Market Sector Update

• The U.S. Federal Reserve (Fed) raised interest rates in June, the second hike this year. Market optimism waned for stimulus or legislative progress from the Trump Administration.
• The trajectory of high yield bond spreads was mixed as investors contended with resurfacing volatility in Treasury rates as well as the volatile oil prices. Specifically, U.S. crude oil traded down sharply in early June, hitting around $42 per barrel before trading higher to end the month just above $46.
• New-issue volume in high yield was modest during June with $26.8 billion of bonds pricing. However, when refinancing activity is excluded, the volume was $11.3 billion.
• U.S. Treasury rates moved higher and the yield curve flattened during the period, with 5- and 10- year Treasuries trading higher during the month.

Portfolio Strategy

• The Fund was introduced on May 18, 2017, and has a limited performance history. It had a positive return for the period from inception to quarter end (before the effect of sales charges) but underperformed its benchmark index.
• Despite the move higher in treasury rates, higher quality high yield bonds outperformed on average.
• Sector selection had a muted impact on the Fund’s performance relative to that of the benchmark. From a sector selection standpoint, the portfolio benefitted from overweight allocations to financials and other industrials. However, that benefit was roughly offset by an overweight to energy and an underweight allocation to consumer non-cyclicals.
• Security selections in consumer cyclicals, financials, technology, utilities and telecommunications were contributors to relative performance.

Outlook

• We are generally seeing stable to improving earnings as expected with the trend still looking to be positive throughout 2017. The retail sector is the notable laggard as these companies remain challenged by changing consumer patterns and increased competition from ecommerce.
• Commodity-related credit metrics have improved, although we have seen increased volatility in oil markets during recent weeks. Industrial-related names remain stable.
• For the high yield market overall, credit metrics continue to be near long-term averages with an improving trend, however, momentum is slowing as these statistics are approaching more normalized levels.
• Technical conditions have been mixed and volatile week to week and we expect this trend to continue for the foreseeable future.
• Oil remains topical as increased price volatility tends to precede retail outflows from the asset class. This pattern is not as strong as during the 2015/2016 period but remains apparent nonetheless. We expect supply to remain relatively muted outside of refinancing activity.
• We view current spread levels to be somewhere in the tight to midpoint range of what we would consider to be fair valuation. The default backdrop has been benign and we expect default rates to remain below longer-term averages. We continue to believe we will trade through fair value due to fundamental strength but remain concerned about equity drawdown correlation.

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, 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.

Ivy PineBridge High Yield Fund is a new fund with limited performance history. The Fund’s inception date is May 18, 2017.

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. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. 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. 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.