Mid-Year Outlook: Derek Hamilton
July 28, 2020
October Ivy Live transcript
Speakers: Brad Warden, Adi Kapoor, Charles John
Jeff: Good afternoon. Welcome to Ivy live the United States has long been the Envy of the world when it's come to technological development. But today that is changed when you've looked for bleeding edge technology. Excuse me in the past. There's one place to turn Silicon Valley. That story is getting bit old Asia's emerged as a fierce competitor in many Technologies and is dominating some countries such as Korea Taiwan and China have made great strides in Industries such as semiconductors Robotics and flat screens. Asia has moved Way Beyond region known primarily for cheap assembly. However, strategic concerns among Western economies may be becoming a headwind.
Asia’s drive to become the epicenter of technological development. We'll talk about it. Thanks for joining. We have a new broadcast platform. So I want to highlight a few things on the bottom. You can open Move minimize and maximize the icons to your personal preferences. The icons are relatively self-explanatory. But to highlight a few send us your questions throughout the live event from the Q&A icon and be sure to register for the next Ivy live consumption disruption. Let's get to the topic at hand. Thank you, Adi, Brad, Charles for joining Adi. I want to start with you. You know, let's go through and we're going to talk about, you know technology and technological development in Asia today. So kind of run us through the importance of technology and Technology to growth in emerging markets today.
Adi: Yeah. Thank you. So today technology out of Asia has certainly become more of a controversial term, especially after vice president. Mike Pence's speech but I think it's important to put things in context and let me start there last year China spent two point one percent of its GDP on R&D that number in absolute terms has quadrupled in the last ten years for context United States. It's still ahead this pin number we spent about three percent of our GDP on R&D and you know, there's certainly a component of like, where is this R&D going and a lot of this R&D might be going towards older Industries like Autos or consumer durables and I think in those Industries there quickly catching up to where the West Was but there's also
I think if you just limit your understanding of what's happening in Chinese technology or Korean and Taiwan technology to like to your point like just assembly and things like that. That's not correct. There are Industries where they are clearly ahead of where the West is. So mobile internet is one of the most obvious ones Ally Pay has 500 million users using their mobile wallet. I mean, it's incredible you go to China these days you can buy your vegetables and fruits from the side stall using your phone. I mean, you can do pretty much you don't need to carry a wallet when you're in China. It's also in technologies that are entirely new for the West as well. So in those Technologies which are which are just new things like AI Cloud CRISPR on the gene editing side, these are areas where nobody has an edge.
These are you know new things that just started happening over the last four or five years. And in those China is
as at par and in some cases ahead of where the West might be where the U.S. Might be because so for instance in AI you know, there's just the amount of data they generate from their mobile economy just far greater and that's a key determinant of like how strong AI will be a technology will be they have the Privacy consumer privacy is not a big deal in China as big of a deal. It is in the United States. So that also allows them access and do more things with data. So that's allowing them to compete and maybe even out compete in some of these newer areas and I think it all reflects. It's like one thing I seriously believe in is if you wanna buy technology and growth in technology, there are two places to do it. You can do it in the S&P.
28% of the Benchmark is technology and consumer services part of the technology. So media and entertainment part where which has companies like Google Etc or you can do it in the Emerging Markets Benchmark. So, you know some of the top companies in our Benchmark Tencent is the Facebook equivalent TSMC is the Intel equivalent Samsung I would say is the Apple equivalent Baba obviously is the Amazon equivalent and I in some ways I'm kind of doing a disservice by comparing them to comparing Baba to Amazon because guess what Baba also has the leading payments platform. So it's actually very similar. So it's about 24% of our Benchmark today is lever to technology.
Jeff: That's MSCIEM?
Adi: That's an MSCIEM that compared to 28% for SNP and that's up from roughly 10 percentage points like it used to be 10 percent 10 years ago. So things are moving very fast. And these companies are becoming big at a very fast pace and becoming increasingly more important. I mean, if you go to an if you go to if you compare that to a Benchmark that number stands at about 8% so you're exactly right. I mean if you have to buy technology, there are two places to do it. It's in US and it’s in Asia. I know the markets have been down and all these stocks are down 20 30 percent year-to-date, which is important to put things in context. There's going to be a retail in China and Alibaba will have 70 percent share of that. Like, you know, they have a 70 percent share of that online retail and that's not going to change very much. So, let me just stop there for like as a starting point to our conversation.
