Delaware Investments Delaware Investments Delaware Investments

Delaware Diversified Floating Rate Fund


Delaware Diversified Floating Rate Fund seeks total return.


The Fund generally invests at least 80% of net assets in a diversified portfolio of floating-rate securities.

Fund information
Inception date02/26/2010
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
Payroll DeductionYes

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 (09/30/2016)

as of quarter-end (09/30/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.62%1.97%1.02%2.06%n/a1.83%02/26/2010
Max offer price-0.18%-0.78%0.09%1.48%n/a1.40%
BofA ML USD 3Mo Deposit Offered Rate Constant Maturity Index0.46%0.49%0.33%0.36%n/a0.35%
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.47%1.97%1.02%2.06%n/a1.83%02/26/2010
Max offer price-1.29%-0.78%0.09%1.48%n/a1.40%
BofA ML USD 3Mo Deposit Offered Rate Constant Maturity Index0.15%0.49%0.33%0.36%n/a0.35%

Returns for less than one year are not annualized.

Benchmark lifetime returns are as of the Fund's inception date.

Class A shares have a maximum up-front sales charge of 2.75% and are subject to an annual distribution fee.

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
Portfolio characteristics - as of 09/30/2016BofA ML USD 3Mo Deposit Offered Rate Constant Maturity Index
Number of holdings3931
Number of credit issuers282
Portfolio turnover (last fiscal year)90%%
Effective duration (weighted average) (view definition).22 years.25 years
Effective maturity (weighted average) (view definition)4.02 years.25 years
Yield to maturity (view definition)2.85%0.85%
Average market price (view definition)$100.78n/a
Average coupon (view definition)3.06%0.85%
Yield to worst (view definition)2.82%0.85%
SEC 30-day yield with waiver (view definition)1.96%
SEC 30-day yield without waiver (view definition)1.96%
Annualized standard deviation, 3 years (view definition)1.43n/a
Portfolio composition as of 09/30/2016Total may not equal 100% due to rounding.
US Investment grade corporate bonds32.6%
Bank loans31.6%
Structured products12.3%
Int'l Investment grade corporate bonds9.0%
Noncorporate securities8.4%
High yield corporate bonds2.6%
Cash and cash equivalents2.4%
Municipal bonds1.2%
Government securities0.1%
Top 10 fixed income holdings as of 09/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Wells Fargo & Co. 1.432 1/30/20201.5%
Bank of America NA 1.287 11/14/20161.4%
Rockwell Collins Inc. 1.200 12/15/20161.2%
Morgan Stanley 1.874 1/27/20201.2%
MAPS1 2013-1A A1.1%
Santander UK PLC 1.675 8/24/20181.1%
NBCUniversal Enterprise Inc. 1.365 4/15/20181.0%
Enbridge Inc. 1.296 10/1/20160.9%
Inter-American Development Bank 0.900 10/15/20200.9%
Statoil ASA 1.248 11/8/20180.9%
Total % Portfolio in Top 10 holdings11.2%

Fixed income sectors as of 09/30/2016

List excludes cash and cash equivalents.

Investment grade credits51.5%0.0%
High yield credits29.4%0.0%
Asset-backed securities10.6%0.0%
Emerging markets3.2%0.0%
MBS and CMOs1.6%0.0%
Municipal bonds1.2%0.0%
U.S. Treasury securities0.1%0.0%
Credit quality as of 09/30/2016

Total may not equal 100% due to rounding. The Fund’s investment manager, Delaware Management Company (DMC), a series of Delaware Management Business Trust, receives “Credit Quality” ratings for the underlying securities held by the Fund from three “nationally recognized statistical rating organizations” (NRSROs): Standard & Poor’s (S&P), Moody’s Investors Service, and Fitch, Inc. The credit quality breakdown is calculated by DMC based on the NRSRO ratings. If two or more NRSROs have assigned a rating to a security the higher rating (lower value) is used. If only one NRSRO rates a security, that rating is used. For securities rated by an NRSRO other than S&P, that rating is converted to the equivalent S&P credit rating. Securities that are unrated by any of the three NRSROs are included in the “not rated” category when applicable. Unrated securities do not necessarily indicate low quality. More information about securities ratings is contained in the Fund’s Statement of Additional Information.

Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
Return of

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.

