Market Sector Update

• The fourth quarter was a challenging period for risk assets as the combination of tighter financial conditions, lingering trade tensions and fears of decelerating economic growth weighed on investor sentiment, creating a risk-off investment environment. Risk assets across the equity spectrum were negatively impacted in this environment, with most asset classes finishing below their start of quarter levels.
• During this period, defensive market segments, which offer durable cash flow streams, fared better than riskier alternatives. As a result, global real estate securities managed to outperform broader equities for the period and in each of its three months.
• Fourth quarter results erased recent sector advances and the group finished the year below their levels at the start of 2018, however, outperformed the broader equity market for the year.

Portfolio Strategy

• The Fund had a negative return and slightly lagged its benchmark for the quarter.
• Relative performance was driven by negative stock selection results stemming from underperformance in Japan and Continental Europe. Underperformance in Japan was driven an overweight position to the region’s development companies, as the period’s risk-off investment sentiment negatively impacted the performance of the subgroup. Results in Continental Europe were attributable to an overweight position to the region’s prime retail sector, which has remained under pressure as the retail dynamic shifts.
• Regional allocation results were positive during the quarter, helping to somewhat offset stock selection results. Allocation decisions benefitted from overweight positions to Hong Kong and Japan, which outperformed; and an underweight position to Continental Europe, which trailed the benchmark.
• Several of the Fund’s country allocations were adjusted during the quarter. The Fund’s underweight position to Australia was transitioned to an overweight. This change was funded by a reduction in the portfolio’s overweight position to the U.S. The portfolio ended the quarter with a market weight position to the U.S. The Fund’s overweight position to the U.K. was modestly increased, while its overweight positioned to Japan was reduced. An overweight position to Hong Kong and underweight positions to Singapore, Canada and Continental Europe were maintained in the quarter.

Outlook

• Financial conditions tightened in 2018. Amid this backdrop, we believe the pace of global economic growth could decelerate in 2019, but remain positive with low odds of a possible recession. A boost of fiscal stimulus – while not typically seen at this late stage of an economic cycle – offers additional support against these headwinds, particularly in the U.S. and China.
• In addition, the potential for slowing economic growth may favor lower risk assets with durable cash flow streams, which could benefit the sector on a relative basis.
• Real estate operating fundamentals are healthy across much of the globe, most recently demonstrated by broadly positive operating results relayed in the latest reporting periods. With recent market declines, many global real estate securities are offering material discounts to their assessed net asset value.
• Given the current state of real estate fundamentals, coupled with more moderate economic growth expectations, we continue to expect solid levels of earnings and dividend growth from real estate securities.

The opinions expressed are those of the Fund’s managers at Class I shares and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Dec. 31, 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.

Co-Portfolio Manager Stanley J. Kraska, Jr. retired from LaSalle Investment Management Securities on Sept. 4, 2018.

On Nov. 5, 2018, the Ivy LaSalle Global Risk-Managed Real Estate Fund merged into the Ivy LaSalle Global Real Estate Fund.

Risk factors: The value of the Fund's shares will change and you could lose money on your investment. Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. Because the Fund invests more than 25% of its total assets in the real estate industry, it may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry. 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. The Fund is non-diversified, meaning that it may invest a significant portion of its total assets in a limited number of issuers, and a decline in value of those investments would cause the Fund's overall value to decline greater than that of a more diversified portfolio. 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.