Delaware Corporate Bond Fund

Objective

Delaware Corporate Bond Fund seeks to provide investors with total return.

Strategy

The Fund primarily invests in corporate bonds, with a focus on bonds that have investment grade credit ratings. The Fund seeks total return through a combination of income and capital appreciation.

Fund information
Inception date09/15/1998
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDGCIX
CUSIP245908751

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

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.

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 month-end (07/31/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.39%0.52%3.74%6.36%6.85%7.15%09/15/1998
Barclays U.S. Corporate Investment Grade Index-0.25%1.49%2.49%4.84%5.37%n/a
Average annual total return as of quarter-end (06/30/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-2.58%0.05%-0.28%4.65%6.88%6.75%7.16%09/15/1998
Barclays U.S. Corporate Investment Grade Index-3.16%-0.92%0.75%3.23%5.11%5.19%n/a

Returns for less than one year are not annualized.

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

Expense ratio
Gross0.70%
Net0.69%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Nov. 28, 2014 through Nov. 30, 2015. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20152.70%-2.58%n/an/an/a
20143.70%3.60%-0.56%0.23%7.08%
20130.88%-3.45%0.53%1.77%-0.35%
20123.85%3.02%4.90%2.36%14.87%
20111.69%2.21%0.80%2.69%7.57%
20103.95%1.49%6.45%-0.65%11.57%
2009-1.91%14.70%11.73%2.95%29.39%
20080.04%-1.84%-6.60%0.07%-8.21%
20071.63%-0.64%1.25%1.28%3.54%
2006-0.43%-0.38%5.05%2.37%6.68%
2005-0.78%3.39%-0.96%0.51%2.11%

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

Portfolio characteristics - as of 07/31/2015
Number of holdings302
Effective maturity (weighted average) (view definition)10.81 years
Effective duration (weighted average) (view definition)7.16 years
Annualized standard deviation, 3 years (view definition)4.36
SEC 30-day yield with waiver (view definition)3.84%
SEC 30-day yield without waiver (view definition)3.78%
Portfolio turnover (last fiscal year)215%
Portfolio composition as of 07/31/2015Total may not equal 100% due to rounding.
Credits97.3%
U.S. government securities1.7%
Municipal bonds0.7%
Asset-backed securities0.3%
Top 10 holdings as of 07/31/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Pennsylvania Electric Co. 5.200 4/1/20201.2%
Apple Inc. 3.450 2/9/20451.1%
Verizon Communications Inc. 4.862 8/21/20461.0%
Regency Energy Partners LP / Regency Energy Finance Corp. 5.875 3/1/20221.0%
Marathon Oil Corp. 3.850 6/1/20250.9%
CVS Health Corp. 3.875 7/20/20250.9%
Morgan Stanley 4.350 9/8/20260.9%
AT&T Inc. 4.750 5/15/20460.8%
Omega Healthcare Investors Inc. 4.500 1/15/20250.8%
KeyBank NA/Cleveland OH 3.300 6/1/20250.8%
Total % Portfolio in Top 10 holdings9.4%

Holdings are as of the date indicated and subject to change.

Top sectors as of 07/31/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Financial institutions27.8%
Communications15.2%
Energy11.4%
Utility8.5%
Consumer cyclical7.0%
Technology6.7%
Basic Industry6.1%
Consumer noncyclical5.2%
Noncorporate5.1%
Capital goods2.2%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
20150.0000.155
20140.0600.260
20130.0960.271
20120.1890.280
20110.1360.317
20100.2710.341
20090.0000.338
20080.0000.297
20070.0000.325
20060.0000.320
20050.0210.309

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

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

Mike Wildstein

Michael G. Wildstein, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 13

(View bio)


Roger Early

Roger A. Early, CPA, CFA

Managing Director, Head of Fixed Income Investments, Executive Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy, President and Chief Executive Officer — Delaware Investments® Family of Funds

Start date on the Fund: May 2007

Years of industry experience: 39

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 21

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2014

Years of industry experience: 22

(View bio)


Kashif Ishaq

Kashif Ishaq 

Senior Vice President, Head of Investment Grade Corporate Bond Trading

Start date on the Fund: November 2013

Years of industry experience: 13

(View bio)


