Delaware Core Plus Bond Fund

Objective

Delaware Core Plus Bond Fund seeks maximum long-term total return, consistent with reasonable risk.

Strategy

The Fund invests at least 50% of its net assets in domestic (U.S.) investment grade debt securities. The Fund may also invest up to 30% of its net assets in high yield securities and up to 30% of its net assets in foreign securities.

Fund information
Inception date06/01/1992
Dividends paid (if any)Monthly
Capital gains paid (if any)December
Fund identifiers
NASDAQDUGIX
CUSIP246094502

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 (08/31/2016)

as of quarter-end (06/30/2016)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)5.43%4.78%4.31%3.51%5.60%5.55%06/01/1992
Bloomberg Barclays U.S. Aggregate Index5.86%5.97%4.37%3.24%4.89%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)2.21%4.07%3.90%3.81%5.84%5.55%06/01/1992
Bloomberg Barclays U.S. Aggregate Index2.21%6.00%4.06%3.76%5.13%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
Gross0.95%
Net0.65%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursement from Nov. 27, 2015 through Nov. 28, 2016. Please see the fee table in the Fund's prospectus for more information.

Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
20162.32%2.21%n/an/an/a
20151.94%-1.70%0.49%-0.97%-0.28%
20142.45%2.43%-0.21%1.11%5.89%
20130.32%-3.11%0.50%1.07%-1.27%
20120.49%2.56%2.41%0.57%6.15%
20111.01%2.38%2.36%1.80%7.76%
20102.93%2.42%3.52%-0.90%8.14%
20090.23%8.14%8.49%2.07%20.03%
20081.59%-0.91%-3.43%1.56%-1.26%
20071.20%-0.67%2.36%2.36%5.33%
2006-1.19%-0.25%4.13%0.67%3.32%

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

Portfolio characteristics - as of 08/31/2016Bloomberg Barclays U.S. Aggregate Bond Index
Number of holdings8129,908
Number of credit issuers239
Portfolio turnover (last fiscal year)313%n/a
Effective duration (weighted average) (view definition)4.69 years5.51 years
Effective maturity (weighted average) (view definition)7.96 years7.80 years
Yield to maturity (view definition)2.79%1.95%
Average market price (view definition)$107.03$107.06
Average coupon (view definition)4.01%3.11%
Yield to worst (view definition)2.76%1.95%
SEC 30-day yield with waiver (view definition)2.13%
SEC 30-day yield without waiver (view definition)1.85%
Annualized standard deviation, 3 years (view definition)2.70n/a
Portfolio composition as of 08/31/2016Total may not equal 100% due to rounding.
Credits53.5%
Mortgage-backed securities38.2%
Asset-backed securities6.3%
U.S. government securities1.4%
Municipal bonds0.5%
Top 10 fixed income holdings as of 08/31/2016
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
FNCL OCT TBA5.1%
FNR 2011-80 CB1.6%
FNCL AL75870.9%
JPMorgan Chase & Co. 4.250 10/1/20270.8%
Bank of America Corp. 4.450 3/3/20260.8%
FNCL 9323870.7%
Anheuser-Busch InBev Finance Inc. 3.650 2/1/20260.7%
FNCL BA04310.7%
Credit Suisse Group Funding Guernsey Ltd. 4.550 4/17/20260.7%
FNCL 8905270.5%
Total % Portfolio in Top 10 holdings12.5%

Fixed income sectors as of 08/31/2016

List excludes cash and cash equivalents.

SectorFundBenchmark
Investment grade credits43.5%31.6%
MBS and CMOs32.4%27.7%
High yield credits6.4%0.0%
Asset-backed securities6.3%0.5%
Commercial mortgage-backed securities5.9%1.7%
Emerging markets3.4%0.0%
U.S. treasury securities0.6%36.2%
Municipal bonds0.5%0.0%
International developed0.2%0.0%
Credit quality as of 08/31/2016
RatingFundBenchmark
AAA43.8%70.3%
AA5.5%4.8%
A15.2%11.0%
BBB27.6%13.9%
BB5.3%0.0%
B2.4%0.0%
CCC0.2%0.0%