Jeff: Yeah, and you mention how important it is to specifically China and the Far East but it's not only what they've done. I mean their continued we've got a China 2025 plan where they're going to the state's going to invest billions and billions of dollars in these Leading Edge Technologies, and we'll talk a little bit more about this later. I know companies like Ali Baba, Tencent, they spend billions every year buying, and you know startups in Silicon Valley to gain a technological Edge that way so they are very aggressive.
Adi: Right they absolutely are I mean, it's incredible. So this year alone, we've got two new IPOs from China. These are companies from valuation of 20 to 40 billion dollars Pinduodo 7:38 these are companies that are five to seven eight-year-old companies and here trunk. They are doing business worth 80 billion 70 to 80 billion dollars each. I mean, it's incredible that in five six years. If you just kind of put your mind it like they can take 60 80 billion dollar’s worth of local Commerce or e-commerce business through those platforms. It's incredible how fast these companies are growing a third of the companies today a third of the Unicons in the world companies with a value startups with the valuation of billion-dollar are coming from China and Korea.
Charles: And Jeff to your point on where they going to go in 2025. I think there are three plans today the 250 billion dollar plan for Telecom where they want to innovate their this 250 billion dollars for AI and there's another 250 billion dollars of semiconductors. So you talking about three quarters of a trillion that they're going to spend in the next 10 years to out-compete the US which is some serious money that they're throwing at the problem.
Jeff: Yeah. Yeah, which may be leading to other problems which you know, we talked about that Brad we talked about how important technology is today and Aid mentioned kind of going from you know, basically China and maybe 15 years ago. They were they were about they were contract manufacturing and today not only China but Korea Taiwan it I mentioned in the opening produced Leading Edge components to go to the Electronics kind of walk us through there and tell us how we got there.
Brad: Yeah. I mean, it's interesting to think about the history of technology and kind of How It's migrated across the world. I mean you think back to Silicon Valley which I know is in the title of this and you think back to the discovery of the transistor and the development of that and Intel and all of the technology around that in Silicon Valley in the US and then a lot of the production of those early things were Fabs that were built in the US. Well that started to migrate other places. It went to Japan Taiwan really carved out a niche for being very good at technology and that which some of that was outsourced manufacturing but also it was know how it was people it was capability but a big part of it was cost to and so if you think about how this is developed across the Emerging Markets one, once you develop the capabilities and proven that out in the quality, which I would say in a lot of cases the quality that we see now coming out of the Emerging Market is actually better than what you get domestically but what happened then is then you go. You start thinking about China. Well, obviously you had labor Arbitrage right you think about basically every iPhone comes out of there that's built by hundreds of thousands of people that are working for Ho Hai you think about all of that type of infrastructure that's been built on the basis of the high level of quality that can be delivered out of those Emerging Markets. So number one, I think as we have evolved it's been this migration to where there's talent that is capable of doing these things but it's also been an Arbitrage on wage and labor rates in a lot of cases and beyond that then you started to build an indigenous which you know, Charles just spoke to in terms of the capabilities that now you learn initially right in terms of things you think about Korea Samsung a few decades ago was thought of as a really inferior quality now a lot of cases their technology leads everything else. That's one where again they learned and they learned and learned and began innovating on top of that learning.
Jeff: They're the leader in OLED for instance?
Brad: OLED, right? So every OLED screen that comes on an iPhone now or on a Galaxy phone and in a lot of cases LG right the in TVs all of those then come out of that. And again, I wouldn't call Korea and necessarily an emerging market now, but it started in that way and that technology has grown out of that and to add he's Point talking about CRISPR and some of these things the patent portfolio if you look at the patterns that are filed in a lot of cases AI mentioned you mentioned CRISPR I mention all these things the patents that are being you see the US and China on a number basis really neck and neck and I think that's where you can see and start to recognize the Innovation that's coming out of Asia and I think as we look forward you would you would expect that China a lot of the labor that that Arbitrage on wage is kind of starting to move out a little bit in the tariffs we
About the tariffs later, but that's having a little bit of a motivating Effect 2, but now you're starting to see it migrated to places like Vietnam which I visited a couple times and visited factories there before Samsung LG have Leading Edge factories around OLED based outside of Hanoi Intel has a Fab near Ho Chi Minh City. So you have more Talent there again that that can do these types of high-tech manufacturing and other things maybe not as much Innovation right now, but that will happen in that market as well. And so what China is really starting to do now is try to automate so in a lot of cases you think of cheaper labor or things like that. I think that's absolutely not right. Now what's happening is China's trying to automate a lot more things. They're not only for a quality, but because it's becoming harder and harder to find more people and what they worry about is if you automate that can keep the cost down and keeps those jobs from re-migrating to other places. And so there's a lot of undercurrents that are going on right now.
