Market Sector Update

• Equity returns were volatile in the third quarter and although returns recovered intra-quarter, they ultimately ended slightly negative for the Fund's benchmark index. Over the period, economic indicators weakened, policy uncertainty increased and markets endured disruptions in short-term funding and in the oil markets.
• The dovish pivot articulated by the U.S. Federal Reserve (Fed) in December 2018 continued as the Fed cut the federal funds rate by 50 basis points during the quarter in response to mixed economic data and continued threats to global trade from tensions between the U.S. and China. Interest rates continued to decline as a result, supporting financial conditions as credit and equities recovered in September from the volatility experienced in July. 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 a small negative return but modestly outperformed its benchmark index. Fund performance reflects the mix of returns in the underlying funds and their allocation weightings. The most significant contributors were the Ivy International Core Equity Fund, Ivy International Small Cap Fund and the Ivy Global Equity Income Fund. The Ivy Emerging Markets Equity Fund was the biggest detractor as emerging markets underperformed in the period coincident with very strong U.S. dollar performance.
• 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, 9% in domestic equities and 5% in cash and cash equivalents.

Outlook

• Global growth remains low but positive. Consumer and services activity remain resilient and inflation is very low, which simultaneously reduces the risk of corporate margin compression and allows for very accommodative global monetary and fiscal policy. This environment has fostered easy financial conditions supportive of risk assets despite a slow-down in industrial economic activity.
• However, rhetoric around the U.S.-China trade dispute remains volatile and is a major risk to global growth and corporate earnings. We believe the market has partially reflected this risk 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.

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 Sept. 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.