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 (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment
income
Return of
capital
20160.0000.1660.000
20150.0000.2500.000
20140.0000.2480.038
20130.0000.2780.000
20120.0190.2770.000
20110.0000.3150.000
20100.0000.3580.000
20090.0000.4050.000
20080.0000.3970.000
20070.0000.3720.000
20060.0000.3420.000

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

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

Start date on the Fund: May 2007

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 1997

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 2015

Years of industry experience: 18

(View bio)


Craig Dembeck

Craig C. Dembek, CFA

Senior Vice President, Co-Head of Credit Research, Senior Research Analyst

Start date on the Fund: December 2012

Years of industry experience: 22

(View bio)


J. David Hillmeyer

J. David Hillmeyer, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: November 2011

Years of industry experience: 23

(View bio)


Paul Matlack

Paul A. Matlack, CFA

Senior Vice President, Senior Portfolio Manager, Fixed Income Strategist

Start date on the Fund: December 2012

Years of industry experience: 31

(View bio)


John McCarthy

John P. McCarthy, CFA

Senior Vice President, Senior Portfolio Manager, Co-Head of Credit Research

Start date on the Fund: December 2012

Years of industry experience: 29

(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: 30

(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 fees0.55%
Distribution and service (12b-1) feesnone
Other expenses0.40%
Total annual fund operating expenses0.95%
Fee waivers and expense reimbursements(0.30%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.65%

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

1The Fund's investment manager, Delaware Management Company (Manager), has contractually agreed to waive all or a portion of its investment advisory fees and/or pay/reimburse expenses (excluding any 12b-1 fees, acquired fund fees and expenses, taxes, interest, short sale and dividend interest expenses, brokerage fees, certain insurance costs, and nonroutine expenses or costs, including, but not limited to, those relating to reorganizations, litigation, conducting shareholder meetings, and liquidations) in order to prevent total annual fund operating expenses from exceeding 0.65% of the Fund's average daily net assets from Nov. 27, 2015 through Nov. 28, 2016. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund.

View printable commentary E-mail this page

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

Delaware Core Plus Bond Fund Quarterly commentary June 30, 2016

Overview

In response to ongoing support from global central banks, the Barclays U.S. Aggregate Index recorded a positive return for the second quarter of 2016, with lower-quality bonds outperforming higher-rated investment tiers within that index. Although most broad-market fixed income indices produced solid returns, high yield corporate bonds and global Treasurys ex U.S. were the strongest performers, with the asset-backed securities (ABS) and mortgage-backed securities (MBS) sectors lagging during the quarter. Rate declines within the government sector were significant, however, with yields on the 2-year and 10-year Treasury notes falling from 0.72% to 0.58% and from 1.77% to 1.47%, respectively.

A brief bout of volatility in late June triggered by the British vote to exit the European Union raised the question of whether the so-called Brexit referendum will be the first of many such actions by various countries taken in an effort to preserve their nationalist goals at the expense of a global economic agenda. Regardless of the eventual answer, the issue is almost certain to increase market uncertainty — and thus volatility — for many quarters ahead. Meanwhile, the Federal Open Market Committee’s (FOMC’s) June meeting may have foreshadowed a major shift in domestic monetary policy in coming years, with members projecting fewer rate cuts this year and significantly lower policy rates for 2017 and 2018, relative to previous expectations. Federal Reserve Chairwoman Janet Yellen gave form and substance to the numbers, citing an aging population and relatively low productivity as structural forces that could make the current low level of rates a long-lasting phenomenon.

Lagging economic indicators painted a mixed picture of the U.S. economy, with corporate profits recovering but job growth slipping. On the inflation front, core personal consumption expenditures (the Fed’s preferred inflation gauge) fell slightly to 1.6%. Until personal income and wage-and-salary income show greater evidence of acceleration, the consumer inflation trend will remain muted. Combining these factors with growing global concerns and a strong U.S. dollar, our view is that the market has priced out any rate increases by the FOMC until the middle of 2018.

