2013 Outlook

Delaware Investments portfolio managers reflect on the market conditions of 2012 and share their various perspectives on 2013. The wide range of viewpoints reflects the diversity of opinion that exists at Delaware Investments.*

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Despite the volatility and macroeconomic uncertainty exhibited during 2012, Frank Morris of the Delaware Investments Core Equity team believes conditions around the world should be more constructive in 2013. He cites several factors to support his optimistic outlook, including:

  • valuations that remain attractive
  • strong corporate balance sheets
  • the low interest rate environment.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Francis X. Morris

Francis X. Morris

Senior Vice President,
Chief Investment Officer – Core Equity

(View bio)

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

As we head into 2013, we generally expect to see continued — though gradual — improvement in the global economy. Among the developments that are potentially on the horizon are the following:

  • Key emerging markets, particularly China and Brazil, may trend positively as their economies continue to show stability and avoid further reductions in estimates of GDP growth.
  • Accommodative policy options will likely remain on the table, especially if today’s environment of low interest rates (and low inflation) persists.
  • Further market gains will need to be supported by improving earnings prospects at the company level, versus being driven solely by higher-level policy initiatives.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Liu-Er Chen

Liu-Er Chen, CFA

Senior Vice President,
Chief Investment Officer – Emerging Markets and Healthcare

(View bio)

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

There's no denying that the U.S. tax code will be of immediate importance to municipal bond investors in 2013. But we believe it's important to consider municipal bonds in a broader sense, taking into account not just their exemption status, but also other conditions, including:

  • their consistently high levels of credit quality
  • their income-generating potential
  • their potential to benefit from certain technical factors.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Joseph R. Baxter

Joseph R. Baxter

Senior Vice President,
Head of Municipal Bond Department,
Senior Portfolio Manager

(View bio)

Substantially all dividend income derived from tax-free funds is exempt from federal income tax. Some income may be subject to the federal alternative minimum tax (AMT) that applies to certain investors. Capital gains, if any, are taxable.

Funds that invest primarily in one state may be more susceptible to the economic, regulatory, and other factors of that state than funds that invest more broadly. 

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt. 

The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

The Barclays Municipal Bond Index measures the total return performance of the long-term, investment grade tax-exempt bond market.

Standard & Poor's credit rating agency. Bonds rated below AAA, including A, are more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories, but the obligor's capacity to meet its financial commitment on the obligation is still strong. Bonds rated BBB exhibit adequate protection parameters, although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics with BB indicating the least degree of speculation.

Paul Matlack of the Delaware Investments Fixed Income team believes bond investors will witness distinct themes during 2013. Among them are the following:

  • The income component of the total return equation will be very important, particularly in light of the strong price returns posted in recent years.
  • Looking broadly across major fixed income sectors, we believe that the U.S. corporate credit space will stand out as an area of opportunity.
  • Interest rates will very likely remain low. While a meaningful uptick could theoretically happen, we believe the odds are against it.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Joseph R. Baxter

Paul A. Matlack, CFA

Senior Vice President,
Senior Portfolio Manager,
Fixed Income Strategist

(View bio)

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

Securities in the lowest of the rating categories considered to be investment grade (that is, Baa or BBB) have some speculative characteristics.

High yielding, noninvestment grade bonds (junk bonds) involve higher risk than investment grade bonds.

The Fund may also be subject to prepayment risk, the risk that the principal of a fixed income security that is held by the Fund may be prepaid prior to maturity, potentially forcing the Fund to reinvest that money at a lower interest rate.

Jeff Van Harte of the Delaware Investments Focus Growth Equity team discusses his outlook for global markets in 2013 and his belief that the team’s “research advantage” can identify quality companies, regardless of the economic cycle.

Learn more about the equity and fixed income investment teams at Delaware Investments.
Jeffrey S. Van Harte

Jeffrey S. Van Harte, CFA

Senior Vice President,
Chief Investment Officer – Focus Growth Equity

(View bio)

Because the Fund expects to hold a concentrated portfolio of a limited number of securities, the Fund’s risk is increased because each investment has a greater effect on the Fund’s overall performance.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

Ned Gray of the Delaware Investments Global and International Value Equity team reflects on several events that impacted global markets throughout 2012 and discusses his team's outlook for 2013.

