Market Sector Update

• International markets rebounded from a weak end-of-year 2018, logging strong performance in the first quarter of the new year. While U.S. markets outperformed their international peers, international markets were also up significantly, with developed equities leading emerging market peers.
• With positive performance nearly the rule, growth stocks outpaced value equities. By geography, nearly every country posted positive performance, though Qatar, Turkey and Poland were down modestly.

Portfolio Strategy

• The Fund posted positive performance but underperformed its benchmark for the period. Poor stock selection in consumer discretionary, utilities and communication services were main relative detractors to performance in the period.
• Weakness in utility holding China Resources Power Holdings Co. Ltd. was a top individual detractor to performance. The company dropped significantly when it announced unexpected plans to cut its dividend. Other major detractors included advertising agency Publicis Groupe S.A. and telecommunications provider Vodafone Group plc. Publicis reported strong earnings, but organic growth was weak, heightening investor fears around industry topline expectations. Vodafone weakened in the quarter on continued fear around the sustainability of its dividend in light of mixed earnings results.
• Top contributing sectors included information technology and energy. Technology holding Lenovo Group Ltd. posted strong gains in light of improving earnings in its heretofore troubled server and mobility segments. U.K. builder merchant Travis Perkins plc performed well, beating earnings expectations, including much improved like-for-like sales growth. Also contributing strongly to Fund performance was energy services player Saipem S.p.A., which was up on signs of business recovery as well as progress on its self-help initiatives.
• During the quarter, we added asset manager Amundi S.A. and British American Tobacco plc to the portfolio. In our view, asset management industry valuations are compelling, and Amundi has a strong market presence and is an effective distribution leader across European markets. We believe British American Tobacco’s stock price has been pressured by industry concerns on reduced risk products as well as worries about U.S. market demand. We also added to Hitachi Metals Ltd., John Wood Group plc and Hon Hai Precision Industry Co. Ltd.

Outlook

• The U.S. Federal Reserve (Fed) reversed course, reacting to the market weakness and weaker global growth by becoming more patient after four rate increases last year. With the yield curve now inverted, market expectations are that the Fed now won’t raise interest rates again at any point in the next few years.
• We believe investors will continue to wrestle with ongoing Brexit negotiations, tariff and trade war rhetoric as well as fears of a sharp slowdown in China. These concerns are balanced against hopes for a trade deal between China and the U.S., Chinese domestic demand stimulus and more dovish central bank policy.
• While international markets voiced a sigh of relief in the quarter after a messy end of 2018, we believe valuations across the Fund remain compelling, with valuation spreads continuing to widen. Our largest exposures remain to highly cyclical sectors, financials and industrials, while our smallest sectoral weights are to 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 March 31, 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 03/31/2019: Travis Perkins plc 3.3%, Roche Holdings AG, Genusscheine 3.0%, Schneider Electric S.A. 2.9%, Telsco plc 2.9%, Hitachi Metals Ltd. 2.8%, Lenovo Group Ltd. 2.7%, A.P. Moller-Maersk A/S 2.7%, Honda Motor Co. Ltd. 2.7%, Volkswagen AG 2.7% and ENEL S.p.A. 2.7%.

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.

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.