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Delaware Emerging Markets Fund Quarterly commentary June 30, 2016

Within the Fund

Delaware Emerging Markets Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the MSCI Emerging Markets Index, during the second quarter of 2016.

Russia was the main contributor to performance primarily due to stock selection. Shares of Yandex rose as the company reported strong earnings amid improving conditions in the advertising market. Shares of Rosneft benefited from rising oil prices and an improving production outlook. Sberbank of Russia outperformed after reporting strong earnings and raising guidance. Declining credit costs underpinned a faster-than-expected profit recovery.

Argentina and Korea also contributed to outperformance compared to the benchmark. In Argentina, shares of Arcos Dorados Holdings rose due to improving quarterly results and recovering customer traffic in its restaurants in Brazil. Shares of agricultural producer Cresud benefited from positive investor sentiment surrounding Argentina. In Korea, favorable stock selection boosted relative performance. Shares of Samsung Electronics rose due to expectations for profit recovery driven by organic light-emitting diode (OLED) displays and memory chips. In addition, shares of SK Telecom, a wireless carrier, outperformed due to its valuation merits and rational bidding among the top-three operators during spectrum auctions.

On the negative side, India and China detracted the most from performance due to unfavorable stock selection. In India, shares of conglomerate Reliance Industries declined as refining margins contracted, and the company’s launch of 4G telecom services appears to have been further delayed. In China, shares of declined after the company indicated weakness in its gaming and brand advertising businesses. Shares of Baidu also underperformed following the government’s investigation into healthcare-related advertising on the company’s search results. Baidu subsequently lowered its second-quarter guidance as it addresses these concerns.

Among sectors, financials contributed the most to performance due to the Fund’s overweight positions in Sberbank, Itau Unibanco Holding, and Cresud. Materials also outperformed due to the Fund’s holdings in Sociedad Quimica y Minera de Chile and Cia de Minas Buenaventura, the latter benefiting from soaring gold prices. In contrast, the consumer staples and discretionary sectors detracted the most from performance. Shares of B2W Cia Digital declined as the company announced a rights offering. Shares of Lotte Confectionery declined as Lotte Group’s chairman indicated no plans to transition to a holding company structure. Furthermore, both Lotte Group and Hypermarcas have come under investigation for alleged bribery.


We anticipate that emerging markets will remain volatile, yet our long-term positive view remains intact. While economic growth may continue to face near-term headwinds, we believe that monetary and fiscal policies, coupled with government-reform measures, should provide support. With respect to China, we continue to believe that the economy will muddle through, supported by structural growth in consumption, improvement in living standards, and selective policy support from the government.

Despite a challenging macroeconomic backdrop, we believe that there are pockets of opportunities for long-term stock appreciation driven by structural demographic shifts, technology adoption, implementation of government policy, improvement in corporate governance, and industry consolidation. Our investment approach remains centered on identifying individual companies that we believe possess sustainable franchises and favorable long-term growth prospects and that trade at significant discounts to their intrinsic value. We are particularly focused on companies that we believe could benefit from long-term changes in how people in emerging markets live and work. Sectors we currently favor include technology and telecom.


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 (06/30/2016)
YTD1 year3 year5 year10 yearLifetimeInception
Class A (NAV)2.60%8.23%-7.42%0.06%-2.10%4.91%6.87%06/10/1996
Class A (at offer)-3.32%1.98%-12.72%-1.90%-3.26%4.30%6.55%
Institutional Class shares2.66%8.35%-7.19%0.32%-1.86%5.18%7.15%06/10/1996
MSCI Emerging Markets Index (Gross)0.80%6.60%-11.71%-1.21%-3.44%3.88%n/a
MSCI Emerging Markets Index (Net)0.66%6.41%-12.05%-1.56%-3.78%3.54%n/a

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.

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

MSCI Emerging Markets Index (view definition)

Expense ratio
Class A (Gross)1.73%
Class A (Net)1.70%
Institutional Class shares (Gross)1.48%
Institutional Class shares (Net)1.45%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from May 2, 2016 through May 2, 2017. Please see the fee table in the Fund’s prospectus for more information.

Top 10 holdings as of 06/30/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holdings based by issuer.
Holding% of portfolio
Reliance Industries Ltd5.6%
Samsung Electronics Co Ltd5.6%
SINA Corp/China5.5%
Baidu Inc4.1% Inc3.9%
SK Telecom Co Ltd3.3%
Tencent Holdings Ltd3.0%
Yandex NV2.9%
Itau Unibanco Holding SA2.8%
Rosneft PJSC2.6%
Total % Portfolio in Top 10 holdings39.3%

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

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

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.

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