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Our Company
Ivy Investments
We stand for a legacy of expertise, focused on delivering strong, long-term results. Our name reflects our progressive product offerings and growing global presence as we continue to adapt to the needs of investors.
Quarterly Commentary
Ivy VIP Balanced
12.31.20
Market Sector Update
It is with great relief that we bid ‘good riddance’ to 2020. It was a year marked by historic economic, social and
political events which induced exceptional volatility in markets and unimagined changes in daily life. Encouragingly,
the quarter saw asset markets continue their advance that began in April as COVID-19 vaccines are distributed globally
and the U.S. looks to move past a contentious Presidential election.
The fiscal and monetary stimulus put in place over the last nine months have been a helpful tool to partially offset
the negative economic impacts from COVID-19 with encouraging trends in employment a notable highlight. During a
year of unprecedented events and ignominious records, it was heartening to see the S&P 500 Index close at a new
all-time high to end the calendar year – a record we don’t mind setting! However, the number of cases and deaths
resulting from the COVID-19 virus continued to grow. This is first and foremost a tragic human loss and secondarily a
continuing threat to the global economy. Our country is also in the waning days of a tumultuous election cycle with
meaningful changes to future policy direction which has contributed to uncertainty over the outlook. It is notable that
in the face of such significant headwinds and uncertainty, asset markets have posted a strong advance.
The S&P 500 Index, the Portfolio’s equity benchmark, advanced 7.6% with the energy, financials, industrials and
materials sectors leading the advance. While every sector saw positive returns, the traditionally defensive real estate,
consumer staples and utilities sectors trailed the index.
The Portfolio’s fixed-income benchmark, the Bloomberg Barclays U.S. Government/Credit Index, rose 0.8% as credit
spreads narrowed. The 10-year Treasury yield rose significantly to end the year at 0.92%, up 23 basis points (bps) from
the start of the quarter. The Treasury curve steepened sharply with the spread relationship between the 2-year and the
10-year Treasury bond at 79 bps, up from 56 bps at the start of the quarter. Investment-grade credit spreads narrowed
36 bps during the quarter to 92bps, well below the 20-year average of 146 bps and just 2 bps wider than when 2020
began.
Portfolio Strategy
The Portfolio posted double-digit gains during the quarter and outperformed its benchmark index and peer group.
Outperformance was driven by an overweight to equities and strong security selection in both the equity and fixedincome
sleeves. For the quarter, the Fund’s equity weight averaged 65%, fixed income averaged 34%, with the
remaining balance in cash.
Within the Portfolio’s equity sleeve, strong stock selection in the information technology and health care sectors as
well as overweight allocations to the financials and energy sectors were meaningful contributors to relative
performance. The quarter saw a broad-based rally, so detractors were few and far between. An underweight allocation
and poor stock selection in the materials sector hampered relative performance.
Positions in Micron Technology, Inc., Autodesk, Inc., Infineon Technologies AG, Goldman Sachs Group, Inc. and PNC
Financial Services, Inc. posted particularly strong results. Offsetting this strength was poor performance from Lowe’s
Co., Inc., Tractor Supply Co., O’Reilly Automotive, Inc., Northrup Grumman Corp. and Citigroup, Inc.
Within the fixed-income sleeve, our allocation to corporate credit was a meaningful contributor to outperformance.
Our underweight of Treasuries and strong security selection in the energy and industrial sectors were notable
contributors to relative performance. At the end of the quarter, the fixed-income sleeve had a duration of 7.3 years
which is modestly shorter than the benchmark.
Outlook
As we look ahead, global economic growth is likely to rebound meaningfully in the near term as economies re-open
and stimulus has its intended effect. However, we continue to expect heightened levels of uncertainty as governments,
businesses and individuals adjust to the necessary realities of combating a global pandemic. Our thoughts and prayers
go out to the growing number of people tragically impacted by this virus as well as to those working tirelessly to
contain it. As stewards of your capital, it is our responsibility to perform the seemingly cold-hearted but necessary
analysis of the financial impacts of this pandemic on markets and individual securities. To that end, we have modestly
increased our exposure to equities and begun to reduce our exposure to corporate credit. Late in the quarter, after a
strong run of performance, we began the process of reducing our exposure to investment grade and non-investment
grade credit with the proceeds invested in Treasuries which will serve to narrow the large underweight versus the
benchmark. At quarter end, the Portfolio’s equity allocation was 66.7%, fixed income was 32.6%, with the balance in
cash.
The economic impacts of COVID-19 are likely to be persistent, however, the experience of other countries provides
some hope and evidence that a sharp rebound in economic activity can commence once the spread of the virus slows.
We have begun to see this rebound domestically and expect it to continue in the short term in part due to the lagged
effects of fiscal and monetary stimulus put in place over the last several months. As economies recover, we are closely
watching inflation rates and inflation expectations, which have been modest and must remain so in order to allow
central banks to maintain their accommodative monetary policies.
While we continue to monitor macroeconomic forces and trends, we maintain an emphasis on finding perceived high
quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive
relative outperformance over the next twelve months. This approach has served investors well over time, and our
confidence in it has not waned.
The opinions expressed are those of the Portfolio’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, 2020, 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 S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-cap U.S. equity market. The index includes 500 of the top companies in leading industries of the U.S. economy.
The Bloomberg Barclays U.S. Government/Credit Index measures the performance of U.S. dollar-denominated United States Treasuries, government-related, and investment-grade U.S. corporate securities that have
a remaining maturity of greater than or equal to one year. In addition, the securities have $250 million or more of outstanding face value and are fixed-rate and non-convertible securities. It is not possible to invest
directly in an index.
