Global real estate stocks posted moderate gains during the third quarter, with the sector trailing the S&P 500 Index and the broader markets. Investors' ongoing concerns about the Federal Reserve's eventual tightening of monetary policy contributed to struggling stock prices in segments of our sector that are more vulnerable to higher interest rates. Although several major stock market indexes reached multiyear or all-time highs in mid-September, shares overall sagged as the quarter ended amid concerns about the underlying strength of the U.S. economy and the probability of a federal government shutdown and debt ceiling showdown in October.
The Global Real Estate Fund returned 2.14% in the quarter compared with 2.44% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 1.89% for the Lipper Global Real Estate Funds Average. For the 12 months ended September 30, 2013, the fund returned 7.78% versus 10.95% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 9.77% for the Lipper Global Real Estate Funds Average. The fund's 1-year and Since Inception (10/27/2008) average annual total returns were 7.78% and 17.53%, respectively, as of September 30, 2013. The fund's expense ratio was 1.36% as of its fiscal year ended December 31, 2012.
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.
The largest absolute weight in the portfolio and benchmark is in the U.S., the largest and most mature market within commercial real estate. We also have a significant weighting in Japan, where we believe our holdings are well positioned to benefit from economic recovery and a reversal of deflationary pressures. The portfolio's third-largest weighting is Hong Kong, where we focus on companies with high-quality properties in attractive locations poised for expansion into mainland China. Fund performance during the period benefited from good stock selection in the U.S., France, and Singapore. However, negative returns from our UK holdings restrained overall results.
The U.S. economy continues to improve at a moderate pace with contained inflation, a gradual housing recovery, and growing strength in the labor market. However, despite favorable fundamental and economic data, investors have increasingly turned their attention to future actions of the Federal Reserve's asset purchase program. Fed Chairman Ben Bernanke indicated a desire to scale back the central bank's asset purchase program, but the Fed's lack of confidence in the pace of the recovery prompted his decision to delay tapering the asset purchases. The remote possibility of a default on U.S. sovereign debt also weighed on the sector. We continue to view real estate fundamentals favorably. Improving demand, reasonably constrained supply, and good access to capital markets bode well for our sector in the coming months.