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Delaware Focus Global Growth Fund Quarterly commentary March 31, 2015

Within the Fund

For the first quarter of 2015, Delaware Focus Global Growth (Institutional Class shares and Class A shares at net asset value) lagged its benchmark, the MSCI World Index (net). Strong relative performance in the financials and consumer staples sectors was unable to overcome weak relative performance in the consumer discretionary and industrials sector.

Novo Nordisk contributed to performance during the quarter. The stock reported financial results that were relatively in-line and experienced several positive regulatory developments during the quarter. The company reported positive clinical trial developments for several drugs used in the treatment of diabetes and obesity and European approval to begin marketing a drug to help in the treatment of obesity. We believe the company should continue to see a growing need for its products; unfortunately, diabetes is increasing globally due to rising obesity rates in developing markets and a growing middle class in emerging markets.

Start Today, a Japan-based company which operates e-commerce shopping and fashion related websites, also contributed to the Fund’s performance during the quarter. The stock appreciated as the company gave upward revisions to its earnings forecast; this was driven by strong progress in adapting its e-commerce platform towards wireless devices (smartphones and tablets). While increased cap-ex into this segment could decrease margins in the short-term, we believe it should lead to increased growth potential long term given strong secular demand for wireless and streaming technologies within the region.

Allergan also contributed to performance during the quarter. The stock appreciated as Actavis, a generic and specialty drug manufacturer, completed its acquisition of Allergan at a premium to its stock price. We continue to believe Allergan operates at a high level driven by the core ophthalmology franchise and by the broader use of Botox in both cosmetic and other medical indications. While we currently hold Actavis as a result of the completed acquisition, we are assessing the investment merits of a combined Actavis/Allergan entity.

Baidu was a detractor from performance during the quarter after reporting financial results and future guidance that were below expectations. While Baidu’s heavy capital investments in its mobile-related services is already providing growth for the company, its transition has affected margins and revenue, as mobile monetizes at a lower rate than its legacy desktop services. We agree with the heavy investment spending strategy and continue to believe the company stands to benefit widely from the proliferation of wireless and streaming technologies in China, which makes Baidu’s services even more accessible. We feel the company has upside potential given the sheer size of the Chinese market population and with ancillary businesses that are becoming significant drivers of growth including social media, multi-media sharing services, and mobile search.

Discovery Communications also detracted from performance during the quarter. The stock experienced weakness as the company reported financial results that missed consensus estimates; this was driven, in part, by weakness in U.S. advertising and the negative currency effect on revenues. While there are ongoing concerns related to weakness in U.S. TV advertising and rating trends, we continue to believe that the proliferation of pay-TV services within a growing middle class outside the United States is in strong secular growth (this is similar to the historical industry dynamics that have played out in the U.S. pay-TV industry). We believe Discovery Communications could be a key participant in that trend as the company continues to acquire non-U.S. brands and increase its global presence.

Localiza Rent a Car also detracted from performance during the quarter. While the company reported financial results that were relatively in-line, the stock experienced weakness as investors’ risk aversion toward Brazilian equities increased due to the challenging economic environment. Despite broader market sentiment, the rental car industry in Brazil typically grows faster than the general economy; therefore, we believe the growth outlook is quite favorable for a company like this. In addition, Localiza Rent a Car has shown its ability to shift from managing for growth to generating high cash flow streams in uncertain economic periods, which generally allows it to earn positive returns on capital in a variety of macro environments — a key characteristic for the Fund’s holdings.

Outlook

Despite positive absolute returns in the equity market during the past few years, we believe the relatively tepid market sentiment demonstrate that there are more than just fundamental factors affecting stock prices. A lack of significant bull market sentiment suggests to us that many investors appear to be struggling with accurately predicting the pace of global economic recovery and are assessing factors that threaten economic fundamentals (for example, central bank actions and fiscal policy debates across the globe). While some fundamentals in various geographies may be trending in a positive direction (from a very low base during the global financial crisis in 2008-2009), we don’t believe we are entering into a typical post-recessionary global boom cycle. Rather, we believe the lingering effects of the credit crisis years ago could lead to moderate growth, at best, for the intermediate term. In such a tenuous environment, we believe the quality of a company’s business model, competitive position, and management may prove to be of utmost importance.

Regardless of the economic outcome, we remain consistent in our long-term investment philosophy: We want to own what we view as strong secular-growth companies with solid business models and competitive positions that we believe can grow market share and have the potential to deliver shareholder value in a variety of market environments.

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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.

Performance

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 delawareinvestments.com/performance.

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 (03/31/2015)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)1.12%1.12%4.53%8.66%11.36%n/a17.50%12/29/2008
Class A (at offer)-4.69%-4.69%-1.50%6.53%10.06%n/a16.39%
Institutional Class shares1.16%1.16%4.79%8.95%11.59%n/a17.70%12/29/2008
MSCI World Index (Gross)2.45%2.45%6.60%12.82%10.62%n/an/a
MSCI World Index (Net)2.31%2.31%6.02%12.19%10.00%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.

Prior to Dec. 29, 2010, the Fund had not engaged in a broad distribution of its shares and had been subject to limited redemption requests. The returns reflect expense limitations that were in effect during certain periods and that may have been lower than the Fund's current expenses. The returns would have been lower without the expense limitations.

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

MSCI World Index (view definition)

Expense ratio
Class A (Gross)1.40%
Class A (Net)1.40%
Institutional Class shares (Gross)1.15%
Institutional Class shares (Net)1.15%
Top 10 holdings as of 05/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
QUALCOMM Inc.4.9%
Celgene Corp.4.3%
eBay Inc.3.7%
Novo Nordisk A/S3.7%
Zebra Technologies Corp.3.4%
Experian PLC3.3%
MasterCard Inc.3.2%
Start Today Co. Ltd.3.1%
Actavis plc3.1%
Visa Inc.3.1%
Total % Portfolio in Top 10 holdings35.8%

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

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

Jackson Square Partners, LLC (JSP) is the sub-advisor to the Fund. As sub-advisor, JSP is responsible for day-to-day management of the Fund’s assets. Although JSP serves as sub-advisor, the investment manager, Delaware Management Company, a series of Delaware Management Business Trust, has ultimate responsibility for all investment advisory services.

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.

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.

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

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

Not FDIC Insured | No Bank Guarantee | May Lose Value