Silica Holdings, Inc., 4.51%; Schlumberger Ltd., 4.49%; EOG Resources, Inc., 4.39%; Parsley Energy, Inc., 4.05%; RPC, Inc., 4.01%; Pioneer Natural Resources Co., 3.87%; Continental Resources, Inc., 3.78%; Baker Hughes, Inc., 3.71%; Concho Resources, Inc., 3.22%.

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.

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

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