Real estate stocks provided good returns during the quarter, with some segments performing particularly well. The lodging segment was the strongest, advancing to catch up with other industries after a muted first quarter. Apartment real estate investment trusts (REITs) were also strong, as they rebounded from earlier weakness. The office and industrial and regional mall areas were positive but less robust. Industrial and self-storage REITs turned in more subdued results. Mixed economic data created a somewhat challenging environment for those areas of the market.
The Real Estate Fund returned 6.51% in the quarter compared with 7.22% for the Wilshire US Real Estate Securities Index and 5.92% for the Lipper Real Estate Funds Index. For the 12 months ended June 30, 2014, the fund returned 15.24% versus 13.77% for the Wilshire US Real Estate Securities Index and 9.85% for the Lipper Real Estate Funds Index. The fund's average annual total returns were 15.24%, 23.51%, and 9.82% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. 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.
Stock selection in shopping center REITs, regional malls, and office properties contributed positively to fund performance. Favorable trends in employment have provided a boost to our office holdings, one of which is a large owner and operator of properties in the southeastern U.S. In addition, the Manhattan office market is benefiting from solid fundamentals with improving vacancy rates. Stock selection was negative in lodging, however, although the segment in general was strong as revenue per available room continued to grow. Unfortunately, our holdings in this area did not match the price appreciation of some others in the industry.
A healthier economic outlook underpins the Fed's decision to dial back asset purchases, creating an attractive environment for real estate investments. Improving economic activity drives the demand for our properties, and we anticipate ongoing improvement in property fundamentals as new construction supply remains restrained. Fears that a rise in interest rates would place downward pressure on properties have not materialized. Better fundamentals should temper these concerns and lead to higher rents with growth in cash flows. We maintain a favorable long-term view of real estate fundamentals based on improving demand, reasonably limited supply, and continued access to capital markets. We are, therefore, optimistic about the sector's prospects.