Top 10 equity holdings as a percent of net assets as of 12/31/2020: Microsoft Corp. 3.2%, Autodesk, Inc. 2.2%, Apple, Inc. 2.2%, Zimmer Holdings, Inc. 1.9%, Constellation Brands, Inc. 1.9%, Electronic Arts, Inc. 1.8%,
The Goldman Sachs Group, Inc. 1.8%, Micron Technology, Inc. 1.7%, Lowe’s Co., Inc. 1.7% and Facebook Inc., Class A 1.6%.
The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets
in ways that cannot necessarily be foreseen. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.
Risk factors: The value of the Portfolio’s shares will change, and you could lose money on your investment. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Fixed-income securities are subject to interest rate risk and, as such, the net asset value of the Portfolio may fall as interest rates rise. The lower-rated securities
in which the Portfolio may invest may carry greater risk of nonpayment of interest or principal then higher-rated bonds. In addition to the risks typically associated with fixed-income securities, loan participations in
which the Portfolio may invest carry other risks, including the risk of insolvency of the lending bank or other intermediary. Loan participations may be unsecured or not fully collateralized may be subject to restrictions
on resale and sometimes trade infrequently on the secondary market. The Portfolio’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform nondividend
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 Portfolio 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. The Portfolio typically holds a limited number
of stocks (generally 45 to 55). As a result, the appreciation or depreciation of any one security held by the Portfolio will have a greater impact on the Portfolio’s net asset value than it would if the Portfolio invested
in a large number of securities. The value of a security believed by the Portfolio’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 Portfolio’s prospectus.
Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The
guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with
annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals.
Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.
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Ivy offers model delivery for nine equity strategies
Nine strategies are available in a model-delivery format, to be available in SMA and UMA accounts, providing advisors and investors a new way to access Ivy’s strategies.
Ivy InvestEdSM 529 Plan
A flexible, tax-advantaged 529 plan that allows you to invest for future education goals.
Invest in the future: Health care in emerging markets
Investors commonly see emerging markets as an asset class that requires market timing. That it comes in and out of fashion like turtlenecks and corduroys – just a short-term fad. However, don’t look for reasons this latest investment trend will soon end up in the donation pile.
Ride the cycle
The global economy stands at the dawn of a new business cycle. We outline what it could mean for investors.
Perfect Timing
March payrolls beat consensus estimates by 256,000, the largest one month increase since August. High-frequency data suggests gains in April and May could be greater than 1,000,000.
National Healthcare Directives
Discover how Five Wishes can strengthen client relationships.
10 ways to explain saving and finance to Millennials and Generation Z
How do you discuss finances with phone-obsessed generations? It helps by teaching them how they like to learn. Discover 10 ways to explain saving and finance to Millennials and Generation Edge.
Three plans every Gen Xer needs to consider before they turn 50
Xers - hitting the big 5-0 is a big milestone. Uncover the three essential plans you may want to consider to protect your family and yourself.
Ivy Investments
We stand for a legacy of expertise, focused on delivering strong, long-term results. Our name reflects our progressive product offerings and growing global presence as we continue to adapt to the needs of investors.
Quarterly Commentary
Ivy VIP Balanced
Market Sector Update
Portfolio Strategy
Outlook
The opinions expressed are those of the Portfolio’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, 2020, 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 S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-cap U.S. equity market. The index includes 500 of the top companies in leading industries of the U.S. economy. The Bloomberg Barclays U.S. Government/Credit Index measures the performance of U.S. dollar-denominated United States Treasuries, government-related, and investment-grade U.S. corporate securities that have a remaining maturity of greater than or equal to one year. In addition, the securities have $250 million or more of outstanding face value and are fixed-rate and non-convertible securities. It is not possible to invest directly in an index.
Top 10 equity holdings as a percent of net assets as of 12/31/2020: Microsoft Corp. 3.2%, Autodesk, Inc. 2.2%, Apple, Inc. 2.2%, Zimmer Holdings, Inc. 1.9%, Constellation Brands, Inc. 1.9%, Electronic Arts, Inc. 1.8%, The Goldman Sachs Group, Inc. 1.8%, Micron Technology, Inc. 1.7%, Lowe’s Co., Inc. 1.7% and Facebook Inc., Class A 1.6%.
The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.
Risk factors: The value of the Portfolio’s shares will change, and you could lose money on your investment. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Fixed-income securities are subject to interest rate risk and, as such, the net asset value of the Portfolio may fall as interest rates rise. The lower-rated securities in which the Portfolio may invest may carry greater risk of nonpayment of interest or principal then higher-rated bonds. In addition to the risks typically associated with fixed-income securities, loan participations in which the Portfolio may invest carry other risks, including the risk of insolvency of the lending bank or other intermediary. Loan participations may be unsecured or not fully collateralized may be subject to restrictions on resale and sometimes trade infrequently on the secondary market. The Portfolio’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform nondividend 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 Portfolio 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. The Portfolio typically holds a limited number of stocks (generally 45 to 55). As a result, the appreciation or depreciation of any one security held by the Portfolio will have a greater impact on the Portfolio’s net asset value than it would if the Portfolio invested in a large number of securities. The value of a security believed by the Portfolio’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 Portfolio’s prospectus.
Annuities are long-term financial products designed for retirement purposes. Annuity and life insurance guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. The guarantees have no bearing on the performance of a variable investment option. Variable investment options are subject to market risk, including loss of principal. There are charges and expenses associated with annuities and variable life insurance products, including mortality and expense risk charges, management fees, administrative fees, expenses for optional riders and deferred sales charges for early withdrawals. Withdrawals before age 59 1/2 may be subject to a 10% IRS tax penalty and surrender charges may apply.