Paul Matlack

Paul A. Matlack, CFA

Senior Vice President, Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

Years of industry experience: 30

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 28

(View bio)


Christopher Testa

Christopher M. Testa, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: June 2014

Years of industry experience: 29

(View bio)


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

The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering pricenone
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.48%
Distribution and service (12b-1) feesnone
Other expenses0.22%
Total annual fund operating expenses0.70%
Fee waivers and expense reimbursements(0.01%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.69%

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

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 0.69% of the Fund's average daily net assets from Nov. 28, 2014 through Nov. 30, 2015. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

View printable commentary E-mail this page

This commentary is currently not available. Please check back later.

Delaware Corporate Bond Fund Quarterly commentary June 30, 2015

Overview

During the second quarter of 2015, fixed income markets experienced significant setbacks as rates rose across the yield curve and spreads widened in several key sectors. Intermediate and long maturities led the rate rise as liquidity became a problem. With regulatory blockages, a shrinking repo market, smaller capital commitments at many key trading counterparties, and ongoing market volatility, liquidity will likely continue to be a periodic challenge. Past experience shows that liquidity-based market setbacks tend to be sharp but brief without the sustained impact of deteriorating fundamentals. During the quarter, the Federal Reserve pointed to slightly more upbeat growth conditions and relatively balanced risks while seemingly heading toward an initial rate increase in the second half of 2015. This “most likely” Fed scenario still seems potentially off track since it would come despite recent U.S. dollar strength, lower commodity prices, and below-target inflation statistics. Rarely has the Fed begun to tighten in the face of these factors.

While the “liftoff date” for the initial rate hike has been the policy question of the year, the trajectory of any increases is quickly becoming the more important focus. It seems highly probable that the Fed will raise rates in an unusually gradual way during its next tightening cycle. The Fed’s caution may be based on the continued struggle to break out of the “muddle along” 2%-plus recovery, but it may also be driven by its recognition that other factors have already started the tightening process, such as the stabilization of its balance sheet and the strength of the U.S. dollar. Recently, economic forecasters have begun talking about U.S. growth accelerating into the 2.0–2.5% range in the second half of 2015. If those projections turn out to be accurate, the Fed has good reason to be cautious. The Fed’s own forecasts should also be a warning, as members of the Federal Open Market Committee (FOMC) recently reduced their 2015 gross domestic product (GDP) forecast to 1.8–2.0% growth, while sticking with their 2015 inflation outlook of 0.6–0.8%.

Domestic economic indicators were mixed during the quarter. In the labor market, initial jobless claims remained below 300,000 and manufacturing activity surpassed consensus expectations. However, the weak Purchasing Managers’ Index (PMI) number in June raised the possibility of a loss of momentum entering into the third quarter. Conversely, consumer demand and housing statistics provided a boost in sentiment. Those positives were further supported by the U.S. Commerce Department’s revised first-quarter GDP estimate showing a 0.2% contraction (compared with the previous estimate’s 0.7% drop), perhaps supporting speculation that port delays and harsh winter weather had affected growth. Second-quarter data showed the economy expanding again, but at a pace softer than forecasters were anticipating following the winter slowdown. Supporting a cautionary tone, core inflation rose less than forecasted during the second quarter, a sign that it may take more time to meet the Fed’s inflation goal.

Although the June FOMC meeting took on a more dovish tone, the Fed nonetheless maintained its policy target range of zero to 0.25%. Also, the FOMC was more specific in describing its criteria for raising rates: “further improvement in the labor market” (even though the unemployment rate is now back to spring 2008 levels) and convincing evidence that inflation (which has been running below target) is heading back to 2%.

The Barclays U.S. Aggregate Index recorded a negative return in the second quarter as even the poor returns from Treasury securities turned out to be better than those from corporate bonds. Financials were stronger than other investment grade sectors, with utilities significantly underperforming. U.S. dollar emerging market bonds and asset-backed securities (ABS) produced modest positive returns for the period.

Within the Fund

For the second quarter of 2015, Delaware Corporate Bond Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Barclays U.S. Corporate Investment Grade Index.

