Delaware Limited-Term Diversified Income Fund

Objective

Delaware Limited-Term Diversified Income Fund seeks maximum total return, consistent with reasonable risk.

Strategy

The Fund invests primarily in investment grade fixed income securities, and maintains an average effective duration from one to three years. The Fund is generally diversified across multiple types of fixed income securities.

Fund information
Inception date06/01/1992
Dividends paid (if any)Monthly
Capital gains paid (if any)November or December
Fund identifiers
NASDAQDTINX
CUSIP245912506

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 (06/30/2015)
YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.78%0.87%0.19%1.55%3.56%4.36%06/01/1992
Barclays 1-3 Year U.S. Government/Credit Index0.72%0.93%0.94%1.17%2.83%n/a
Average annual total return as of quarter-end (06/30/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)-0.48%0.78%0.87%0.19%1.55%3.56%4.36%06/01/1992
Barclays 1-3 Year U.S. Government/Credit Index0.13%0.72%0.93%0.94%1.17%2.83%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
Gross0.68%
Net0.68%
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20151.27%-0.48%n/an/an/a
20140.57%0.77%-0.24%0.33%1.43%
2013-0.22%-2.19%-0.02%0.78%-1.66%
20121.24%1.34%0.60%-0.55%2.64%
20110.14%2.02%1.36%-0.60%2.94%
20101.99%0.25%1.73%-0.04%3.97%
20091.85%4.80%4.42%1.33%12.93%
20082.39%-0.93%0.22%0.69%2.37%
20071.57%0.01%2.20%2.61%6.52%
20060.07%0.50%2.46%0.84%3.92%
20050.03%1.50%-0.07%0.44%1.91%

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

Portfolio characteristics - as of 06/30/2015
Number of holdings623
Effective maturity (weighted average) (view definition)3.57 years
Effective duration (weighted average) (view definition)2.98 years
Annualized standard deviation, 3 years (view definition)1.60
SEC 30-day yield with waiver (view definition)1.36%
SEC 30-day yield without waiver (view definition)1.36%
Portfolio turnover (last fiscal year)80%
Portfolio composition as of 06/30/2015Total may not equal 100% due to rounding.
Credits60.4%
Asset-backed securities30.3%
Mortgage-backed securities6.6%
U.S. government securities1.7%
Commercial mortgage-backed securities1.1%
Top 10 holdings as of 06/30/2015
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
GEDFT 2012-2 A1.8%
COMET 2007-A1 A11.2%
CF 2014-1A A1.0%
BMWFT 2012-1A A0.9%
MAPS1 2013-1A A0.9%
Shell International Finance BV 2.000 11/15/20180.9%
Southern Co. 2.450 9/1/20180.9%
PFSFC 2013-AA A0.8%
CVS Health Corp. 2.250 12/5/20180.8%
NAVMT 2014-1 A0.8%
Total % Portfolio in Top 10 holdings10.0%
Top sectors as of 06/30/2015
List excludes cash and cash equivalents.
Sector% of portfolio
Investment grade credits53.2%
Asset-backed securities30.3%
MBS and CMOs6.6%
High yield credits4.2%
Emerging markets3.0%
Commercial mortgage-backed securities1.1%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
Return of
capital
20150.0000.0900.000
20140.0000.1650.001
20130.0000.1530.000
20120.0150.1880.000
20110.1250.2340.000
20100.0410.2590.000
20090.0000.3490.000
20080.0000.3600.000
20070.0000.3890.000
20060.0000.3760.000
20050.0000.3700.000

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. 

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)


Paul Grillo

Paul Grillo, CFA

Senior Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: February 1999

Years of industry experience: 34

(View bio)


Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: October 2013

Years of industry experience: 17

(View bio)


Brian McDonnell

Brian C. McDonnell, CFA

Senior Vice President, Senior Portfolio Manager, Senior Structured Products Analyst, Trader

Start date on the Fund: April 2012

Years of industry experience: 26

(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 table below 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 expenses0.20%
Total annual fund operating expenses0.68%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements0.68%

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

View printable commentary E-mail this page

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

Delaware Limited-Term Diversified Income 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 — both in Treasurys and other global sovereigns — and spreads widened in several key sectors. Intermediate and long maturities led the rate rise as liquidity was a problem at times, especially for sovereign bonds. 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 a range of 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%.

During the second quarter of 2015, yields on 10-year Treasurys rose from 1.92% to 2.35%, and yields on 2-year Treasurys rose from 0.56% to 0.65%. Rates rose steadily during the quarter, at times with great volatility. The 3-month T-bill / 10-year T-note curve steepened 45 basis points to 2.34% by the end of the quarter (a basis point equals a hundredth of a percentage point). The 1-month London interbank offered rate (Libor) remained essentially unchanged for the period, ending the quarter at 0.18%. (Data: Bloomberg.)

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

Delaware Limited-Term Diversified Income Fund (Institutional Class shares and Class A shares at net value) underperformed its benchmark, the Barclays 1–3 Year U.S. Government/Credit Index, for the second quarter of 2015.

Among the primary drivers of performance:

  • The Fund’s continued overweight in investment grade corporate bonds detracted from relative performance due to spread widening in the corporate sector.
  • Yield curve positioning also detracted, as the Fund’s intermediate and longer-duration holdings underperformed.
  • Individual security selection contributed to relative performance during the quarter.
  • The Fund’s overweight positions in short floating-rate ABS were a positive for performance and served to anchor the overall portfolio.

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 could most likely come through a sharp decline in asset values (fundamentals should 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.

[14907]

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.

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

The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.

If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.

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.

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.

Diversification may not protect against market risk.

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 08/03/2015)

Institutional ClassPriceNet changeYTD
NAV$8.520.011.07%
Max offer price$8.52n/an/a

Total net assets (as of 06/30/2015)

$1.1 billion all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 06/30/2015)
RatingNo. of funds
Overall3468
3 Yrs2468
5 Yrs3393
10 Yrs4276
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 06/30/2015)

YTD ranking70 / 186
1 year73 / 176
3 years130 / 148
5 years94 / 113
10 years40 / 86
Lipper classificationSht-Intmt Inv Grade Debt

(View Lipper disclosure)

Benchmark, peer group

Barclays 1-3 Year U.S. Government/Credit Index (view definition)

Lipper Short-Intermediate Investment Grade Debt Funds Average (view definition)

Additional information