Ivy Proshares MSCI ACWI Index Fund

Ivy Proshares MSCI ACWI Index Fund

Market Sector Update

  • While the global growth outlook remains positive and inflation expectations remain relatively low, the backdrop for equities remains supportive. The consistently positive economic data from the eurozone through 2017 supported the euro versus the U.S. dollar as the economic and interest rate divergence of recent years slowed.
  • Global central banks used the benign backdrop to slowly turn away from expansionary monetary policy and continue their policy normalization. For example, the U.S. Federal Reserve (Fed) expectedly raised rates during the quarter and indicated they plan on three additional rate increases in 2018. The Fed has stated they will slowly unwind its multitrillion- dollar balance sheet.
  • Large capitalization companies outperformed in the U.S. this quarter, while small cap equities outperformed large cap equities in Europe.
  • Emerging market equity returns were positive for the quarter, generating mid-single-digit returns, and outperformed developed market equities. The best performing countries were South Africa, Greece and India, while the best performing sectors were healthcare, consumer discretionary and materials. Global trade and economic activity were strong across all markets.
  • Oil prices and hard commodities continued their price rebounds into the quarter end. This boosted returns in the energy sector as well as equities in commodity-producing countries.

Portfolio Strategy

  • The Fund performed in line with the benchmark (before the effects of sales charges) during the period. The Fund's allocation to emerging-market equities helped performance as developing markets typically outperformed their developed market peers.
  • The Fund’s relatively large allocations to the information technology, consumer discretionary and financials sectors helped performance as those sectors performed well for the period. In addition, relatively small allocations to the poorperforming utilities and telecommunications sectors benefitted performance.
  • From a country allocation standpoint, the Fund’s large allocations to the U.S., the U.K. and Japan (an approximate 64% aggregate allocation) helped performance as those markets posted gains for the period. In addition, Fund allocations to South Korea and South Africa benefitted performance as those markets posted strong gains for the period.


  • We believe the improved outlook for global growth is supportive for international equities, as historically both European and Japanese markets have tended to outperform during such periods. For Europe, we continue to see a number of improving factors such as a return to positive loan growth, falling unemployment and improving economic lead indicators.
  • We expect labor markets to continue tightening, which should lead to higher wages and inflation. Unemployment rates are at or below previous record lows in a number of countries. This is a broad-based phenomenon, even in the Eurozone where it had previously been led lower primarily by Germany. In Japan, we believe inflation should rise on the back of a weaker yen and an output gap that has closed.
  • While returns are not likely to be as robust as markets enjoyed in 2017, the fundamental backdrop appears to remain quite positive and will continue to be monitored in relation to tightening monetary policy, credit conditions and valuations as the year progresses.

The opinions expressed are those of the Fund’s manager 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, 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.

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 Fund entails other risks, including imperfect benchmark correlation and market price variance that may decrease performance. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the Index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. A number of factors may affect the Fund’s ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. The Fund’s use of derivatives presents several risks, including the risk that these instruments may change in value in a manner that adversely affects the Fund’s net asset value and the risk that fluctuations in the value of the derivatives may not correlate with the reference instrument underlying the derivative. 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. 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.