But maybe one more thing I'll add just from an Emerging Market standpoint is that if you look at the demographics across Emerging Markets, you know, Adi talked about Ally Pay as a platform. There's not this this burden of history in a lot of cases whether it's in you think about land lines for telephones or some of these things a lot of these places. They can really they've skipped all of that. Right and they can go straight to the most Innovative types of solutions and then a large part of that is the adoption of the technology is greater because most of the population may be under 30 or 40 years old. So it's a lot easier to adopt that technology which then Grant you comfort which then allows you to innovate even more quickly. So these are the types of things that as we as investors, look at that gets us really excited because there is a huge runway for growth and these different pockets and where it's going to come there's massive amounts of opportunity right now as you think Beyond just what we may you think about as a Silicon Valley from a western point of view?
Jeff: Yeah, the Legacy technology point it is just is always been fascinating to me. It's not like, you know a Verizon here in the USA in the u.s. It's still paying for 2G and 3G deployment. Right. Now you just get 5 G and that's all you've got very efficient that way. So the title of this is kind of the new Silicon Valley and we aren't quite there yet. But you know and maybe it's not one Silicon Valley. Maybe it's 2 we can talk about that. But is it is Asia East Asia? Are they five years from now? Are they going to be on par with the US as far as where you go to get bleeding edge technology?
Brad: I think from my perspective. I think you still have some period of time right but in terms of I look at different and I think it's a question that can be parsed into many different areas because they're going to be areas where the US make keep an advantage and in particular areas inside of semiconductors or there may be things like memory, right? China's really made a big push Charles mentioned the real Focus to build an indigenous type of semiconductor because China really relies a lot on buying semiconductors from outside the country and that's a that's a national imperative for them that they can be self-sufficient in that and so they have to acquire the technology in the capability and the know how to do that because it's a very challenging thing to do. So, I think it's going to take time for that type of leading Innovation and Leading Edge capability, especially on the semiconductor side, but there's no doubt about it. You look at a company like a Huawei right that's in China and their chip Engineers are every bit as good as a lot of the guys that are sitting at Intel and so you there's absolutely that that's coming down the pike but I do think there will continue to be pockets and areas that still the guys that have the Deep knowledge and know-how and the patents and the libraries and all that behind.
it will stay ahead but I think as you look to things you mentioned the OLED, right? I mean OLED’s a perfect example, BOE and China is one that's coming online right now and there were yields are going up significantly in OLED. I think they will be challenging Samsung and LG and OLED. I mean in the real short near term and then may surpass them. So I do think that there's still a lot of technology that I think is will stay where it is right now, but it's going to be caught up in past whether it's in five years or ten years. I think we start looking at 10 years. That's a timeframe given the amount of capital. They're investing I think becomes a much more interesting landscape in terms of that especially as you start continue to LeapFrog Technologies. I think you mentioned 5G from a technology standpoint as that technology rolls out. That's a technology that's largely been developed not only at Qualcomm, but at Huawei at Samsung at all these guys in the patents that are shared across them can be will change how that technology is adopted where when all of those things too. So I do think that the next 10 years are probably the most exciting in Asia and emerging markets in terms of what they can do.