He also discusses several issues that he believes could affect the global equity markets in the upcoming year. These include:

  • the evolving crisis in the euro zone
  • slowing growth in emerging markets
  • the team's focus on identifying what it views as the best undervalued companies in the world.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Edward A. Gray

Edward A. "Ned" Gray, CFA

Senior Vice President,
Chief Investment Officer – Global and International Value Equity

(View bio)

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

We believe that 2013 will likely bring periods of market fluctuations as investors interpret an abundance of monetary policy actions, fiscal austerity programs, and political developments around the world. Despite formidable macro-level headwinds, we believe:

  • Infrastructure companies are well-positioned for the year ahead, owing largely to the essential nature of the services they provide.
  • Many investors will be on a so-called "hunt for yield," generating demand for equity investments that deliver sustainable levels of income.
  • Rates of return will vary widely at the individual security level, putting a premium on fundamental, company-by-company research.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Brad Frishberg

Brad Frishberg, CFA

Managing Director,
Chief Investment Officer of Infrastructure Securities – Macquarie Funds Group

(View bio)

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors. Because the Fund concentrates its investments in securities issued by companies principally engaged in the infrastructure industry, the Fund has greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities.

"Nondiversified" Funds may allocate more of their net assets to investments in single securities than "diversified" Funds. Resulting adverse effects may subject these Funds to greater risks and volatility. Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

Macquarie Capital Investment Management LLC, an affiliate of Delaware Distributors, L.P., is the Fund's sub-adviser. The sub-adviser is responsible for the investment management of the Fund's assets.

Ty Nutt and Carl Rice discuss their team's long-term optimism, despite several risk factors that may potentially cause volatility in 2013. The team continues to focus on several key portfolio themes for 2013, including: quality, cheap valuations, and managing downside risk. They also discuss attributes of companies they believe may have a good chance of outperforming the broader market in the new year. These attributes include:

  • strong cash flows
  • diversified business models
  • relatively high dividend yields.
Learn more about the equity and fixed income investment teams at Delaware Investments.
D. Tysen Nutt Jr.

D. Tysen Nutt Jr.

Senior Vice President,
Senior Portfolio Manager,
Team Leader

(View bio)

Carl D. Rice

Carl D. Rice, CFA

Vice President,
Senior Investment Specialist

(View bio)

 

Value investing focuses on buying stocks that are trading at bargain prices based on fundamental analysis, then holding them until they become fully valued. Typically, value investors select securities with lower than average price-to-book or price-to-earnings ratios and/or high dividend yields.

Diversification may not protect against market risk.

The P/E ratio is a valuation ratio of a company's current share price compared to its earnings per share.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

The S&P/Case-Shiller 20-City Home Price Index measures the residential housing market, tracking changes in the value of single-family housing in 20 metropolitan regions across the United States.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.

The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.

2012 has been a year of prolific monetary policy actions worldwide. Bob Zenouzi, chief investment officer for the Real Estate Securities and Income Solutions team, shares the team's opinions on what this might imply for 2013. Among the team's views:

  • It's quite likely that monetary measures have not been as successful as central bankers might have anticipated.
  • In 2013, investors will likely pay a premium for assets that can deliver competitive yields, particularly as they go further out on the risk spectrum.
  • The cost and availability of credit may be among the key market drivers.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Babak Zenouzi

Babak "Bob" Zenouzi

Senior Vice President,
Chief Investment Officer – Real Estate Securities and Income Solutions (RESIS)

(View bio)

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations. A REIT fund's tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.

Nondiversified Funds may allocate more of their net assets to investments in single securities than "diversified" Funds. Resulting adverse effects may subject these Funds to greater risks and volatility.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.

Chris Beck continues to attempt to position his portfolios to take advantage of current conditions as well as three macroeconomic themes he believes could benefit small- and mid-cap stocks in 2013. These themes include:

  • an accommodative Fed policy
  • healthy corporate balance sheets
  • a revival in mergers-and-acquisitions activity.
Learn more about the equity and fixed income investment teams at Delaware Investments.
Christopher S. Beck

Christopher S. Beck, CFA

Senior Vice President,
Chief Investment Officer – Small-Cap Value / Mid-Cap Value Equity

(View bio)

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the U.S. stock market.

The Russell 2000 Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

*The views expressed in each outlook represent the Manager's assessment of the market environment as of December 2012, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's current views. The views expressed in each outlook are general in nature and do not relate to a particular mutual fund.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting the fund literature page or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

IMPORTANT RISK CONSIDERATIONS

Investing involves risk, including the possible loss of principal.

Certain statements made here are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: "believe," "anticipate," "expect," "estimate," "project," "will," "shall" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services or products, future performance or financial results, and the outcome of contingencies, such as legal proceedings. The protection afforded by the safe harbor for forward-looking statements provided by the PSLRA are claimed hereunder.

Due to the uncertainty inherent in forward-looking statements, actual results or economic conditions may differ materially from those anticipated in the forward-looking statements.

Investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligations to update any forward-looking statements to reflect events or circumstances that occur after the date of this document.