U.S. equities rose in the first quarter of 2013, lifting several major indexes to multiyear, if not all-time, highs. Share prices advanced as the economy continued to expand, the labor market improved somewhat, and the Federal Reserve persisted with its asset purchase plans to suppress interest rates and stimulate growth. All real estate industries delivered positive returns, with smaller and more highly levered real estate investment trusts (REITs) outperforming their established blue chip peers.
The Real Estate Fund returned 5.90% in the quarter compared with 7.41% for the Wilshire Real Estate Index and 5.63% for the Lipper Real Estate Funds Index. For the 12 months ended March 31, 2013, the fund returned 10.13% versus 13.82% for the Wilshire Real Estate Index and 9.35% for the Lipper Real Estate Funds Index. The fund's average annual total returns were 10.13%, 6.22%, and 12.32% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.78% as of its fiscal year ended December 31, 2011.
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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.
An overweight position in shopping center REITs was a significant contributor to relative results. Stock selection in office REITs was also positive. Favorable trends in employment have provided a boost for the segment. An underweight in health care, which posted strong results for the quarter, was a source of relative weakness. We continue to see sector-specific risks in health care REITs. We believe the specialized nature of assets and high industry concentration pose problems for the sector. Stock selection within apartment REITs detracted from relative results, as ongoing rent increases from an improving housing market weighed on performance.
We continue to view real estate fundamentals favorably. This is a positive period for property owners since demand is not likely to be met with adequate supply. The imbalance provides a tailwind for real estate values long term and is currently producing moderate absorption of available space. Leasing pipelines are active, and occupancy rates and rents are increasing in many markets across a range of property types. Debt remains widely available at very low interest rates, which have led to lower capitalization rates and also helped boost property values. Following strong appreciation, some valuations have become elevated compared with other segments of the equity market. However, REIT yields still compare favorably with those offered by other investment assets.