Adi: Yeah, I think like Innovation, you know is not always disruptive. It tends to be what I creative. So like in things like it's not, you know to the semiconductor industry. The lead that is has in the United States. It's not going to go away and it can go away only if you allow the Chinese companies to like by a player who's built their product in technology over multiple decades then reach that is why done that is 5 and here comes the review. Yeah, and that's why they're so worried in the President Trump's Administration is so worried about not allowing those Acquisitions to go through because if you let them do that then then then then they just Leap Frog Decades of innovation that happened. But at the same time like I said before in newer areas AI CRISPR Quantum Computing, they will be neck and neck and to Charles’ point. They're going to put every resource that they have to make sure that in the end in the era of in the technologies that we compete on in the next two decades. They're on par with the United States because it's a strategic imperative as well as an economic imperative that they do that.
Jeff: So let's talk about some of this Leading Edge technology Charles. Yeah. Go ahead take it away.
Charles: Yeah, you know, maybe I'll just talk about two companies that may not be household names is one is HiSilicon. The other one would be Hans’s laser and so HiSilicon is a technology company embedded inside of Huawei. It's a private company, but they make they've done a lot of progress. They made a lot of progress in creating some of the Leading Edge Chips in the world Hikvision, you know to add this point. They China already has companies that are number one in the world today Hikvision for example is number one and in cameras and any kind of surveillance gear and they use chips made from a HiSilicon just a few months ago. HiSilicon came out with chips that had AI enabled in them and what this does for you as a consumer is you can put if you have three cameras on your phone this AI chip it looks at you take a picture and in real time. It looks at three hundred different types of you know, background and images and it gives you the best picture that's what it's doing today. And they're one of the first companies that came out with an AI embedded feature inside a chip and they going, you know neck to neck with call with companies like Qualcomm, which is you know, they have close to forty five thousand patents. They've been at this business for about 30 years and they're going to keep innovating at a staggering rate, you know, and everything that probably makes if its PlayStation gear if it’s smartphones they use HiSilicon chips. And so, you know, that's one company that I think, you know five years from today 10 years from today. They're going to be maybe a lot larger than some of the Western European or American companies. And if you go back in history, you know, 10 or 15 years ago. If you asked an engineer from Alcatel-Lucent or Nortel what they thought of the Chinese and no one would have imagined these companies would be so large and so dominant Nortel’s bankrupt the extinct and Alcatel-Lucent is now part of part of Nokia. And so and today the company Huawei which owns HiSilicon they are close to number one in market share for 4G and potentially for 5G as well. Then you move to some of the newer economy areas like lasers and Hans laser is one of the largest laser companies in China. They are about seven times larger than the next competitor and just like, you know, I think in the last since 1971 until came up with Moore's Law and innovating and silicon. There was a huge amount of cost downs and dollars per transistors and that led to you know, PC is your smartphone's every device we have at home and the same thing has happened with lasers in the last 10 years. You've had just cost Downs by some of the Leading Edge companies in the world. And so what's enabled a company like Hans laser to do is take this technology from a US company called ipg and then they are selling lasers to every Industrial company out there in China and guess what, you know, maybe the industrial companies in Europe have a seven-year replacement cycle the new factories in China are buying the latest gear and if you are old they're changing these Technologies every two years and so you've got a huge market and if you fast forward, maybe five years from now Hans laser might end up being one of the largest laser companies in the planet because if you think of India in your things like Brad talked about like automation, you know,
Laser enables a lot of those features and so you and these are just two examples you've got lots of other examples in China where you know, they have good technology and I was in and changing a few months ago. I met with this company and they have some really Innovative management techniques, you know where Hans laser allows they've gotta think like 18 or 20 different operating divisions and they give each of the executives a hundred percent autonomy. They can hire their own people. They can they can be flexible depending on how quickly the end markets are changing and this is a Chinese company which has like a fairly Innovative management structure. And so this notion of them being, you know, 10 20 years behind. I think that's a bit of a stale concept and we should recognize that some of these companies are going to be fairly Innovative and they might be very formidable competitors.
Jeff: So now I'm going to put you on the spot a little bit. Yes, we've mentioned automation a few times a you know, that's going to be really important as we go forward robotics. I know Chinese government throwing a lot of money in that direction that's been an area that in the past has been dominated by Japan more or less learned or there any ideas there?
