Ivy Global Income Allocation Fund

Ivy Global Income Allocation Fund
06.30.17

Market Sector Update

  • Equities globally continued to creep higher despite signs of economic slowing. Interest rates globally dropped for most of the quarter as falling oil prices led to lower inflation expectations before rising to almost unchanged levels at quarter end as markets perceived central banks were still intent on normalizing policy.
  • Commodity prices retrenched during the quarter with the fall in oil prices particularly damaging to energy stocks. Fears of large supply increases by shale oil drove the decline as producers increasingly become more efficient with production techniques.
  • Global political risk began to moderate as election outcomes in several European countries produced outcomes with more centrist governments.
  • Leading economic indicators and economic surprise index’s began to moderate after a strong first quarter.

Portfolio Strategy

  • The Fund underperformed versus its blended benchmark during the quarter. Performance of the individual sections of the portfolio was mixed. The fixed-income portfolio slightly outperformed its benchmark while the equity portfolio slightly underperformed. Both asset allocation and currency hedging ended up being a drag to performance, resulting in modest underperformance as a whole to the benchmark during the quarter.
  • The fixed-income portfolio was hurt by its short duration but made up performance through good credit selection, particularly in the financial sector which the Fund is significantly overweight.
  • Equity portfolio underperformance was mainly driven by an overweight to energy and an underweight to consumer staples. The Fund has been adding energy exposure as oil prices have pulled back. The Fund has been wrongly underweight consumer staples for some time stemming from valuation concerns. An overweight to financials did slightly benefit performance for the period.

Outlook

  • On the equity side, the Fund has been increasing its exposure to the energy sector as oil prices have declined. Our focus has been in two areas: exploration and production companies with the ability to grow production and companies exposed to volume growth in the midstream and downstream sectors. Outside of the increased energy exposure, the Fund remains overweight the semiconductor industry within information technology as well as financials, while maintaining underweight allocations to consumer staples and utilities.
  • Little changed in the fixed-income portfolio during the quarter, as our shorter duration and credit-heavy positioning was maintained.
  • We remain reluctant to make any large asset allocation bets, and have been running a largely neutral to slightly overweight equity asset allocation.

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 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.

Diversification and asset allocation are investment strategies that attempt to manage risk within your portfolio but they do not guarantee profits or protect against loss in declining markets.

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. 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. Fixed-income securities are subject to interest-rate risks and, as such, the net asset value of the Fund may fall as interest rates rise. Dividend-paying investments may not experience the same price appreciation as non-dividend-paying instruments. Dividend-paying companies may choose not to pay a dividend, or dividends may be less than was anticipated. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.

IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Ivy Investment Management Company, the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS℠ , and the financial services offered by their affiliates.