Delaware Small Cap Core Fund


Delaware Small Cap Core Fund seeks long-term capital appreciation.


The Fund invests in stocks of small companies believed to have a combination of attractive valuations, growth prospects, and strong cash flows.

Fund information
Inception date12/29/1998
Dividends paid (if any)Annually
Capital gains paid (if any)November or December
Fund identifiers

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)3.31%14.37%19.87%18.05%8.19%11.15%12/29/1998
Russell 2000 Index3.54%12.03%17.90%15.27%7.61%n/a
Average annual total return as of quarter-end (06/30/2015)
QTDYTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.14%3.26%7.20%19.52%19.46%8.85%11.20%12/29/1998
Russell 2000 Index0.42%4.75%6.49%17.81%17.09%8.40%n/a

Returns for less than one year are not annualized.

Prior to Aug. 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. 12b-1 fees were waived for this period. Had 12b-1 fees been applied, performance would have been lower. Expense waivers were in effect for the periods shown. Performance would have been lower if waivers did not apply.

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
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return

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

Portfolio characteristics - as of 07/31/2015
Number of holdings142
Market cap (median)$1.64 billion
Market cap (weighted average)$2.15 billion
Portfolio turnover (last fiscal year)30%
Beta, 3 years (relative to Russell 2000 Index) (view definition)0.92
Annualized standard deviation, 3 years (view definition)11.82
Portfolio composition as of 07/31/2015Total may not equal 100% due to rounding.
Domestic equities96.2%
International equities & depositary receipts2.1%
Cash and cash equivalents1.7%
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
Casey's General Stores Inc.1.4%
West Pharmaceutical Services Inc.1.2%
Ligand Pharmaceuticals Inc.1.2%
G-III Apparel Group Ltd.1.1%
Popeyes Louisiana Kitchen Inc.1.1%
Kforce Inc.1.0%
Barnes Group Inc.1.0%
WNS Holdings Ltd.1.0%
Total % Portfolio in Top 10 holdings11.2%

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
Health Care15.3%
Capital Goods8.7%
Basic Materials6.9%
Business Services6.0%
Consumer Services5.3%
Consumer Discretionary4.2%
Consumer Staples3.0%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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. 

Francis X. Morris

Francis X. Morris 

Senior Vice President, Chief Investment Officer — Core Equity

Start date on the Fund: November 2004

Years of industry experience: 32

(View bio)

Chris Adams

Christopher S. Adams, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 27

(View bio)

Mike Morris

Michael S. Morris, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 22

(View bio)

Donald Padilla

Donald G. Padilla, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 28

(View bio)

McAfee Burke, CFA

Vice President, Portfolio Manager

Start date on the Fund: July 2015

Years of industry experience: 10

(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 fees0.75%
Distribution and service (12b-1) feesnone
Other expenses0.32%
Total annual fund operating expenses1.07%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.07%

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

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Delaware Small Cap Core Fund Quarterly commentary June 30, 2015

Within the Fund

For the second quarter of 2015, Delaware Small Cap Core Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Russell 2000® Index. Stock selection within the technology sector was the largest detractor from performance during the quarter, followed by capital goods and healthcare. The three stocks within the portfolio that detracted the most were all technology companies. On the positive side was stock selection in the consumer discretionary and consumer staples sectors. In addition, an underweight allocation to the utilities and real estate investment trust (REIT) sectors were contributors to returns (these were two of the weakest sectors within the Index).

Among individual stocks, FARO Technologies was the largest detractor during the quarter, declining 25%. FARO Technologies makes 3D documentation tools, laser scanners, and portable coordinate measuring machines that are used throughout the world in multiple industrial end markets. The company missed sales estimates and lowered guidance as a result of unfavorable foreign exchange effects. We remain positive about FARO — we believe the company has a strong balance sheet with a healthy cash position and is experiencing favorable sales of its laser scanner product.

Analog and mixed-signal semiconductor supplier Semtech declined 26% during the quarter. The stock performed poorly during the quarter due to a weak earnings outlook which was tied to the company’s exposure to Korean handset customers who have lowered build plans due to share loss to Chinese original equipment manufacturers (OEMs). We continue to like the stock, as we believe the company’s sales issues are transitory. Additionally, Semtech is leveraged to three strong secular trends: increased bandwidth and connectivity requirements, miniaturization and performance (smaller devices), and smart home/smart grid technology.

GrubHub provides an online platform and mobile application for ordering takeout and delivery from restaurants. Shares of GrubHub slid 25% during the quarter despite reporting better-than-expected revenue. The cause for the decline stemmed from concerns about rising expenses related to the build-out of the company’s delivery platform and the potential for increased competition. We maintain a positive view on GrubHub — the company is the dominant ordering platform in the United States, and we believe that the company’s investments back into its business are justified.