Charles: Yeah. So when you think of automation, you know in a broadly you can think of it as you know one is just Vision you can think of Robotics and you can think of something like lasers and I think you know, the one of the more topical things just in the past has been Global Supply chains and how they're relocating around the world, you know, Brad brought that up and I think one of the biggest stumbling blocks companies are facing today is we just met with a large are Japanese company that is changing that is relocating to Mexico some of the supply chain. They can't hire enough heads. And so if you run into labor issues, which is going to be a problem in every country, you know, then I think the next step is to try to get automation equipment. And so, you know some of the companies that could benefit from this would be robotic companies and vision companies like Cognex and Keyence you've got Han’s Laser, you’ve got IPG in the U.S. So you've got all these semiconductor analog companies that provide sensors that go into all this automation equipment.
Jeff: Which by the way are really cheap right now too.
Charles: That's right. That's right. So with this Market meltdown, you know, I think as you get this complex supply chain getting, you know shifted about and changed automation. I think it's going to be a very topical theme and we definitely spending a lot of time looking at stocks that might benefit from it.
Jeff: Now Brad in here in the news over the past few weeks and it's probably nothing new but maybe the US government is just hitting us over the head with it. There's been you know, kind of some talk about maybe some security issues with getting equipment from countries in Asia, you know, can you fill us in a little bit what that's about and maybe the repercussions from that and I think the repercussions are things we've already mentioned, but we can we can get into that a little bit more.
Brad: Yeah. I mean, I think what Jeff's referring to is the idea? I think there was a Bloomberg article a couple weeks ago that talked about potentially a chip that's being implanted along the supply chain into basically motherboards that go into on virtually every server across the globe and there was some concern that that was showing up at Amazon and Google and a lot of other things and even at some of the parts of the defense companies and I think this is something that isn't necessarily a new revelation in terms of governments or people utilizing technology obviously to gather information and intelligence. I think the West has done it for a long time. Should it be a surprise that Asia or China or anybody is trying to do similar things? I don't think so. I think that's something that I think underlying all technology security is an area. Obviously that is a big investment Focus for has been for us for a long period of time and I think it's going to continue to be even more important and people are going to continue to double and triple and quadruple check what they have in their data centers and how they're protecting that intellectual property. And I think a lot of the geopolitical things that have been going on right now are exactly that the concern I think out of the Trump Administration that intellectual property is being compromised and that there are certain things that are being taken and that advantage that then can be exploited. And so I think that's a big part of what is this tariff and a lot of the things that are going on right now, but the fundamental thing here and I think as we've talked about it and looked at it and debated it internally is the idea of a secure supply chain, right? So I think everyone right now is stepping back and saying, okay not only do I need to look and see where my stuff is coming from if I have to worry about 25 percent tariffs and that kind of thing now, there's only a limited amount you can do that to Charles point on people. I mean, you got to have people if you think about just taking okay think there was a Wall Street Journal article about just making the iPhone in the u.s. What you got hundreds of thousands of people involved in that in China and to pick that up and be able to just replicate it in the US and do it and do it effectively. I mean, it's a virtual impossibility in the near term. It would take years and years to replicate that and so but making sure that that supply chain has Integrity is something that I think is going to get more and more focus and that's something that we're looking at in terms of ways to do that whether it's through software different things that analyze whether it's Chip analytics looking at boards looking at servers looking at Behavior power utilization. There's a lot of different things that you can do to look at that but also new technologies, which I know we've come up with and talked in the past about blockchain, right? I mean you think about things that can optimize and ensure that the product that you are shipping me from another country is secure and I know that it's been secure through the entire process there are different things like that that we can utilize so I think they'll be a real scrutiny on
Supply chains in the near term as a result of this whether or not this this article there was some question of whether the article was true or not certain companies denied it all that I don't I think that's irrelevant at this point. I think the important point is the fact that people are going to step back and look at their supply chains. Look at what they put into their data centers or on their desktops and make sure that that's secure and that they're not compromising what most every company in the world thinks of as their core competence and their intellectual property that they built through investment through R&D and all of these things over a long period of time.
Jeff: Yeah, when I think about this, I just think about the Trump Administration and I think this is very strategic to them that not only maybe to try to keep a leader position in technology, but you know at the end of the day for example of China said, we're not going to ship motherboards out anymore. Basically the tech industry across the world would stall. So the supply chain is going to have to be diversified over time.
