Waddell & Reed Wilshire Global Allocation Fund


Market Sector Update

  • The U.S. Federal Reserve raised interest rates in June, the second hike this year. As short rates rose, the yield curve flattened through most of the quarter as oil prices weakened and optimism waned for Trump Administration-led stimulus.
  • Equity and fixed income markets generally moved higher around the globe. In U.S. equities, growth indexes again outperformed value.
  • European markets took a turn for the better, in part following the market-friendly election of Emmanuel Macron as president in France and a potentially reform-minded legislature.
  • The U.S. dollar continued to consolidate and weaken against the currencies of most trading partners, including the Mexican peso which is showing strength after a battering in 2016 following the U.S. presidential election.
  • U.S. economic data showed improvement, Europe’s economy continued its positive trajectory and economic growth moderated in China.

Portfolio Strategy

  • The Fund had a positive return for the quarter (before the effect of sales charges), but slightly trailed the return of its blended benchmark index.
  • The Fund ended the quarter with about 37% allocated to fixed income products, about 26% allocated to domestic equity products and about 37% 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. The Ivy International Core Equity Fund was the largest allocation to underlying funds during the quarter at about 26%, followed by Ivy Advantus Bond Fund at 10%.
  • At quarter end, the largest contributors to performance were the Fund’s allocations to Ivy Value Fund, Ivy International Core Equity Fund and Ivy Emerging Markets Equity Fund. Although Ivy International Core Equity Fund was a top performance contributor, our decision to overweight international equities in general was a mild detractor during the quarter.


  • 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 inexpensive now, we are not concerned about a global recession in the near term. Most of the world’s major economies are either continuing their slow expansion or accelerating their growth in gross domestic product. Coupled with generally accommodative central bank policies, we think this backdrop means most asset classes are likely to avoid a steep, short-term drawdown.
  • In the current investment environment, we believe the most compelling investment opportunities include foreign equities. We continue to overweight foreign developed and emerging market equities relative to U.S. equities.
  • Within fixed income, we favor credit issues over government securities. Although we have become somewhat more constructive regarding foreign fixed income versus domestic issues, we continue to prefer U.S. fixed income over the extremely low yields offered in most foreign developed markets.

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 June 30, 2017, 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.

Effective May 18, 2017, the Waddell & Reed Advisors Asset Strategy Fund was renamed Waddell & Reed Advisors Wilshire Global Allocation Fund and its investment strategy was changed to operate as a “fund of funds.” The Fund’s performance prior to that date reflects its former strategy; its performance may have differed if the Fund’s current strategy had been in place.

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.

Waddell & Reed Investments refers to the investment management services offered by Waddell & Reed Investment Management Company, the investment manager of the Waddell & Reed Advisors Funds, distributed by Waddell & Reed, Inc.