Delaware Investments Delaware Investments Delaware Investments
Print Banner

Print commentary

View printable commentary E-mail this page

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

Delaware Global Real Estate Opportunities Fund Quarterly commentary December 31, 2016

Within the Fund

For the fourth quarter of 2016, Delaware Global Real Estate Opportunities Fund Institutional Class shares outperformed the Fund’s benchmark, the FTSE EPRA/NAREIT Developed Index, and the Fund’s Class A shares at net asset value underperformed the benchmark.

The Fund’s quarterly returns were driven by strong stock selection in the United States and Japan and an underweight position in Hong Kong. Within the U.S., lodging stocks performed particularly strongly, driven by investor expectations of higher growth. Sunstone Hotel Investors was one of the Fund’s stronger performers, rising more than 20% during the quarter. Following the U.S. election, many economically sensitive sectors rallied on the belief that President-elect Trump would reinvigorate the economy. Lodging stocks immediately reacted, and Sunstone Hotel Investors was well positioned because of the quality and geography of its properties. Additionally, Fund performance was boosted by an underweight in some of the more interest-rate-sensitive, longer-duration lease sectors such as healthcare, as the rise in bond yields caused these stocks to fall during the quarter.

Within Japan, developer companies significantly outperformed Japanese REITs (or J-REITs, which are landlord companies), as developers are generally better able to offset the cost of higher debt. Coming off a strong quarter, Hong Kong real estate stocks fell by double digits during the fourth quarter. Much of Hong Kong’s real estate stocks’ rally in the middle part of 2016 was due the expectation that U.S. debt costs would remain low for a long time. As the potential for higher interest rates in the U.S. increased, the stocks fell. Because the Hong Kong dollar is pegged to the U.S. dollar, any rise in interest rates in the U.S. results in a rise in local funding costs. In addition, Hong Kong mortgages are short in duration and have floating rates, so they feel the impact of rising rates relatively quickly.

The Fund’s overweight position in Germany and poor stock selection in Singapore and the United Kingdom detracted from performance. Within Germany, the residential stocks corrected the most despite having good fundamentals. Germany’s Vonovia SE proved to be one of the Fund’s weakest performers, falling close to 14% during the quarter. German residential real estate benefited from investors’ desire for safety. As bond yields rose and investors sought higher returns in more risky investments, these stocks came under pressure. Within the U.K., Shaftesbury, a street retail landlord, fell more than 10% during the quarter. Shaftesbury owns what we view as some of the most attractive street retail properties throughout London, which performed well in the aftermath of the Brexit result, when investors sought safety. As investors targeted higher growth markets, the defensiveness of Shaftesbury became less important and the stock fell.


The fourth quarter of 2016, and much of 2016 for that matter, proved to be quite a volatile period. Events occurred that many thought were improbable. Central banks seemed to be trying to step back from influencing the markets, whether through “normalizing” rates or by through less quantitative easing, for example. While this has certainly increased volatility, we believe some positives may arise. In our opinion, an environment in which companies are rewarded or punished for their capital decisions is a much healthier environment than one in which companies are rewarded simply because of central bank policies.

The big question for 2017 and onward, in our view, is how will the world handle higher bond yields? Will growth surprise to the upside or disappoint? We expect higher volatility across most markets to continue throughout 2017. Bond market volatility has increased noticeably in the past few months, but so far credit has remained strong. We are closely watching the credit markets, which tend to signal any early signs of stress or disappointments in growth.

We continue to maintain the Fund’s large overweight in the U.S., given solid fundamentals of low supply and reasonable rental growth, and while the cost and availability of capital are still favorable. The Fund continues to invest in Europe, due to gradual but positive fundamental recovery in Spain, Germany, and France. The Fund’s positioning is weighted toward French office names and general exposure to multiple property sectors in Spain. We have started increasing the Fund’s exposure to certain areas in the West End of London given the large discounts there.

We maintain the Fund’s cautious positioning in Asia and the emerging markets. China’s slowdown has been managed thus far; however, risks have increased due to capital flight and continual government intervention. Despite Hong Kong’s recent rebound in home prices, we remain concerned about the longer-term prospects. Until stabilization is evident, we consider Asia a “value trap.” We intend to maintain the Fund’s underweight to Japan, Hong Kong, and most of Southeast Asia. The Fund currently has no investments in emerging markets given slowing growth and rising debt levels.


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 (12/31/2016)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)-5.46%3.76%3.76%6.19%10.00%n/a1.86%01/10/2007
Class A (at offer)-10.89%-2.19%-2.19%4.09%8.71%n/a1.26%
Institutional Class shares-5.27%4.18%4.18%6.52%10.27%n/a2.11%01/10/2007
FTSE EPRA/NAREIT Developed Index-5.39%4.99%4.99%6.78%10.33%n/a2.34%

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)1.72%
Class A (Net)1.40%
Institutional Class shares (Gross)1.47%
Institutional Class shares (Net)1.15%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Feb. 28, 2017 through Feb. 28, 2018. Please see the fee table in the Fund's prospectus for more information.

Share class ticker symbols
Institutional ClassDGROX
Top 10 holdings as of 02/28/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Simon Property Group Inc.3.0%
Welltower Inc.2.8%
Mitsubishi Estate Co. Ltd.2.8%
Deutsche Wohnen AG2.5%
Cheung Kong Property Holdings Ltd.2.4%
Brookdale Senior Living Inc.2.4%
HCP Inc.2.4%
AvalonBay Communities Inc.2.4%
Sun Hung Kai Properties Ltd.2.4%
Goodman Group2.2%
Total % Portfolio in Top 10 holdings25.3%

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