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

Within the Fund

For the second quarter of 2015, Delaware Global Real Estate Opportunities Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the FTSE EPRA/NAREIT Developed Index.

Currency impacts and country allocations hurt performance during the quarter. The Fund benefited from solid stock selection, though not enough to offset the aforementioned negative drivers.

The Fund’s overweight in the United States hindered performance, but we believe the rise in rates has been reflected in current U.S. real estate investment trust (REIT) pricing. The private markets are healthy with rising rents and limited supply. In our view, large pools of capital looking to invest in U.S. real estate can make that allocation cheaper on Wall Street than on Main Street (that is, REITs are cheaper than private real estate). We think private equity could be a buyer if these discounts persist, as multiple firms have raised large pools of capital.

Japanese exposure also detracted from performance. Japan remains our largest underweighted country in the Fund’s portfolio. For the quarter, Japan outperformed the benchmark return by approximately one-and-a-half percentage points, which caused a drag on Fund performance. Stock selection in Japan was suboptimal as we favor REITs, and therefore the Fund was less exposed to developers, which realized better returns during the quarter.

The Fund was also hurt by its exposure to Finland. While the benchmark has a minimal weighting in Finland, the Fund’s investment in Citycon (which declined 17.5%) created a drag from both a stock selection and an allocation perspective. Citycon, and Finland as a whole, performed poorly during the quarter, as the company conducted a rights offering to pay for a large portfolio acquisition; this created an overhang and pressured stock prices in Finland downward.

On the positive side, the Fund built on last quarter’s strength in the United Kingdom. Again, both allocation and stock selection were favorable and helped boost returns relative to the benchmark. The Fund’s investments in the U.K. were up 4.9% while the country as a whole was up 3.9%. The U.K. continued to benefit from the strength of the London market. Shaftesbury was the strongest position in the second quarter, returning 11.6%. Shaftesbury recognized industry-leading growth and demand from its in-place portfolio and several development schemes across London.

Stock selection in Hong Kong was another positive area for the Fund, as it more than offset the negative effect of our slight underweight to the country, which was the strongest region for the second quarter with a 4.0% return. In Hong Kong, we slightly increased exposure to companies with operations in mainland China because of the near-term effects of government efforts to boost growth. Long-term, however, we are concerned with mainland China, because of economic weakness and uncertainty, coupled with excess supply. As a result of our positioning in the quarter, the Fund’s strongest-performing holding was Kerry Properties (gaining 14.9%), which has 50% exposure to mainland China.


Global real estate equities have done a round trip this year: up 4.2% in the first quarter and down 6.7% in the second quarter, creating a year-to-date return of -2.8%. At midyear, global real estate lagged broad global equities, as measured by the MSCI EAFE Index, which returned 5.9% year to date. We have continued to expect volatility this year as interest rates and central banks are transitioning. We view much of this volatility as creating investment opportunity, but we realize that the timing and magnitude of market reactions are unpredictable in the short term. (Data: FTSE, Bloomberg.)

While we have made some adjustments in the portfolio, such as adding to the Fund’s European allocation, we continue to favor the U.S. For the foreseeable future, we believe that a variety of unpredictable macro and technical factors may cause markets and individual stocks to react with short-term dislocations. This may keep volatility relatively high. In our view, the biggest issue is how and when central banks decide to raise rates. Ultimately, however, we believe that fundamentals and cost of capital should rule real estate values across the globe. As we have said before, it could take time for the market to adjust to a directional change in rates. As this process creates dislocations between real value and implied values in the stock market, we continue to look for opportunities in this environment.

The MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index designed to measure equity market performance of developed markets, excluding the United States and Canada.


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

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 09/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Simon Property Group Inc.5.2%
Mitsui Fudosan Co. Ltd.3.6%
General Growth Properties Inc.3.1%
Equity Residential3.0%
Public Storage2.8%
Sun Hung Kai Properties Ltd.2.5%
SL Green Realty Corp.2.5%
AvalonBay Communities Inc.2.5%
Unibail-Rodamco SE2.0%
Total % Portfolio in Top 10 holdings30.1%

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