Risk managed solutions

Roger Early, Head of Fixed Income Investments, discusses why the team’s assets under management, structure, and mindset are strengths that help distinguish it from others. [Runtime: 2:14]

Watch the video

Read video transcript

Roger Early

Roger A. Early, CPA, CFA

Executive Director, Head of Fixed Income Investments, Executive Vice President, Co-Chief Investment Officer — Total Return Fixed Income Strategy

Start date on the Fund: February 2010

Years of industry experience: 40

(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 2010

Years of industry experience: 35

(View bio)

Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2011

Years of industry experience: 18

(View bio)

J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: February 2010

Years of industry experience: 23

(View bio)

You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in Delaware Investments® Funds. More information about these and other discounts is available from your financial intermediary, in the Fund's prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

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 price2.75%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.50%
Distribution and service (12b-1) fees0.25%
Other expenses0.20%
Total annual fund operating expenses0.95%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements0.95%

View printable commentary E-mail this page

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Delaware Diversified Floating Rate Fund Quarterly commentary September 30, 2016


The Bloomberg Barclays U.S. Aggregate Index recorded a positive return in the third quarter as risk assets continued to respond positively to the unflinching support of global central banks. Domestic bond prices also were supported by non-U.S. investors fleeing the negative sovereign yields on offer overseas. Although most broad-market fixed income indices produced positive returns, high yield corporate bonds and emerging market debt were the strongest performers, with the high-quality AAA-rated credit and asset-backed securities (ABS) sectors lagging during the quarter.

In the United States, the economic scorecard was decidedly mixed. Second-quarter gross domestic product growth was reported at 1.4% by the U.S. Commerce Department, a modest improvement from the downwardly revised 0.8% growth in the first quarter. There was some evidence of further healing in the labor market, with jobless claims remaining low while nonfarm payrolls rebounded from the depressed levels of the second quarter. On the inflation front, the core personal consumption expenditures (the Federal Reserve’s preferred inflation gauge) rose 1.7% year-over-year, up from 1.6% at the end of the previous quarter. Both personal income and consumer spending remained subdued, though slightly improved from three months earlier. Elsewhere, the Institute for Supply Management’s total manufacturing and nonmanufacturing new orders fell from 58.6 to 50.25, the lowest level since 2009.

Given the uneven economic data, it was no surprise to investors that the Fed held off on tightening monetary policy. Notably, the rate-setting Federal Open Market Committee (FOMC) further scaled back its forecast for how high rates will rise in coming years. At its September meeting, the FOMC lowered its expectations for 2016 from two hikes to one, lowered 2017 expectations from three hikes to two, and kept expectations for 2018 unchanged at three. Additionally, policy makers trimmed growth and inflation forecasts for the current year. As the quarter ended, investors were discounting only one rate hike in December for the remainder of 2016. However, a sharp rise in the 3-month London interbank offered rate (Libor) — combined with the selling of Treasury securities by foreign central banks — raised the possibility that some degree of monetary tightening might already be under way, even as the Fed remained on the sidelines.

Within the Fund

For the third quarter of 2016, Delaware Diversified Floating Rate Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the BofA Merrill Lynch U.S. Dollar 3-Month Deposit Offered Rate Constant Maturity Index. Following is a brief discussion of the key drivers of Fund performance during the quarter.

The global search for yield helped propel bond prices higher, resulting in all the major asset classes in the Fund’s portfolio generating a positive return in excess of the benchmark’s return of 0.15%. Once again, utilities was the strongest-performing sector within investment grade credit, led in part by subordinated holdings to National Rural Utilities Cooperative and DTE Energy. The Fund’s roughly 18% exposure to financials also performed well within high grade credit as concerns about the potential implications of “Brexit” waned. Examples of investments within the banking sector that performed strongly include PNC and USB trust preferred securities. Although industrials lagged both financials and utilities, the sector posted a return in excess of 1%, net of hedges. Commodity-sensitive holdings continued to perform well, particularly energy-related names such as ConocoPhillips and the pipeline partnership Regency Energy. Noncorporate exposure, including sovereigns and supranationals, slightly outperformed the benchmark.

Below-investment-grade assets, including bank loans and high yield bonds, outperformed the benchmark index and contributed approximately 80 basis points of return to the Fund. By credit quality, CCC-rated holdings generated the strongest return (3.63%) but represented less than 2% of the Fund’s assets. B-rated debt averaged nearly 13% of the portfolio and returned 2.77%, slightly better than the 2.57% return of the Fund’s BB-rated holdings.