The Fund’s performance within the healthcare sector was positive during the quarter. However, the Fund trailed the returns of the healthcare sector within the Index. Of note, the two strongest-performing stocks during the quarter were in the healthcare sector. Specialty pharmaceuticals company, Ligand Pharmaceuticals, gained 31% and medical device company, DexCom, gained 28% during the quarter.

Ligand Pharmaceuticals develops programs that lead to licensing deals or acquires royalty revenue-generating assets with biotechnology and pharmaceutical companies. The stock was a strong performer during both the second and first quarters. During the second quarter, one of Ligand’s partners, Viking Therapeutics, executed an initial public offering. Ligand owns slightly less than half of the new public company. Ligand raised earnings guidance after the offering as the company is expected to book a healthy gain on the investment. In addition, Ligand’s revenues from the company’s fully funded partnership programs with its Captisol® technology continues to grow. Many leading large-cap pharmaceutical companies use Captisol for its ability to increase the solubility and stability of active pharmaceutical ingredients which, in turn, improves the development process of new drugs. We continue to favor shares of Ligand based on its diversified business model, multiple drug development partnerships, and what we see as an attractive pipeline of potential new drugs.

DexCom’s main business involves the development of continuous glucose monitoring systems for people with diabetes. The company’s shares appreciated nicely during the quarter as the company continues to book solid revenue from core businesses, in addition to experiencing positive trends from new wireless monitoring technologies. Although we remain positive on the company’s fundamentals, we began reducing the Fund’s position during the quarter — the company’s growth has led its market capitalization to appreciate to the point where it will graduate from the Russell 2000 Index to the Russell 1000® Index during the annual Russell reconstitution.

Stock selection within the consumer discretionary sector was the strongest contributor to relative performance during the quarter. Boot Barn Holdings is a lifestyle retail chain devoted to western apparel, footwear, and accessories. We added this name to the Fund’s portfolio in the first quarter of 2015 and it is performing well, up 34% during the second quarter. The company announced strong earnings in May and gave initial guidance on strong sales momentum. In early June, the company announced that it planned an immediately accretive acquisition of a western lifestyle competitor, Sheplers, that subsequently closed prior to the end of the quarter. Sheplers is a regional western lifestyle retailer with locations in Texas and the Southwest. The company has a successful e-commerce business which should significantly increase Boot Barn’s online sales. We continue to have a positive outlook for Boot Barn since it is still in the early stages of growth and has solidified its position as the largest western lifestyle retailer in the U.S.


A stronger dollar should continue to put pressure on larger-cap companies that generate sales overseas. We believe small-cap stocks remain a good way to leverage the strength of the U.S. economy as small-cap companies derive a significant portion of revenue domestically. The strength of the domestic economy has helped to push the consumer confidence reading back over the 100 mark. Consumer income and spending have increased, while unemployment continues to decline. Lower gasoline prices have the potential to further boost consumer spending, which should provide a tailwind to small-cap stocks. In addition, the Fund is overweight the restaurant industry, which seems to be in a good position to benefit from further improvement in consumer spending. Domestic housing momentum appears strong as evidenced by rising pending home sales in April and May. Historically, low mortgage rates, low housing inventory, and a steadily improving economy should support new construction activity over the medium term. The Fund has exposure to this opportunity via positions in building materials companies within the basic materials sector.

We believe the Federal Reserve will begin to raise rates most likely later this year, which supports our overweight in the finance sector. When rates increase, regional banks should benefit from net interest margin expansion. In addition, the portfolio’s small-cap banks are experiencing positive loan growth trends relative to their large-cap peers. The Fund is underweight yield sensitive sectors like REITs and utilities that do not look attractive to us in this environment and have suffered recently from rate sensitivity. Our research continues to favor companies with what we view as strong balance sheets and cash flow, sustainable competitive advantages, and high-quality management teams, which we believe have the potential to outperform over the cycle.

The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe.

The Russell 1000 Index is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership.


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.

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

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

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.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

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

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.

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.

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 08/31/2015)

Institutional ClassPriceNet changeYTD
NAV$19.73no chg-2.66%
Max offer price$19.73n/an/a

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

$925.3 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 07/31/2015)
RatingNo. of funds
3 Yrs5647
5 Yrs5577
10 Yrs4378
Morningstar categorySmall Blend

(View Morningstar disclosure)

Lipper ranking (as of 07/31/2015)

YTD ranking296 / 815
1 year71 / 802
3 years61 / 689
5 years16 / 611
10 years106 / 392
Lipper classificationSmall-Cap Core Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2000® Index (view definition)

Lipper Small-Cap Core Funds Average (view definition)

Additional information