Market Sector Update

• The U.S. stock market was up more than 7% on broad indexes in the quarter, marking the strongest quarter in nearly five years. Large-capitalization stocks outperformed their small-cap counterparts and growth stocks continued to outpace value stocks.
• In U.S. dollar terms, equity markets outside of the U.S. produced mixed results, with developed markets posting mildly positive returns while emerging markets continued their downturn. Although global trade continues to be a major issue, the U.S. made positive strides during the quarter with a preliminary renegotiated trade deal with the European Union and a finalized deal with South Korea, the first completed pact under the current administration.
• The U.S. dollar rose marginally during the quarter.
• U.S. bond markets were slightly higher during the quarter. The U.S. Treasury yield curve rose across all maturities, with the biggest increases in the short- to intermediate-term segment of the curve. The bellwether 10-year Treasury yield ended the quarter at 3.05%, up 20 basis points from June.
• The U.S. Federal Reserve increased overnight interest rates by 25 basis points in September to a range of 2.00% to 2.25%.
• Real gross domestic product grew 4.2% on an annualized basis during the second quarter of 2018. Net exports contributed 1.06% while personal consumption added 2.6% to real economic growth during the quarter.

Portfolio Strategy

• The Fund had a positive return for the quarter (based on Class I shares), but underperformed its blended benchmark index.
• The Fund ended the quarter with about 34.8% allocated to fixed income products, about 30.6% allocated to domestic equity products and about 34.6% allocated to foreign equity and global real estate products.
• 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, the Ivy International Core Equity Fund was the largest underlying fund allocation at about 15.1%, followed by Ivy Value Fund at 8.2%.
• The three largest contributors to performance in the quarter were the allocations to the underlying Ivy Value Fund, Ivy Large Cap Growth Fund and Ivy ProShares S&P 500 Dividend Aristocrats Fund. The Ivy Large Cap Growth Fund was the underlying allocation with the strongest absolute performance during the quarter.

Outlook

• The Fund’s allowable allocation ranges are wide, 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.
• Although global equities are not cheap, we are not concerned about a global recession in the near term. Nearly all of the world’s major economies are continuing their economic expansion. Coupled with strong producer and consumer sentiment and corporate earnings growth, we continue to believe this backdrop will allow most asset classes to avoid a steep and protracted drawdown.
• In the current investment environment, we continue to believe the most compelling equity investment opportunities include foreign equities. In our Fund allocations, we remain overweight foreign developed and emerging market equities relative to U.S. equities, though we reduced the level of overweight during the past quarter.
• Within fixed income, we moved further underweight in duration because of our belief that the short end of the domestic yield curve will continue to rise and the overall yield curve will continue to flatten or perhaps invert.

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 Sept. 30, 2018, 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.

W. Jeffery Surles, CFA, became a co-portfolio manager on Feb. 5, 2018. Co-Portfolio Manager Cynthia Prince-Fox retired from the firm on April 30, 2018.

Waddell & Reed Advisors Wilshire Global Allocation Fund merged into Ivy Wilshire Global Allocation Fund on Feb. 26, 2018. The returns prior to this date reflect the performance of Waddell & Reed Advisors Wilshire Global Allocation Fund, which was incepted on March 9, 1995. Ivy Wilshire Global Allocation Fund adopted that performance as the result of a reorganization in which it acquired all assets and liabilities of WRA Wilshire Global Allocation Fund. Prior to the reorganization, the Ivy Wilshire Global Allocation Fund had no assets and had not commenced operations.

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.

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.