Emerging markets debt was the strongest-performing asset class in the Fund, returning more than 3%. Top-performing names in the sector included commodity-related issuers Petroleos Mexicanos and YPF.

The Fund’s 8% exposure to asset-backed securities returned about 0.5%, whereas the Fund’s 4% allocated to collateralized loan obligations returned 1.21%. In an attempt to minimize interest rate sensitivity, we utilized interest rate swaps to hedge the cash flows on fixed-rate bonds. These swaps were additive to performance due to the move higher in interest rates.

We are pleased to report that there were no material detractors from performance during the quarter, as all the Fund’s major asset classes generated returns in excess of the benchmark.


We believe both domestic and global growth will likely remain mired in a lower-for-longer track as a pattern of synchronous stagnation continues to grip the developed world. China remains burdened by massive excess capacity, poor bank asset quality, and the dampening effect of economic restructuring that has led to plummeting commodity prices and slowing growth across all natural resource–based economies. Europe remains hobbled by the structural and policy limitations of a single-currency European Union, a failure to rapidly address bank capital levels and funding mechanisms in the aftermath of the financial crisis, and persistently high unemployment and economic inefficiency across its southern tier. In the U.S., job gains have been centered in low-wage sectors, structural unemployment remains high, overall wage growth has been stagnant, and personal spending is subdued. With corporate and government spending muted and bank lending stabilizing below pre-crisis levels, the American economy is stuck on a sub-2% growth track. Finally, global central bank policy tools have entered the stage of diminishing returns, while in the U.S. a vacillating central bank desperate to get benchmark rates off zero fears that a premature move will choke off the tepid recovery, thus making every Fed meeting a catalyst for volatility in a market addicted to easy money.

Futures markets and Fed statements seem to make it clear that, barring unforeseen deterioration in the growth or employment outlook, a December rate hike is in the offing. While we concur with that view, we have also seen this “movie” before, and believe that nothing can be taken for granted in a world burdened by debt and facing the growth challenges described above.

With global risk-free rates at record low levels and most spread sectors trading at or inside long-term averages, we think it is reasonable to assume that investor demand for yield will remain intense, valuations will become stretched, and trading liquidity will be inadequate in the face of unforeseen market moves. We believe that our active, fundamental, research-based approach to fixed income investing provides the potential for investors to navigate the extraordinary market conditions that we currently face.

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

Bond ratings are determined by a nationally recognized statistical rating organization.

Per Standard & Poor’s credit rating agency, bonds rated below AAA are more susceptible to the adverse effects of changes in circumstances and economic conditions than those in higher-rated categories, but the obligor’s capacity to meet its financial commitment on the obligation is still strong. Bonds rated BBB exhibit adequate protection parameters, although adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments. Bonds rated BB, B, and CCC are regarded as having significant speculative characteristics, with BB indicating the least degree of speculation of the three.


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 800 523-1918. 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, non-investment-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.

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 derivatives transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

Because the Fund may invest in bank loans and other direct indebtedness, it is subject to the risk that the fund will not receive payment of principal, interest, and other amounts due in connection with these investments, which primarily depend on the financial condition of the borrower and the lending institution.

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

Fund Finder

Daily pricing (as of 10/24/2016)

Class APriceNet change
NAV$8.33no chg
Max offer price$8.57n/a

Total net assets (as of 09/30/2016)

$290.3 million all share classes

Morningstar ranking (as of 09/30/2016)

YTD ranking302 / 422
1 year319 / 412
3 years176 / 261
5 years119 / 174
10 yearsn/a
Morningstar categoryNontraditional Bond

(View Morningstar disclosure)

Lipper ranking (as of 09/30/2016)

YTD ranking3 / 126
1 year11 / 121
3 years22 / 101
5 years2 / 70
10 yearsn/a
Lipper classificationUltra Sht Obligation Fds

(View Lipper disclosure)

Benchmark, peer group

BofA Merrill Lynch U.S. Dollar 3-Month Deposit Offered Rate Constant Maturity Index (view definition)

Morningstar Nontraditional Bond Category (view definition)

Lipper Ultra Short Obligation Funds Average (view definition)

Additional information