Global real estate securities declined during the second quarter of 2015 as interest rates rose, putting pressure on our segment of the market. While fundamentals did not materially change in the real estate environment overall, investors seemed to react to the prospect of Fed tightening expected later this year. This expectation for higher interest rates caused long-term bond yields to rise in the second quarter, leading to a sell-off of equity securities thought to be more sensitive to interest rates, such as utilities, consumer staples, and real estate.
The Global Real Estate Fund returned −5.96% in the quarter compared with −6.67% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and −5.83% for the Lipper Global Real Estate Funds Average. For the 12 months ended June 30, 2015, the fund returned 1.31% versus 0.41% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 0.65% for the Lipper Global Real Estate Funds Average. The fund's average annual total returns were 1.31%, 12.33%, and 14.75% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of June 30, 2015. The fund's expense ratio was 1.07% as of its fiscal year ended December 31, 2014.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Global Real Estate Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
Our return was hurt by our exposure to the U.S. market, which was inversely linked to movements in the 10-year Treasury yield. While interest rates may drive short term performance of the stocks, fundamentals are what matter long term. Demand is healthy across all property types and supply remains limited. Occupancy and rent growth continue to enjoy good prospects. The UK and Continental Europe performed well, with both markets enjoying good gains on a local currency basis. However, the weak euro trimmed the return for dollar-based investors. The UK has been a relatively safe haven in the current atmosphere of Greece-induced volatility. UK fundamentals are sound, although operating fundamentals in the rest of Europe are more muted.
Since the global economic recovery has been moderate, developers have been slower to launch construction of new commercial real estate projects relative to previous recovery periods. This has allowed solid occupancy gains and positive rental growth over the past few years, driving increasing cash flows, net asset values, and dividends. We expect the favorable supply/demand imbalance to continue over the next few years and, therefore, we believe that good operating fundamentals should persist for the foreseeable future. In the short run, while real estate tends to be correlated with interest rates, we are encouraged by the fact that rates may remain relatively low given moderate global growth and inflation. In addition, fundamentals will drive real estate value over the long run, and we will focus on seeking the best opportunities throughout global locations.