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Ivy Investments is now a part of Macquarie Asset Management
As of April 30, 2021, Ivy Investment Management Company is now part of Macquarie Asset Management. Macquarie Asset Management (MAM) provides specialist investment solutions to clients across a range of capabilities including infrastructure & renewables, real estate, agriculture, transportation finance, private credit, equities, fixed income, and multi-asset solutions.
Quarterly Commentary
Ivy Focused Value NextShares
03.31.19
Market Sector Update
The end of 2018 saw the return of stock volatility as equity markets took a sharp late year fall. This pullback, however,
was followed immediately by a back and forth recovery to start 2019.
The stocks that led the decline in December were the first to recover in January, providing a painful sting to investors
who decided the selloff was a signal to position portfolios more defensively. Following a complacent 2017, large market
swings have returned and have elevated fear amongst investors. Global growth has appeared to slow, and the Federal
Reserve (Fed) has taken notice, halting further interest rate hikes for 2019.
Portfolio Strategy
The Fund had a positive single-digit absolute return but underperformed the Russell 1000 Value Index (its benchmark)
during the quarter, primarily due to individual stock selection.
As a concentrated Fund, it exhibits higher volatility in returns over the short term, in pursuit of longer-term gains. The
Fund also paid a quarterly dividend of 20 cents per share, which is a 3.96% annual dividend yield based on its quarterend
net asset value of $20.18.
Weakness in a varied selection of areas hurt overall performance. CVS Health Corp., the America’s largest drugstore
chain, completed the acquisition of Aetna, and lowered its earnings outlook. Initial guidance after a merger is always
risky, but we believe when the dust settles this stock could be notably higher and continue to hold. AbbVie stock
performance fell during the quarter as investors continued to worry over whether or not, Humira, the company’s
biggest selling drug, was going generic. We think the company’s pipeline of new drugs will provide a positive surprise.
PBF Energy, Inc., an oil refiner, also hampered performance. On the positive side, The Chemours Company, a chemical
company, rallied, followed closely by Synchrony Financial.
We focus primarily on stock selection and avoid making sector calls. We overweight or underweight sectors based
on individual stock opportunity, with some limits to control risk or volatility. We are overweight financials, consumer
discretionary and materials, where we find both value and yield. In these areas, we have been able to find what we
believe are good companies with repeatable business models generating high rates of free cash flow (the cash a
company generates after cash outflows to support operations and maintain its capital assets), and low stock prices
relative to our estimation of each company’s true intrinsic value.
The Fund is underweight consumer staples, industrials and utilities. We simply do not find many attractive investments
in these sectors at this time although we are constantly on the lookout for opportunities.
Outlook
The U.S. economy has enjoyed a long successful run from the end of the 2008 recession. There was an additional
boost with the tax cut in early 2018. We believe the recent economic data supports the idea of a slowing economy early
in the year but a re-acceleration later. The Fed has indicated a pause in interest rate hikes, and many wonder if it is not
just a pause, but a cessation. Other macro events to watch are the trade negotiations with China, the lapping of last
year’s tax cut, job creation and inflation. We a cautiously optimistic that the Fed has done a good job with raising rates
and believe the risk of a near-term recession is low.
We think recent economic data supports the idea of a slowing economy but does not yet support the concept of a
shrinking economy (recession). The current challenge will be for the Fed to tighten money policy back up, yet not slow
the economy into contraction. The recent pause in interest rate hikes for 2019 indicates it is not an easy task – slowing
the economy and inflation via rate hikes is a difficult job. We liken it to stepping on a rolling egg to stop it without
breaking it. History shows a high probability of failure, if interest rates rise too much thus helping to create a recession.
This is something we will watch carefully.
The opinions expressed are those of the Fund’s manager 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, 2019, 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.
IVY000224 07/31/2019
Top 10 holdings (%) as of 03/31/2019: American Capital Agency Corp. 5.8, PBF Energy, Inc. 5.5, Phillips 66 5.1, Prudential Finanical, Inc. 5.0, MetLife, Inc. 4.9, Gilead Sciences, Inc. 4.2, Pfizer, Inc. 4.2, Gap, Inc. (The) 4.1,
International Business Machines Corp. 4.1 and International Paper Co. 4.1.
The Russell 1000 Value Index is an unmanaged index comprised of securities that represent the large cap sector of the stock market. It is not possible to invest directly in an index.
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. 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. Investing in companies in anticipation of a catalyst carries the risk that certain of such catalysts may not happen or the market may react differently than expected to such catalysts, in which case
the Fund may experience losses. The securities of many companies may have significant exposure to foreign markets as a result of the company’s operations, products or services in those foreign markets. As a
result, a company’s domicile and/or the markets in which the company’s securities trade may not be fully reflective of its sources of revenue. Such securities would be subject to some of the same risks as an
investment in foreign securities, including the risk that political and economic events unique to a country or region will adversely affect those markets in which the company’s products or services are sold. 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.
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.
NextSharesTM is a trademark of NextShares Solutions LLC. All rights reserved. Used with permission.
Ivy NextShares funds are managed by Ivy Investment Management Company and are distributed by ALPS Distributors, Inc.
ALPS Distributors, Inc., NextShares Solutions LLC, and Ivy Investment Management Company or Ivy Distributors, Inc. (or their affiliates) are all unaffiliated companies.
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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.
Ivy InvestEdSM 529 Plan
A flexible, tax-advantaged 529 plan that allows you to invest for future education goals.
Ivy Investments is now a part of Macquarie Asset Management
As of April 30, 2021, Ivy Investment Management Company is now part of Macquarie Asset Management. Macquarie Asset Management (MAM) provides specialist investment solutions to clients across a range of capabilities including infrastructure & renewables, real estate, agriculture, transportation finance, private credit, equities, fixed income, and multi-asset solutions.
Quarterly Commentary
Ivy Focused Value NextShares
Market Sector Update
Portfolio Strategy
Outlook
The opinions expressed are those of the Fund’s manager 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, 2019, 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.
IVY000224 07/31/2019
Top 10 holdings (%) as of 03/31/2019: American Capital Agency Corp. 5.8, PBF Energy, Inc. 5.5, Phillips 66 5.1, Prudential Finanical, Inc. 5.0, MetLife, Inc. 4.9, Gilead Sciences, Inc. 4.2, Pfizer, Inc. 4.2, Gap, Inc. (The) 4.1, International Business Machines Corp. 4.1 and International Paper Co. 4.1.
The Russell 1000 Value Index is an unmanaged index comprised of securities that represent the large cap sector of the stock market. It is not possible to invest directly in an index.
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. 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. Investing in companies in anticipation of a catalyst carries the risk that certain of such catalysts may not happen or the market may react differently than expected to such catalysts, in which case the Fund may experience losses. The securities of many companies may have significant exposure to foreign markets as a result of the company’s operations, products or services in those foreign markets. As a result, a company’s domicile and/or the markets in which the company’s securities trade may not be fully reflective of its sources of revenue. Such securities would be subject to some of the same risks as an investment in foreign securities, including the risk that political and economic events unique to a country or region will adversely affect those markets in which the company’s products or services are sold. 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.
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.
NextSharesTM is a trademark of NextShares Solutions LLC. All rights reserved. Used with permission.
Ivy NextShares funds are managed by Ivy Investment Management Company and are distributed by ALPS Distributors, Inc.
ALPS Distributors, Inc., NextShares Solutions LLC, and Ivy Investment Management Company or Ivy Distributors, Inc. (or their affiliates) are all unaffiliated companies.