Ivy Wilshire Global Allocation Fund

Ivy Wilshire Global Allocation Fund

Market Sector Update

  • The U.S. stock market, represented by the Wilshire 5000 Total Market Index, was up 14.5% for the quarter and 20.8% for the year. Although Coronavirus infections are accelerating and many cities are re-imposing restrictions, both consumer and business surveys are moderating at encouraging levels. However, job growth has slowed dramatically and initial jobless claims remain at what would normally be historic levels. The big news on the virus front is the commencement of vaccine distribution, but that does not mean we are close to any normalization of everyday activities. Equities may appear to be “priced for perfection” but are not necessarily expensive, given very low government bond yields, and a rebound in economic growth and earnings may be supportive of strong equity returns in 2021.
  • All eleven sectors were in positive territory this quarter, with energy (+29.1%) and financials (+24.9%) representing the best performing sectors. There was significant dispersion among sectors, with the main laggard being consumer staples, up +7.0%.
  • Equity markets outside of the U.S. also enjoyed a strong quarter, with emerging markets outperforming all developed markets. The U.K. was on a path to recovery, but concerns about a new variant of the COVID-19 virus have led to renewed restrictions and the withdrawal of social accommodations granted for holiday gatherings. A second wave of infections is hindering other European countries as well, and the European Central Bank (ECB) responded by expanding its money-printing program by hundreds of billions of euros. Among the largest countries within emerging markets, South Korea (+29% in local currency terms) and Brazil (+26%) led the gains this quarter. China was up +11% and we believe the Chinese economy is poised for growth this year.
  • The U.S. Treasury yield curve was up across most maturities during the quarter after a dramatic drop earlier this year. Although the curve is down meaningfully for the year, the long end managed to push above 1.50% by year end. The 10- year Treasury yield ended the quarter at 0.93%, up 24 basis points from September. The Federal Open Market Committee met twice during the quarter, as scheduled, with no change to their overnight rate, which they expect will be near zero through at least 2023. The Committee reiterated its pledge to support the economic recovery, including an increase in its bond-buying activities. Credit spreads continued to tighten during the quarter, boosting investment grade and high yield returns.

Portfolio Strategy

  • The Fund uses a fund-of-funds structure that allocates assets among affiliated equity and fixed income mutual funds with both domestic and foreign investment strategies. As of quarter end, Ivy International Core Equity was the largest underlying fund allocation at about 13.1%, followed by Ivy Value Fund at 9.9%.
  • The Fund posted positive performance for the quarter, outpacing its blended benchmark return. Global equity markets sold off in October, followed by a large rebound in November, spurred by the announcement of positive results from late-stage vaccine trials and continued support from central banks. Virtually every major asset class rallied during the quarter, many reversing losses posted in October. The U.S. dollar weakened during the quarter, boosting the returns of unhedged foreign equity and fixed income investments.
  • The Fund ended the quarter with approximately 34.5% allocated to fixed income funds, 35.0% allocated to domestic equity funds, about 30.4% allocated to foreign equity and global real estate funds, and 0.1% allocated to private placement investments.
  • The three largest contributors to performance in the quarter were the allocations to Ivy International Core Equity Fund, Ivy Value Fund and Ivy Emerging Markets Equity Fund. Ivy Small Cap Core Fund was the underlying allocation with the strongest absolute performance during the quarter. Ivy Government Securities Fund recorded the worst standalone performance for the quarter, as high-quality U.S. government fixed income trailed virtually all risk-on asset classes during the quarter. The Fund’s small allocation to illiquid Private Placements was written down during the quarter, costing a small decline to overall Fund performance.


  • The Fund’s allowable allocation ranges are accommodating, but we anticipate equity-oriented investments will range from 55-75% and fixed income-oriented investments will range from 25-45% during most market environments. The Fund’s long-term strategic target is a 65% allocation to global equities and 35% to global fixed income.
  • Following a marked selloff in October, markets rallied in November as the outcome of the U.S. Presidential election became clearer and investor sentiment was buoyed by positive news on vaccine approval and distribution. Equity markets met further optimism in the fourth quarter as the passing of a stimulus package and ongoing support from central banks sustain hopes for continued momentum toward global economic recovery. However, the strength and pace of that recovery remain dependent on a number of variables (such as the trajectory of COVID-19, reopening of schools, further policy support, etc.), which are uncertain, implying that market volatility may increase going forward.
  • Although COVID-19 statistics, by most measures, worsened in the fourth quarter, vaccine approval, distribution and administration to those most at risk suggest that future surges may be more effectively managed and therefore not as severe as we have seen thus far. Furthermore, many safety protocols put in place to prevent the spread of COVID-19 have also limited the transmission of influenza, providing reasons for cautious optimism that flu season may not compound the rise of infections as heavily as feared. Any full market recovery will require being able to welcome children back to school and workers back to offices safely, which may still be months away, but an approved vaccine certainly provides a potential path in the right direction.
  • We do not foresee interest rates rising dramatically in the near future and the Federal Reserve is unlikely to increase the Fed Funds Rate through 2023. At some point the massive borrowing being done by the federal government to combat COVID-19 and stimulate the economy may lead to sharp increases in the interest rate demanded for U.S. Treasuries, but we do not believe rates will rise materially in the coming months.

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, 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.

All information is based on Class I shares.

Wilshire Associates sub-advises a portion of the Fund consisting of the multi-asset segment, which invests in affiliated mutual funds, and shall have no responsibility over any other assets or segments of the Fund.

The Wilshire 5000 Total Market Index is an unmanaged index that represents the total U.S. equity market. It is not possible to invest directly in an index.

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. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. The performance of the Fund will depend on the success of the allocations among the chosen underlying funds. 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. Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Investing in small-capitalization stocks may carry more risk than investing in stocks of larger more well-established companies. Although larger companies tend to be less volatile than companies with smaller market capitalizations, returns on investments in securities of large-capitalization companies could trail the returns on investments in securities of smaller companies. Investing in companies involved in one specified sector may be more risky and volatile than an investment with greater diversification. Investing in the energy sector can be riskier than other types of investment activities because of a range of factors, including price fluctuation caused by real and perceived inflationary trends and political developments, and the cost assumed by energy companies in complying with environmental safety regulations. Investing in commodities is generally considered speculative because of the significant potential for investment loss due to cyclical economic conditions, sudden political events, and adverse international monetary policies. Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. 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.