U.S. real estate securities followed up an impressive calendar year of performance in 2014 with continued strength during the first quarter of 2015, driven by further improvement in fundamentals, increased M&A activity, economic expansion, and low long-term interest rates. Only the lodging sector turned in negative absolute performance. All other sectors, however, were positive as occupancy remains high and supply constrained across most property types. Self-storage was the strongest sector, benefiting from rising occupancies and accelerating rents. The apartment sector was another bright spot, extending its run of favorable results amid robust property-level fundamentals and solid U.S. job growth. Offices also performed well, bolstered by rising demand and limited supply.
The Real Estate Fund returned 5.55% in the quarter compared with 4.74% for the Wilshire US Real Estate Securities Index and 4.51% for the Lipper Real Estate Funds Index. For the 12 months ended March 31, 2015, the fund returned 24.49% versus 25.25% for the Wilshire US Real Estate Securities Index and 22.48% for the Lipper Real Estate Funds Index. The fund's average annual total returns were 24.49%, 15.86%, and 9.72% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.79% as of its fiscal year ended December 31, 2013.
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 Real Estate Fund charges a 1%
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 largest industry weighting is in the apartments segment, where strong demand and increased occupancy have boosted rent increases. We prefer property managers operating in attractive real estate markets where the cost of home ownership is high. We also have a significant weighting in regional malls, focusing on high-quality malls located in attractive real estate markets that tend to produce stable and growing cash flows. We have a substantial allocation to office REITs, with a bias toward in-fill locations. We own several community shopping center REITs that are frequently anchored by neighborhood grocery stores or other needs-based amenities.
The conditions for an attractive environment for real estate investment remain in place. Improving economic activity drives the demand for the properties of real estate firms, and we look forward to continued improvement in property fundamentals as new construction supply still appears restrained. Despite the Federal Reserve ending asset purchases in October last year and indicating that target rates may move up some time in 2015, interest rates have yet to launch on an upward trajectory as many expected. We feel that even if a rise in rates was triggered, the event itself would not necessarily be bad for real estate securities if spurred by the Fed increasing target rates along with an improving economy. Improving economic fundamentals should help foster an environment for higher rents, cash flow, and dividend distributions, which should help temper these concerns.