Market Sector Update

• It was another fantastic quarter for global equity markets as economic activity and employment trends continued their rebound since the dramatic sell-off in the first quarter precipitated by the COVID-19 pandemic and collapse in energy markets. Markets priced in further economic normalization and pro-cyclical impulse as effective vaccines begun inoculating populations.
• Governments and central banks, globally, continue to provide unprecedented policy support to offset the negative economic effects of responses to the pandemic including monetary easing, fiscal stimulus and direct asset purchases. The U.S. Federal Reserve (Fed) adopted a new average inflation framework and forward guidance that sets an extremely high bar for raising rates, which suggests monetary policy is less likely to hamper any improvements in growth.

Portfolio Strategy

• The Fund experienced very strong double-digit gains in the quarter and outperformed its benchmark index during the period. Fund performance reflected the mix of returns in the underlying funds and their allocation weightings. The Ivy Emerging Markets Equity Fund was a stand-out contributor to positive relative performance, accompanied to a lesser extent by the Ivy Pzena International Value Fund, which together more than offset the modest detractors to performance from the other underlying funds.
• The Fund ended the period with the following target asset allocation: Ivy International Core Equity Fund 31%, Ivy Emerging Markets Equity Fund 29%, and a 10% allocation each to Ivy Pzena International Value Fund, Ivy Global Growth Fund, Ivy International Small Cap Fund and Ivy Global Equity Income Fund to provide a well-diversified portfolio of international stocks.

Outlook

• Global markets and economies continue to face challenges as the pandemic continues. While consumption and expenditures continue to rebound, previous levels of economic activity and employment remain distant. While effective vaccines have begun to be distributed, cases of COVID-19 continue to grow rapidly. As populations are inoculated against the virus and as low interest rates and trillions of dollars of stimulus continue to work their way through the economy, activity is expected to continue its upward trajectory toward more normal levels in 2021. The labor market is expected to reach “full employment” by 2022, buoying equity earnings estimates. And while securities valuations are demanding, fiscal stimulus is expected to continue, adding to the pro-cyclical impulse.
• Additionally, the Fed has indicated a willingness to maintain accommodative monetary policy until a “persistent” and “significant” increase in inflation is observed, likely alleviating upward pressure that might otherwise exist for interest rates. However, myriad risk factors remain, as always. Among these risks include the risk of inflation and valuation compression in securities markets that have already priced in much of this good news.

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 December 31, 2020, 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. All information is based on Class I shares. Diversification cannot ensure a profit or prevent against a loss in a declining market. Past performance is not a guarantee of future results.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

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.