Global real estate securities followed up strong performance in 2014 with continued strength during the first quarter of 2015. Despite market speculation that U.S. interest rates might edge higher in anticipation of Federal Reserve tightening later in the year, modest downward pressure on long-term U.S. treasury yields persisted during the first quarter. In combination with strong fundamentals, lower long-term bond yields set up another favorable quarter in which REITs solidly outperformed broader U.S. equities. In addition, the current low oil price environment could potentially be a boon for consumers in Europe, Japan, and the U.S., which would benefit a variety of property types in the real estate space, including retail.
The Global Real Estate Fund returned 5.45% in the quarter compared with 4.17% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 4.09% for the Lipper Global Real Estate Funds Average. For the 12 months ended March 31, 2015, the fund returned 15.59% versus 16.06% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 14.84% for the Lipper Global Real Estate Funds Average. The fund's average annual total returns were 15.59%, 11.94%, and 16.48% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of March 31, 2015. The fund's expense ratio was 1.09% as of its fiscal year ended December 31, 2013.
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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 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 United States, the largest and most mature market within commercial real estate. We hold a diverse range of U.S. commercial real estate companies, with our largest allocations in regional mall companies. We believe that commercial real estate should benefit from constrained new supply in conjunction with a measured return to more robust economic activity. We 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. We also maintain a substantial weighting in Hong Kong, where we focus our efforts on those companies with high-quality properties in attractive locations. In many cases, these are poised for strategic expansion into mainland China.
The conditions remain in place for an attractive environment for real estate investment. Improving economic activity drives the demand for our properties, and we anticipate ongoing strength in property fundamentals as new construction supply appears restrained. Despite the Federal Reserve indicating that short-term rates may edge up later in 2015, interest rates have yet to begin an upward trajectory as many expected. Even if a rise in rates occurred, it would not necessarily be bad for REITs, assuming it's accompanied by economic growth. Better fundamentals should lead to higher rents, cash flow, and dividend distributions, which should help temper rate concerns. We maintain a favorable long-term view of real estate fundamentals based on improving demand, reasonably constrained supply, and continued access to capital markets.