Charles: No, it doesn’t have to be diversified, but you also to keep in mind there was one guy who wrote this may this point that in a place like Korea takes you 28 days to get a construction permit in Bangladesh. It takes you two hundred eighty days. So you just don't shift things to two countries without you know, seeing the kind of repercussions.
Jeff: But are there other countries where it's easy to do business where you know, five years from now, we're going to see a burgeoning tech industry.
Charles: Oh, absolutely. I think in Mexico Philippines Vietnam, they already have clusters of manufacturing and I'm sure they could scale them pretty quickly. But you know, I think these don't happen overnight, they'll happen in the long run and they'll be some stocks that will benefit from it some that that won't
Brad: And that's really why China's been successful right? I mean, they've been able to go out and say, okay we're going to Grant you this land clear it in a week and start construction, right? I mean there was very limited amount of push back on that and I think that gave them a great Advantage which also means that they're going to have that Advantage when they say we're going to put this money to work as a country and dictate this is going to work basically and then go out and go after it and I think that's a very powerful thing. Once you take out the bureaucracy of Permitting or all these factions that may and a lot of markets to corruption. Right? I mean outside that that their ways that that business has been done for a long time and a lot of countries that where that's I mean it just it won't be tolerated.
Adi: There's a reason why they've done so well like it's still not the first ones to do this export-oriented growth model. They have certainly executed well on the infrastructure side and this whole shifting Supply change the way more complicated topic then I think we can imagine because you know with every production facility that you have there's a lot of components that go into a certain phone that might be getting assembled in China but not every country has that production base of raw material guys because you can't just import everything like that.
Trade is a very complicated issue to and the supply change these days are so lean that you know, we're just not the world is not set up to overnight move anything. So in the near term will be very difficult to move a whole lot of anything. And yes, there would be some countries which are better placed but there's a reason why so many things are happening in China. That's because they made it very easy for businesses to do that over there.
Jeff: We have seen I know probably everybody this is but we've seen some evidence of some pushback against kind of alleged long time alleged wrong doers and Huawei and ZTE which may be offering some new opportunities for some companies that maybe haven't been thought very highly of for the past few years and Nokia and Ericsson.
Nokia the com equipment group does these companies have been you know one I think horribly run but to the returns have been poor because their customers beat them on pricing, you know for the last few decades and but you're getting to this point where one is just four players left so that the industry is Consolidated you've got this thing called 5G which is happening next year and that could be really beneficial for these companies but more importantly for Nokia and Ericsson which have dominated the US and Europe if companies like Huawei and ZTE are they take less share over time in places like Western Europe or Australia or India or Japan and you see evidence of that, you know, you see articles just in the last few weeks talking about contracts being awarded to Ericsson over Huawei then suddenly these start and that's something we always look at just a change in narrative. What is happening to this industry if you had to price aggressors that are not capable of being in your markets anymore? That's great for your returns for your margins and so it's something you know, we're monitoring closely and you know, the changes it’s at things are happening so fast right now, but it's something that that we are focusing on and to your point. I think you know if they are blocked companies like Nokia and Ericsson could benefit in the long run.
Jeff: Yeah. Yeah good stuff our times up. Thank you all for joining us today. As a lot of great information. Be sure to register for November's Ivy live as we discussed the health of the US consumer heading into 2019 and our outlook for the retail sector. We can't rely on tax cuts to drive additional spending and cops will be tough too much of a head wind tune in to find out thanks for joining we leave you with our promo for November.
Several technical terms and acronyms where used throughout the recording. GDP is Gross Domestic Product, R&D is Research and Development, the MSCI EAFE Index is an equity index which captures large and midcap presentation across 21 developed markets countries, AI is artificial intelligence, Labor arbitrage is the practice of searching for and then using the lowest-cost workforce to produce products or goods. Block chain is a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.
The opinions expressed are those of the panel and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through the date of the event, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This 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. Risk factors: Investing involves risk and the potential to lose principal. Investing in companies involved in one specified sector or in a single asset class may be more risky and volatile than an investment with greater diversification. 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.
IVY INVESTMENTS® refers to the investment management and investment advisory services offered by Ivy Investment Management Company, the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds and IVY VARIABLE INSURANCE PORTFOLIOS℠, and the financial services offered by their affiliates.