Delaware Small Cap Core Fund


Delaware Small Cap Core Fund seeks long-term capital appreciation.


The Fund invests in stocks of small companies believed to have a combination of attractive valuations, growth prospects, and strong cash flows.

Fund information
Inception date12/29/1998
Dividends paid (if any)Annually
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)9.16%13.21%7.84%17.46%7.64%10.51%12/29/1998
Russell 2000 Index11.46%15.47%6.71%15.82%7.07%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)7.02%13.21%7.84%17.46%7.64%10.51%12/29/1998
Russell 2000 Index9.05%15.47%6.71%15.82%7.07%n/a

Returns for less than one year are not annualized.

Prior to Aug. 1, 2005, the Fund had not engaged in a broad distribution effort of its shares and had been subject to limited redemption requests. 12b-1 fees were waived for this period. Had 12b-1 fees been applied, performance would have been lower. Expense waivers were in effect for the periods shown. Performance would have been lower if waivers did not apply.

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 09/30/2016Russell 2000 Index
Number of holdings1371,960
Market cap (median)$1.98 billion$0.74 billion
Market cap (weighted average)$2.16 billion$1.87 billion
Portfolio turnover (last fiscal year)38%n/a
Beta (relative to Russell 2000 Index) (view definition)0.92n/a
Annualized standard deviation, 3 years (view definition)13.66n/a
Portfolio composition as of 09/30/2016Total may not equal 100% due to rounding.
Domestic equities95.7%
International equities & depositary receipts2.3%
Cash and cash equivalents2.0%
Top 10 equity 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
Granite Construction Inc.1.2%
Minerals Technologies Inc.1.2%
Tenneco Inc.1.2%
Barnes Group Inc.1.2%
Proofpoint Inc.1.2%
ESCO Technologies Inc.1.2%
Neenah Paper Inc.1.1%
TESARO Inc.1.1%
j2 Global Inc.1.1%
AAON Inc.1.1%
Total % Portfolio in Top 10 holdings11.6%

Equity sectors as of 09/30/2016

List excludes cash and cash equivalents.

Capital goods10.1%0.0%
Basic materials7.9%0.0%
Business services5.9%0.0%
Consumer services3.6%0.0%
Consumer discretionary3.1%0.0%
Consumer staples2.1%0.0%
Communications services1.2%0.0%
Credit cyclicals1.2%0.0%
Distribution history - annual distributions (Institutional Class)1,2
Distributions ($ per share)
YearCapital gains3Net investment

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. 

A blended approach

The Core Equity team blends growth and value stocks from across the small-cap universe. Learn more about the team’s differentiated stock-selection process. [Runtime: 2:29]

Watch the video

Read video transcript

Francis X. Morris

Francis X. Morris 

Senior Vice President, Chief Investment Officer — Core Equity

Start date on the Fund: November 2004

Years of industry experience: 33

(View bio)

Chris Adams

Christopher S. Adams, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 28

(View bio)

Mike Morris

Michael S. Morris, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 23

(View bio)

Donald Padilla

Donald G. Padilla, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: November 2004

Years of industry experience: 29

(View bio)

David E. Reidinger 

Vice President, Senior Portfolio Manager

Start date on the Fund: October 2016

(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 fees0.73%
Distribution and service (12b-1) feesnone
Other expenses0.29%
Total annual fund operating expenses1.02%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.02%

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

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Delaware Small Cap Core Fund Quarterly commentary September 30, 2016

Within the Fund

For the third quarter of 2016, Delaware Small Cap Core Fund (Institutional Class shares and Class A shares at net asset value) underperformed its benchmark, the Russell 2000® Index.

The most significant detractor from performance was stock selection within the technology, healthcare, and consumer discretionary sectors. Market performance was quite strong during the quarter, led by lower-quality stocks, defined as those with a high beta and low return on equity. These factors detracted from performance. Stock selection within the transportation and energy sectors contributed, as did an underweight position within the utilities sector.

With regard to stock selection, apparel manufacturer and retailer G-III Apparel Group was the largest detractor. The company’s stock declined 36% during the quarter as shares were hit twice — first in July, after announcing an acquisition, and again in August, after missing earnings expectations. During the quarter, G-III Apparel Group acquired the Donna Karan International (“DKNY”) brand. G-III Apparel Group has a rich history of acquiring brands and increasing their sales. While recent business has been weak, we maintain a positive outlook on the company for two reasons: We believe it has a strong management team, which has demonstrated an ability to navigate various retail environments, and the company has a rich portfolio of brands, in our view.

