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Delaware Global Real Estate Opportunities Fund Quarterly commentary September 30, 2015

Within the Fund

For the third quarter of 2015, Delaware Global Real Estate Opportunities Fund (Institutional Class shares and Class A shares at net asset value) had a slight negative return but outperformed its benchmark, the FTSE EPRA/NAREIT Developed Index.

The outperformance was driven primarily by strong stock selection, though allocation was also a contributor during the quarter. Currencies had a modest positive effect.

We maintained the Fund’s overweight in the United States, given what we view to be strong real estate fundamentals and discounted valuations. While this positioning did not help in the first half of the year, it contributed to Fund performance in the third quarter from both an allocation and stock selection perspective. Year to date, the Fund’s U.S. holdings are now its largest contributor. In general, the Fund benefited during the quarter from overweight allocations to the apartment and self-storage sectors, which are more economically sensitive due to their short-term leases. Public Storage was the Fund’s strongest performer, gaining 15.8%. As the largest owner of self-storage units in the U.S., the company has strong fundamentals driven by increased demand from a falling homeownership rate and virtually no competition from new supply. AvalonBay Communities, which gained more than 10%, realized strong demand at its coastal apartment communities that are exposed to markets with high job and wage growth.

Hong Kong (-16.7%) and Singapore (-18.8%) — despite being the weakest-performing markets for the quarter — were actually two of the stronger contributors to relative performance, as a result of the Fund’s underweight in both countries. In Hong Kong, we realized good stock selection from the Fund’s holding in Hysan Development, a defensive retail landlord with mostly Hong Kong exposure. In addition, we avoided weak-performing companies with heavy exposure to mainland China. We held an underweight in Singapore, as it has suffered from its ties to the Chinese economy and a large supply threat from new development. Poor stock selection in Singapore only modestly offset some of the benefits from the Fund’s underweight allocation.

Germany and Sweden were notable detractors from Fund performance during the quarter. In Germany, although the Fund had exposure to its strong-performing residential market through Vonovia (formerly known as Deutsche Annington Immobilien) — which gained 13.8% — the Fund lacked positions in two outperforming residential companies, Deutsche Wohnen (+16.4%) and LEG Immobilien (+18.7%). During the quarter, Deutsche Wohnen agreed to acquire LEG, which boosted both stocks. In Sweden, we sold the Fund’s sole position in Fabege during the quarter. Ultimately, this underexposure to Sweden hurt relative performance, as the country gained 7.9% for the quarter.


The Fund remains overweight in the U.S., where we continue to see what we think are the most favorable opportunities with solid and predictable fundamentals, availability of capital, and meaningful discounts to net asset value. As mentioned last quarter, we are also seeing some attractive opportunities in Europe, as fundamentals have bottomed and there is potential for upside bias in cash flow expectations for certain companies. We have chosen not to overweight Europe, however, because in general we believe valuations are full. The United Kingdom offers attractive opportunities, in our opinion, as its rental rates and cash flow growth are among the highest in the world. While valuations are high in the U.K., we believe the growth potential could offset some of the valuation premium. Elsewhere, we have maintained the Fund’s underexposure to Asia due to the uncertainty surrounding China’s economy and its policies.

The outlook for credit and capital is an emerging theme that we are keenly focused on. Though capital has been readily available for institutionally backed real estate for the past several years, we are seeing signs that cost and availability could change for lower-quality or riskier assets. While not much yet has meaningfully changed, credit spreads have widened some. It’s uncertain how long credit markets’ status quo will last. As global growth slows, we want to be sure not to miss an inflection point, so we will continue to closely monitor the capital markets.

Overall, we continue to find what we believe are good investments at attractive valuations, and we think that heightened volatility may create occasional shorter-term investment opportunities as well.


The views expressed represent the Manager's assessment of the Fund and market environment as of the date indicated, 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. Information is as of the date indicated and subject to change.

Document must be used in its entirety.


The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of quarter-end (09/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)-0.17%-3.80%3.69%7.67%8.70%n/a1.28%01/10/2007
Class A (at offer)-5.93%n/a-2.26%5.58%7.43%n/a0.59%
Institutional Class shares-0.11%-3.77%3.79%7.89%8.94%n/a1.51%01/10/2007
FTSE EPRA/NAREIT Developed Index-1.42%-4.16%3.58%7.04%8.32%n/an/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

The Delaware Global Real Estate Opportunities Fund's performance information for periods prior to Sept. 28, 2012, reflects the performance of The Global Real Estate Securities Portfolio (the “Portfolio”) of Delaware Pooled® Trust, which merged into Delaware Global Real Estate Opportunities Fund (the “Fund”) as of that date. The performance information for Class A shares at offer has been adjusted to reflect the Fund’s current maximum sales charge. The Fund also has higher expenses than the Portfolio, including a Rule 12b-1 fee to which the Institutional Class of the Portfolio was not subject. Historical performance results at net asset value and offer prior to Sept. 28, 2012 have not been recalculated to reflect these expenses, but future results will be affected by them. The historical performance of the Portfolio would have been lower had it been subject to the Fund’s expense ratio.

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

FTSE EPRA/NAREIT Developed Index (view definition)

Expense ratio
Class A (Gross)1.78%
Class A (Net)1.40%
Institutional Class shares (Gross)1.53%
Institutional Class shares (Net)1.15%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Feb. 27, 2015 through Feb. 29, 2016. Please see the fee table in the Fund's prospectus for more information.

Top 10 holdings as of 10/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Simon Property Group Inc.5.1%
Mitsui Fudosan Co. Ltd.3.4%
General Growth Properties Inc.3.3%
Equity Residential2.9%
SL Green Realty Corp.2.6%
Public Storage2.5%
AvalonBay Communities Inc.2.4%
Sun Hung Kai Properties Ltd.2.2%
Host Hotels & Resorts Inc.2.1%
Total % Portfolio in Top 10 holdings29.3%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

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.

All third-party marks cited are the property of their respective owners.

Not FDIC Insured | No Bank Guarantee | May Lose Value