Ivy Science and Technology Fund

Ivy Science and Technology Fund

Market Sector Update

  • Equities rebounded from the significant decline in the final months of 2018 and largely recovered all losses from last quarter.
  • The reasons for this strong rebound were the dovish pivot by the Federal Reserve (Fed) on future interest rate tightening and optimism around the China trade dispute. While U.S. and China economic data continued to weaken through the quarter, the Fed’s actions and positive trade negotiation meetings supported a significant equity rally.
  • The S&P North American Technology Index, the benchmark for the strategy, increased nearly 20% in the quarter after the roughly 18% decline in the fourth quarter of 2018.
  • The broad snapback within the technology sector drove positive performance across the spectrum, regardless of market capitalization or subsector.

Portfolio Strategy

  • The Fund’s double-digit return significantly outperformed the benchmark during the period. Stock selection within information technology was the primary driver of outperformance. Euronet Worldwide, Inc. was the top individual relative contributor, while allocations to Universal Display Corp. and Aspen Technology, Inc. also contributed to outperformance.
  • The Fund’s underweight in some of the largest benchmark constituents, namely Amazon.com, Inc., Facebook, Inc., Apple, Inc., and Cisco was a drag during the period. The impact of the underweight positions was more than offset by the outperformance in the portfolio.
  • Despite strong performance, the Fund’s allocation to health care, a sector absent from the benchmark, detracted on a relative basis due to the strong rebound in technology equities.


  • The supportive factor for the technology and health care sectors is the constant pace of innovation. While we are highly cognizant of moves in the market, our three-to-five year timeline for investing allows us to take a longer term approach. For example, technology is going to be more critical going forward for companies to gain advantages. Data aggregation, data analytics, migration towards cloud computing, semiconductors – all are key areas we are positioned to take advantage of going forward. We expect cloud computing capex to bounce back in the second half of 2019, a meaningful contributor to how we view our investable universe right now.
  • We continue to be optimistic on semiconductors. The space has contributed strongly to information technology performance over the past couple years and we believe the emergence of new secular growth opportunities, like autos, machine learning and ubiquitous connectivity will continue to support above-market returns in the sector. While we remain constructive on semiconductors, we expect some level of volatility that likely creates compelling new opportunities for the Fund over the longer term.
  • We are carefully monitoring the technology supply chain and demand signals coming from key technology endmarkets. The U.S.-China geopolitical risk remains, but we are optimistic on the trajectory of these relations along with an expected rebound in technology spending in the next few quarters.
  • Our exposure in biotechnology remains a key area of innovation within health care and an area where we expect our holdings to outperform over the coming quarters. Gene therapy and personalized advanced therapies are the areas of groundbreaking research and innovation that should provide significant opportunities for investment.

The opinions expressed are those of the Fund’s managers for Class I shares 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 3/31/2019: Microsoft Corp. 9.2%, Euronet Worldwide, Inc. 5.8%, Aspen Technology, Inc. 5.1%, WNS (Holdings) Ltd. ADR 5.0%, Vertex Pharmaceuticals, Inc. 4.8%, ACI Worldwide, Inc. 4.7%, Universal Display Corp.: 4.6%, Apple, Inc. 4.5%, Micron Technology, Inc. 4.5%, Alibaba Group Holding Ltd. ADR 4.4%.

The S&P North American Technology Sector Index is a modified-capitalization weighted index representing U.S. securities classified under the GICS® technology sector and internet retail sub-industry. It is not possible to invest directly in an index.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. Because the Fund invests more than 25% of its total assets in the science and technology industry, the Fund’s performance may be more susceptible to a single economic, regulatory or technological occurrence than a fund that does not concentrate its investments in this industry. Securities of companies within specific industries or sectors of the economy may periodically perform differently than the overall market. In addition, the Fund’s performance may be more volatile than an investment in a portfolio of broad market securities and may underperform the market as a whole, due to the relatively limited number of issuers of science and technology related securities. Investment risks associated with investing in science and technology securities, in addition to other risks, include: operating in rapidly changing fields, abrupt or erratic market movements, limited product lines, markets or financial resources, management that is dependent on a limited number of people, short product cycles, aggressive pricing of products and services, new market entrants and obsolescence of existing technology. 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.