Delaware Limited-Term Diversified Income Fund


Delaware Limited-Term Diversified Income Fund seeks maximum total return, consistent with reasonable risk.


The Fund invests primarily in investment grade fixed income securities, and maintains an average effective duration from one to three years. The Fund is generally diversified across multiple types of fixed income securities.

Fund information
Inception date06/01/1992
Dividends paid (if any)Monthly
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 (09/30/2016)

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

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)3.20%2.93%2.06%1.14%3.53%4.27%06/01/1992
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index1.68%1.31%1.09%1.05%2.59%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)0.59%2.93%2.06%1.14%3.53%4.27%06/01/1992
Bloomberg Barclays 1-3 Year U.S. Government/Credit Index0.02%1.31%1.09%1.05%2.59%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
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 09/30/2016Bloomberg Barclays 1-3 Year U.S. Government/Credit Index
Number of holdings7171,764
Number of credit issuers239
Portfolio turnover (last fiscal year)94%n/a
Effective duration (weighted average) (view definition)1.89 years1.92 years
Effective maturity (weighted average) (view definition)3.84 years1.98 years
Yield to maturity (view definition)2.00%1.05%
Average market price (view definition)$101.79$101.97
Average coupon (view definition)2.81%2.04%
Yield to worst (view definition)1.97%1.04%
SEC 30-day yield with waiver (view definition)1.39%
SEC 30-day yield without waiver (view definition)1.39%
Annualized standard deviation, 3 years (view definition)1.22n/a
Portfolio composition as of 09/30/2016Total may not equal 100% due to rounding.
Asset-backed securities32.8%
Mortgage-backed securities16.1%
Commercial mortgage-backed securities0.7%
U.S. government securities0.5%
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
COMET 2007-A1 A11.4%
FHR 4457 KZ1.3%
CHAIT 2015-A6 A61.1%
BACCT 2007-A4 A41.1%
MAPS1 2013-1A A1.0%
GEDFT 2012-2 A1.0%
NAVMT 2014-1 A0.9%
CHAIT 2013-A9 A0.9%
CHAIT 2014-A5 A50.9%
Total % Portfolio in Top 10 holdings12.2%

Fixed income sectors as of 09/30/2016

List excludes cash and cash equivalents.

Investment grade credits40.5%34.6%
Asset-backed securities32.8%0.0%
MBS and CMOs16.1%0.0%
High yield credits6.6%0.0%
Emerging markets2.2%0.0%
Municipal bonds0.8%0.0%
Commercial mortgage-backed securities0.7%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 (Institutional Class)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.

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 1999

Years of industry experience: 35

(View bio)

Adam Brown

Adam H. Brown, CFA

Senior Vice President, Senior Portfolio Manager

Start date on the Fund: October 2013

Years of industry experience: 18

(View bio)

John McCarthy

John P. McCarthy, CFA

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

Start date on the Fund: July 2016

Years of industry experience: 29

(View bio)

Brian McDonnell

Brian C. McDonnell, CFA

Senior Vice President, Senior Portfolio Manager, Senior Structured Products Analyst, Trader

Start date on the Fund: April 2012

Years of industry experience: 27

(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 fees0.48%
Distribution and service (12b-1) feesnone
Other expenses0.19%
Total annual fund operating expenses0.67%
Fee waivers and expense reimbursements(0.08%)
Total annual fund operating expenses after fee waivers and expense reimbursements0.59%

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

1 The 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 0.59% of the Fund’s average daily net assets from Oct. 5, 2016 through Oct. 5, 2017. These waivers and reimbursements may only be terminated by agreement of the Manager and the Fund. Additionally, the Fund’s distributor, Delaware Distributors, L.P. (Distributor), has contracted to limit the Fund’s Class A shares’ 12b-1 fees to no more than 0.15% of average daily net assets from April 29, 2016 through May 1, 2017. This waiver may be terminated only by agreement of the Distributor and the Fund.

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Delaware Limited-Term Diversified Income 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. However, yields rose on short- and intermediate U.S. Treasury maturities amid frequent shifts in the outlook for Federal Reserve policy, declining volatility following the “ Brexit” vote in June, and selling by central banks (especially China) related to reserve management programs. Meanwhile, domestic bond markets 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 Fed’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

Delaware Limited-Term Diversified Income Fund (Institutional Class shares and Class A shares at net asset value) outperformed its benchmark, the Bloomberg Barclays 1–3 Year U.S. Government/Credit Index, for the third quarter of 2016.

The Fund’s overweight allocation to investment grade corporate bonds, combined with strong security selection in the investment grade sector, were the primary drivers of performance for the period. Out-of-benchmark allocations in mortgage-backed securities (MBS), commercial mortgage-backed securities (CMBS), high yield bonds, and emerging market debt also contributed to relative performance, as these sectors outperformed the return of the benchmark. Conversely, the Fund’s small allocation to municipal bonds detracted from relative performance.


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 (EU), 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 800 362-7500. 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.

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 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.

Diversification may not protect against market risk.

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 10/27/2016)

Institutional ClassPriceNet change
NAV$8.56no chg
Max offer price$8.56n/a

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

$990.7 million all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 09/30/2016)
RatingNo. of funds
3 Yrs4498
5 Yrs2415
10 Yrs4283
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Morningstar ranking (as of 09/30/2016)

YTD ranking134 / 589
1 year120 / 583
3 years72 / 498
5 years314 / 415
10 years51 / 283
Morningstar categoryShort-Term Bond

(View Morningstar disclosure)

Lipper ranking (as of 09/30/2016)

YTD ranking98 / 192
1 year79 / 190
3 years58 / 155
5 years98 / 111
10 years42 / 85
Lipper classificationSht-Intmt Inv Grade Debt

(View Lipper disclosure)

Benchmark, peer group

Bloomberg Barclays 1-3 Year U.S. Government/Credit Index (view definition)

Morningstar Short-Term Bond Category (view definition)

Lipper Short-Intermediate Investment Grade Debt Funds Average (view definition)

Additional information