Ivy ProShares S&P 500 Dividend Aristocrats Index Fund

Ivy ProShares S&P 500 Dividend Aristocrats Index Fund

Market Sector Update

  • Large-cap domestic equities finish the year with a positive performance as the Fund’s broad target the S&P 500 Index, increased 6.6% for the quarter, capping a fiscal period in which the Index produced returns of 21% for the year.
  • Part of the late quarter equities rally was spurred by the progress and eventual passage of the most sweeping overhaul of U.S. tax policy in more than 30 years.
  • One of the cornerstones of the new tax legislation was the permanent reduction of the corporate tax rate from 35% to 21%. Many companies celebrated the legislation by announcing wage increases and bonus payments for employees, as well as corporate investment and philanthropic initiatives.
  • Market volatility remained at historically low levels while business sentiment and capital spending continued to track higher, indicating that investor confidence remains strong. Employment was strong and inflation remained in check.

Portfolio Strategy

  • A passively managed index fund, the Fund posted positive gains for the quarter before the effect of sales charges, but fell short of its benchmark, the S&P 500 Dividend Aristocrats Index, and its broad market target, the S&P 500 Index.
  • When comparing the benchmark to the broad market target, the sector allocation contributed to underperformance, which was partially offset by favorable stock screening.
  • At the sector level, the Fund’s underweight position to technology hurt relative performance and was the largest detractor the quarter. Strong stock performance within industrials, health care and consumer staples sectors were standouts. Sector allocation impacts slightly detracted from performance for the quarter.
  • Industrials holding W.W. Grainger surged in the quarter after beating earnings expectations and maintaining positive guidance for the future, while Brown-Forman, a spirits distributor, was up over 26% for the period on strong earnings and also raised full year guidance.
  • Conversely, two names not held in the index –Amazon and Microsoft– performed strongly amidst the broader technology rally and led relative detractors. Also, health care holding Cardinal Health, an overweight position in the index, declined during the period after reporting an earnings decline.


  • The Fund’s portfolio remains focused exclusively on companies within the S&P 500 Index that have grown their dividends for at least 25 consecutive years. While not necessarily providing the highest dividend yield, a strategy based on high-quality companies with a consistent track record of dividend growth provides the potential for attractive long-term outperformance.
  • Our outlook on economic expansion and corporate earnings growth remains fairly positive barring a major unforeseen event. We are cautiously optimistic about equities, which should be buoyed by good overall growth and a lack of substantial disruptions. Broadly, we believe the strong inertia to equities will continue.
  • The lower corporate tax rate could allow for additional capital expenditures by businesses and potentially create a boost in optimism that could fuel a virtuous cycle of greater investment that buoys business confidence, which in turn leads to even more investment.

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, 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.

The Fund is a passively managed index fund and does not invest in securities based on the managers’ view of the investment merit of a particular security or company, nor does it conduct conventional investment research or analysis or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities that, in combination, provide exposure to the Index without regard to market conditions, trends or direction.

The S&P 500 Dividend Aristocrats Index measures the performance S&P 500 companies that have increased dividends every year for the last 25 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company. The S&P 500 Index is composed of 500 selected common stocks chosen for market size, liquidity, and industry grouping, among other factors. It is not possible to invest directly in an index.

The Russell 2000 Dividend Growth Index measures the performance of Russell 2000 companies that have increased dividends every year for the last 10 consecutive years. The Index treats each constituent as a distinct investment opportunity without regard to its size by equally weighting each company. It is not possible to invest directly in an index.

Top 10 holdings (%) as of 12/31/17: Brown-Forman Corp. 2.3, Hormel Foods Corp. 2.3, W.W. Grainger, Inc. 2.3, Clorox Co. 2.2, Lowe’s Co., Inc. 2.2, Wal-Mart Stores, Inc. 2.1, AT&T, Inc. 2.1, Sysco Corp. 2.1, T. Rowe Price Group, Inc. 2.1, PepsiCo., Inc. 2.1.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Large capitalization companies in which the Index and, by extension, the Fund are exposed may go in and out of favor based on market and economic conditions. The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform non-dividend paying stocks and the market as a whole over any period of time. In addition, there is no guarantee that the companies in which the Fund invests will declare dividends in the future or that dividends, if declared, will remain at current levels or increase over time. The amount of any dividend the company may pay may fluctuate significantly. In addition, the value of dividend-paying common stocks can decline when interest rates rise as fixed-income investments become more attractive to investors. This risk may be greater due to the current period of historically low interest rates.