As the June quarter ended, a key question remained unanswered: Will asset prices fall to a level that reflects very weak economic growth, or will central bank policies finally succeed in pushing growth to much higher levels, and thus justify current asset prices? In recent months, bond prices for many weak or declining corporate credits have risen far more than their fundamental credit metrics would support. With higher, more normal rates of growth having failed to materialize deep into an economic expansion, it is reasonable to give serious consideration to the risks of continued slow global growth.

Within the Fund

Delaware Core Plus Bond Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Barclays U.S. Aggregate Index, for the second quarter of 2016.

  • The Fund’s underweight to Treasury securities had a positive impact on relative returns as Treasury bonds outperformed the return of the benchmark. Our focus on intermediate- to-longer-term maturities also contributed to performance as the yield curve flattened.
  • Government-backed MBS underperformed the benchmark index during the quarter, though strong security-specific and curve positioning had a positive impact on Fund performance. Elsewhere, ABS also lagged the index return. Relative to the Barclays ABS sector, Fund positions underperformed due to our emphasis on short-maturity and floating-rate issues. Meanwhile, commercial mortgage-backed securities (CMBS) had a positive effect on relative performance based on the Fund’s overweight allocation.
  • The Fund’s small overweight to investment grade corporate credit benefited relative performance over the period, given the sector’s outperformance of the benchmark index. Security selection also had a positive impact on performance.
  • A slight overweight to high yield bonds also benefited relative performance.
  • Fund positions in emerging market debt had a positive effect on performance as the sector outperformed many of the broader fixed income markets for the quarter.
  • Non-dollar developed markets, while representing only a small allocation, produced slightly positive results during the quarter.

Outlook

We believe that an economic landscape fraught with fundamental and political uncertainty will continue to weigh heavily on domestic and global growth expectations. Globalization trends of the past 30 years are being called into question amid an increase in nationalistic leanings worldwide. These concerns should translate into an environment where corporate profits remain challenged and low interest rates present hurdles for the world’s financial companies.

Despite having spent a considerable portion of their monetary ammunition, we expect central banks to provide verbal support for markets and to take additional steps as warranted. Nevertheless, some central banks, including the Bank of Japan, have seen policies lead to unexpected outcomes that present additional challenges, rather than the expected solutions.

As always, the U.S. labor market will remain a key focus area for investors. After two months of softer payroll readings, we will look to incoming data for clues regarding wage growth, inflation expectations, and the willingness of consumers to provide additional economic support. It is our expectation that investors will continue searching for income opportunities wherever they might be found, which could lead to risk-reward dislocations across assets. In light of today’s demanding environment, we believe it is especially appropriate to maintain our longtime emphasis on a fundamental approach to investing in fixed income markets.

Mortgage-backed securities are fixed income securities that represent pools of mortgages, with investors receiving principal and interest payments as the underlying mortgage loans are paid back. Many are issued and guaranteed against default by the U.S. government or its agencies or instrumentalities, such as Freddie Mac, Fannie Mae, and Ginnie Mae. Others are issued by private financial institutions, with some fully collateralized by certificates issued or guaranteed by the U.S. government or its agencies or instrumentalities.

[17142]

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, 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 Funds 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.

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.

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 experience portfolio turnover in excess of 100%, which could result in higher transaction costs and tax liability.

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 09/28/2016)

Institutional ClassPriceNet change
NAV$8.54no chg
Max offer price$8.54n/a

Total net assets (as of 08/31/2016)

$135.5 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 08/31/2016)
RatingNo. of funds
Overall4956
3 Yrs3956
5 Yrs3846
10 Yrs4603
Morningstar categoryIntermediate-Term Bond

(View Morningstar disclosure)

Morningstar ranking (as of 08/31/2016)

YTD ranking747 / 1086
1 year821 / 1070
3 years355 / 956
5 years389 / 846
10 years75 / 603
Morningstar categoryIntermediate-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 08/31/2016)

YTD ranking150 / 212
1 year161 / 202
3 years92 / 188
5 years109 / 162
10 years33 / 94
Lipper classificationCore Plus Bond Funds

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays U.S. Aggregate Index (view definition)

Morningstar Intermediate-Term Bond Category (view definition)

Lipper Core Plus Bond Funds Average (view definition)

Additional information