Within the business services sector, Essendant, a wholesale distributor of business products, declined 32%. The company missed second quarter earnings expectations and reduced its guidance, which negatively affected the stock price. The company’s new CEO came on in 2015 and continues to work toward cutting costs and diversifying the company’s client book. One factor that affected the miss was margin contraction, which resulted from a shifting customer mix to lower margin clients and items. We maintained the Fund’s position during the quarter as we believe management has an executable plan for improvement.

Stock selection within the healthcare sector detracted from performance. The Fund’s holdings returned 10% while similar holdings within the Index rose 14%. Within the sector, shares of medical technology company Conmed detracted. Conmed’s stock declined 16% during the quarter after it missed sales estimates and lowered guidance. We remain positive about the company as we believe the company’s new CEO is focused on the long-term execution of both sales goals and margin improvements.

The three strongest contributing stocks came from within the healthcare sector. Cepheid — a molecular diagnostics company dedicated to developing, manufacturing, and marketing easy-to-use molecular systems and tests — appreciated 71% during the quarter. The company was acquired by Danaher for $53 a share in cash, a 54% premium. Danaher expects the deal to be accretive to earnings.

Vanda Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of novel treatments for disorders of the central nervous system. One key therapy, Hetlioz, offers life-altering help for the blind who suffer from Non-24-Hour Sleep-Wake Disorder. The stock appreciated 49% during the quarter upon news of a win from the U.S. Patent Office’s Patent Trial and Appeal Board’s (PTAB) review of the company’s patent expiration date for Fanapt, a schizophrenia treatment. We maintain a positive view on Vanda Pharmaceuticals as the company offers unique therapies that are increasing in sales.

Shares of biological medical device company CryoLife appreciated 49% during the quarter. The company’s new CEO has continued to execute on his new corporate strategy, which includes a tighter focus on the cardiac surgery market. The company has also made a series of acquisitions and reorganized its sales force to enhance cross sell opportunities. The execution was evidenced during the quarter as the company beat expectations and raised guidance. Therefore, we maintain a positive view on CryoLife as we believe sales should continue to grow and the company will realize value from new products.


We would like to see top-line growth for companies, which will partly be dependent upon consumer spending. From what we have seen, consumers are saving more of their incomes and have higher expenses on the services side. This combination has dampened spending. At the same time, earnings estimates have started to expand to a more realistic level. Still, we believe companies will continue to be penalized for missed earnings. As the market has appreciated, valuations, as measured by price-to-earnings of the Russell 2000 Index, have expanded since the last quarter.

The powerful small-cap market rally off the February lows led to appreciation of more than 30%. Market performance has been strong in 2016 and yet, we would not be surprised to see increased volatility this quarter as the U.S. presidential election takes place. The market environment has become more difficult for active managers as investors appear to be increasing allocations to overvalued, higher yielding stocks and exchange-traded funds (ETFs), which created last quarter’s low-quality market rally. We believe that our process could benefit in this environment as we remain invested in all sectors of the market. Stock selection remains our strong suit. This has been evidenced during the year, as the Fund has acquired 10 holdings, our highest number on record.

Within the Fund, the largest overweight sectors are capital goods, basic materials, finance, energy, and healthcare. The overweight to the healthcare sector has been reduced as we continue to exit a number of positions that have exceeded our market capitalization thresholds. The Fund is now more overweight within the energy sector; we added a position and prices have appreciated as oil costs have steadied. The Fund remains underweight within the yield-sensitive utilities sector, as well as within consumer discretionary and media.

We will continue to apply our investment process, which focuses on a combination of thorough company-by-company analysis and disciplined portfolio construction. We intend to focus our research efforts on identifying what we view as great companies that we believe offer sustainable competitive advantages, strong balance sheets, healthy cash flows, and high-quality management teams with the potential to outperform.


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.

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

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

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.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

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.

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.

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 10/24/2016)

Institutional ClassPriceNet change
Max offer price$20.51n/a

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

$1.6 billion all share classes

Overall Morningstar RatingTM

Institutional Class shares (as of 09/30/2016)
RatingNo. of funds
3 Yrs4655
5 Yrs5570
10 Yrs4387
Morningstar categorySmall Blend

(View Morningstar disclosure)

Morningstar ranking (as of 09/30/2016)

YTD ranking512 / 823
1 year429 / 797
3 years129 / 655
5 years57 / 570
10 years95 / 387
Morningstar categorySmall Blend

(View Morningstar disclosure)

Lipper ranking (as of 09/30/2016)

YTD ranking549 / 867
1 year444 / 854
3 years147 / 712
5 years56 / 622
10 years113 / 425
Lipper classificationSmall-Cap Core Funds

(View Lipper disclosure)

Benchmark, peer group

Russell 2000® Index (view definition)

Morningstar Small Blend Category (view definition)

Lipper Small-Cap Core Funds Average (view definition)

Additional information