Market Sector Update

• Equity returns were volatile in the second quarter and although ultimately positive, certainly muted relative to a very strong first quarter.
• The dovish pivot articulated by the U.S. Federal Reserve (Fed) in December 2018 continued and the Fed’s June meeting resulted in markets increasing expectations for rate cuts in response to weakening economic data and threats to global trade from tensions between the U.S. and China.
• Interest rates declined precipitously as a result, supporting financial conditions as credit and equities recovered in June from the volatility experienced in May. The markets took solace from not only more dovish central banks, globally, but also in response to assurances that trade negotiations between the U.S. and China would continue.

Portfolio Strategy

• The Fund finished the quarter with positive performance but underperformed its benchmark index. Fund performance reflects the mix of returns in the underlying funds and their allocation weightings. The most significant contributors were from the Ivy International Core Equity Fund, Ivy Global Growth Fund and Ivy Global Equity Income Fund. The Ivy Emerging Markets Equity Fund and the Ivy Pzena International Value Fund contributed the least to performance as emerging markets and value-oriented equities relatively underperformed in the period. On the other hand, exposure to the U.S. and growth-oriented equities were both positive tailwinds for the Fund.
• Relative to its benchmark index, the Fund’s underperformance was roughly equally attributable to the underperformance of both emerging markets and value styles as well as the Ivy International Core Equity Fund’s underperformance relative to its own benchmark. The Ivy International Core Equity Fund suffered from an overweight allocation to higher volatility energy securities, emerging market assets (specifically China) and a drag from its relatively large cash allocation in a rising market.
• The Fund ended the period with the following target asset allocation: Ivy International Core Equity Fund 35%, Ivy Pzena International Value Fund 20%, Ivy Emerging Markets Equity Fund 15%, and a 10% allocation each to Ivy Global Growth Fund, Ivy International Small Cap Fund and Ivy Global Equity Income Fund.
• At quarter end, about 86% of the portfolio was invested in foreign equities, 10% in domestic equities and 4% in cash and cash equivalents.

Outlook

• Global growth remains tepid, but inflation is very low, which allows for very accommodative global monetary and fiscal policy – an environment that has fostered financial conditions supportive of risk assets in terms of both interest rates and credit spreads. Policy makers in China have implemented numerous measures to stimulate growth and our economists anticipate these factors will be a tailwind to growth in the coming quarters.
• However, rhetoric around the U.S.-China trade dispute has become more volatile and remains a major risk factor to global growth and corporate earnings. But we believe the market has reflected this by applying very significant valuation discounts to higher beta, cyclical securities relative to historical norms. With a less clear macro backdrop and a difficult choice between lower-priced, high-beta stocks or higher-priced compounders, we have positioned the Fund in an attempt to maximize the potential impact of the stock selection skills of our underlying active managers.

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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, 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.

All information is based on Class I shares.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. 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 performance of the Fund will depend on the success of the allocations among the chosen underlying funds. Investing in a single region involves greater risk and potential reward than investing in a more diversified fund. 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.