Waddell & Reed Wilshire Global Allocation Fund


Market Sector Update

  • The U.S. Treasury yield curve flattened during the quarter but was up across all maturities, with short to intermediate yields up more than longer term rates. The 10-year Treasury was up slightly and finished the quarter at 2.33%. The U.S. Federal Reserve (Fed) announced it would begin trimming its $4.5 trillion balance sheet, which was accumulated following the global financial crisis.
  • Equity and fixed income markets generally moved higher around the globe. In U.S. equities, growth indexes again outperformed value.
  • Gains were broad based across Europe, with all of the major foreign markets in positive territory for the quarter. Economic news out of Japan was encouraging as surveys indicated that manufacturers were increasing output and factories were exhibiting less available capacity.
  • Growth in real gross domestic product accelerated more than originally reported for the second quarter and marked the strongest quarter since the first quarter of 2015. Both consumer and business spending contributed to growth, as did a shrinking trade deficit. A contraction in government spending was a detractor.

Portfolio Strategy

  • The Fund had a positive return for the quarter (before the effect of sales charges), closely in line with its benchmark. It ended the quarter with about 35% allocated to underlying fixed income funds, about 26% allocated to underlying domestic equity funds and about 40% allocated to underlying foreign equity and global real estate funds.
  • The “fund-of-funds” structure 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 24.7%, followed by Waddell & Reed Advisors Government Securities Fund at 9.3%.
  • The largest contributors to performance were the Fund’s allocations to Ivy Emerging Markets Equity Fund, Ivy International Core Equity Fund and Ivy Large Cap Growth Fund. The Ivy Emerging Markets Equity Fund had the strongest absolute performance among the underlying funds 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 cheap, we are not concerned about a global recession in the near term. Most of the world’s major economies are either continuing their expansion or accelerating their growth in gross domestic product. Coupled with improved sentiment and corporate earnings growth, 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.

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, 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.