Market Sector Update

• International equities moved higher in the second quarter despite significant month-to-month volatility. The flight to safety continued to dominate market sentiment as trade tension and recession concerns heightened during the quarter, leading value stocks to once again underperform.
• Global economic data was generally weak for the quarter, as the continuation of trade wars weighed heavily on the markets. In early May, U.S.-China trade negotiations deteriorated and the U.S. increased tariffs from 10% to 25% on $200 billion of Chinese goods. On a positive note, at quarter end, the U.S. and China agreed to resume trade discussions.
• The best performing sectors were industrials, financials and technology, while by geography, Argentina, Russia and Greece led the way, all posting double-digit returns.

Portfolio Strategy

• The Fund posted positive performance but underperformed its benchmark for the quarter. Poor stock selection in the information technology, health care and consumer discretionary sectors drove relative underperformance. On the other hand, stock selection in the industrials and utilities sectors benefited performance.
• Top individual detractors to performance in the period included Mylan, Inc. (Dutch generic drug manufacturer), Lenovo Group Ltd. (Chinese PC maker) and John Wood Group plc (U.K. oil services company). Mylan’s underperformance was driven by a combination of company-specific issues as well as continued pricing pressure on generic drugs. Although we believe the stock is deeply undervalued, the changing industry dynamics could have a permanent impact on profitability. We continue to closely monitor the investment. Lenovo fell due to trade-related concerns, though we believe company fundamentals remain quite positive. John Wood Group reported weak cash flow despite in line earnings.
• The top contributors to relative performance were Schneider Electric S.A. (French electrical equipment maker) and Standard Chartered plc (U.K.-based global trade bank). Schneider benefitted from a rebound in perceived cyclical industrials as well as strong quarterly sales updates that demonstrated robust, better-than-peer, organic growth. Standard Chartered performed well in light of increased stock repurchases as well as its liability-sensitive balance sheet benefitting from lower interest rates.
• We initiated three new positions this quarter, which included TechnipFMC plc (U.K. oil services company), Catcher Technology Co. Ltd. (Taiwan-based casing manufacturer) and Resona Holdings, Inc. (Japanese regional bank). TechnipFMC is a leading oil service company with a significant offshore presence. Recent disappointing guidance on earnings and cashflow has led to significant underperformance. Catcher Technology specializes in casing manufacturing for mobile devices such as the iPhone. Given the weakness of recent iPhone volumes, Catcher’s earnings and share price have seen a meaningful decline. With a cash balance that is more than 50% of its market capitalization and potential for further share gains with Apple over time, we see meaningful upside potential in the share price. Resona came under pressure recently due to lowered guidance. We see good synergy opportunities from its recent acquisition of three regional banks from Sumitomo Mitsui Financial Group.

Outlook

• Earnings forecasts have continued to drift lower, as they have since mid-2018, with more modest growth expected this year. Lower commodity prices and softer growth have weighed in particular on the industrials sector, while parts of information technology have also cooled down. In emerging markets, profit expectations have also fallen, but there are some signs of improvement recently. Fears of a U.S. recession remain top of mind, but aside from the yield curve inversion, there are scant tangible warning signs.
• Global headwinds continue to appear from leading economic indicators, with the U.S. now falling in line with the weak global backdrop. China's policymakers have stepped up the pace of fiscal and monetary stimulus, but credit growth remains subdued.
• We believe value stocks are trading at extremely depressed levels, and are excited by the opportunity to buy great franchises with potential for company specific improvement. Our largest exposures remain to highly cyclical sectors financials and industrials, while our smallest sector weights are in real estate, materials and utilities.

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, 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.

Top 10 equity holdings as a percent of net assets as of 06/30/2019: Schneider Electric S.A. 3.4%, Roche Holdings AG, Genusscheine 3.0%, Rexel S.A. 3.0%, ENEL S.p.A. 2.9%, Hitachi Metals Ltd. 2.8%, Tesco plc 2.8%, Volkswagen AG 2.7%, %, A.P. Moller-Maersk A/S 2.7%, Honda Motor Co. Ltd. 2.7% and Travis Perkins plc 2.6%.

Effective July 31, 2018, Pzena Investment Management, LLC replaced Mackenzie Financial Corporation as the sub-adviser of the Ivy Cundill Global Value Fund. In connection with the change in sub-adviser, the Ivy Cundill Global Value Fund has been renamed to Ivy Pzena International Value Fund. In connection with the change from the Ivy Cundill Global Value Fund to the Ivy Pzena International Value Fund effective July 31, 2018, the benchmark changed from the MSCI ACWI Value Index to the MSCI EAFE Index. The index was changed to more closely align with the Fund’s international investment approach.

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. 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. 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 value of a security believed by the Fund's manager to be undervalued may never reach what the manager believes to be its full value, or such security's value may decrease. These and other risks are more fully described in the Fund's prospectus.