The investment grade credit market was weaker over the quarter, as the continued flood of new-issue supply fueled by merger and acquisition activity weighed on valuations. Increasing new-issue concessions caused a repricing of secondary levels, with spreads on the index widening from 129 basis points to 145 basis points, led by those health insurers and cable operators with increased event risk. (A basis point equals a hundredth of a percentage point.)

Security selection contributed to the Fund’s outperformance, enhanced by participation in the strong new-issue calendar. The recent heavy supply has come with above-average concessions, and investors have shown strong demand for those deals. An underweight to longer-dated issues within the electric utility space also benefited Fund performance, as the Treasury curve steepened over the quarter.

From a duration standpoint, our overweight to the intermediate segment or the “belly” of the curve — and a corresponding underweight to the long end — benefited Fund performance as domestic and global disinflationary pressures eased, which drove a “bear steepening” in the Treasury yield curve. We continued to use interest rate futures to manage curve and overall portfolio duration deviations relative to the index.

High yield represented an average of about 13% of the Fund’s portfolio for the period. The sector outperformed the overall benchmark and also proved beneficial for relative performance as the allocation was less sensitive to interest rate moves. Performance was strongest in B-rated securities, which generated positive returns.

Outlook

Our broad investment concern is the current disconnect between below-trend global economic growth and the quantitative easing–induced rise in financial asset values. Though the ultimate reconnection will most likely come through a sharp decline in asset values (fundamentals will prevail), predicting its timing is beyond difficult and carries its own risks. While bond markets will certainly feel the adjustment, stock markets will probably be at the center of the move.

Interestingly, a number of “outside the box” market factors are warning that this decline in asset values could come in the near future. In no particular order, U.S. equity markets have recently seen a meaningful reduction in the level of new highs while an old — but frequently worthy — indicator shows that the Dow Jones Industrial Average recently reached new highs while transports were making new lows. “Confirmation” is critical in momentum-based markets and now may be waning. Also, while the Shanghai Stock Exchange Composite Index has sustained an almost 20% pullback after a historic rally, the Japanese yen recently broke through key support and could be headed to much weaker levels. The connection here, of course, is that economic growth in China (and Asia as a whole) would be hurt by a further sharp decline in the yen. Finally, despite the apparent bounce in U.S. economic statistics over the past two months, a “relative to expectations” statistic, the Citigroup Economic Surprise Index, is pointing to weakness in U.S. data. In this very uncertain and volatile market environment, our goal is to position client portfolios with prudent levels of risk — levels that are reasonable and sustainable during market dislocations so that we can respond to market setbacks not by panic selling, but by opportunistic buying. .

The Barclays U.S. Aggregate Index is a broad composite that tracks the investment grade domestic bond market.

The Purchasing Managers’ Index or PMI, published by Markit Group, measures the health of the manufacturing sector.

The Dow Jones Industrial Average is an often-quoted market indicator that comprises 30 widely held blue-chip stocks.

The Shanghai Stock Exchange Composite Index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.

The Citigroup Economic Surprise Index is a rolling measure of beats and misses of indicators relative to consensus expectations.

[14962]

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.

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 800 362-7500. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

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.

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.

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

The Fund may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivative transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

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

The Funds are distributed by Delaware Distributors L.P., an affiliate of Delaware Management Holdings, Inc., and Macquarie Group Limited.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 08/28/2015)

Institutional ClassPriceNet changeYTD
NAV$5.74no chg-0.47%
Max offer price$5.74n/an/a

Total net assets (as of 07/31/2015)

$1.5 billion all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 07/31/2015)
RatingNo. of funds
Overall5153
3 Yrs4153
5 Yrs4135
10 Yrs590
Morningstar categoryCorporate Bond

(View Morningstar disclosure)

Lipper ranking (as of 07/31/2015)

YTD ranking66 / 208
1 year147 / 204
3 years24 / 173
5 years18 / 149
10 years9 / 101
Lipper classificationCorp Debt BBB Rated Fds

(View Lipper disclosure)

Benchmark, peer group

Barclays U.S. Corporate Investment Grade Index (view definition)

Lipper Corporate Debt Funds BBB-Rated Average (view definition)

Additional information