The FTSE EPRA/NAREIT Developed Real Estate Index posted positive returns and outperformed broader developed market equity indexes for the quarter. U.S. large- and mid-cap indexes ended the period higher, while small-caps suffered moderate losses. Stocks in developed non-U.S. markets underperformed U.S. shares, but a weaker U.S. dollar versus most major currencies helped returns in dollar terms. New measures from the Bank of Japan and the European Central Bank, whose monetary policies are already very accommodative, that pushed certain interest rates into or deeper into negative territory appeared beneficial to equity markets. Within the real estate index, performance was mixed, although the majority of countries turned in positive absolute returns.
The Global Real Estate Fund returned 4.60% in the quarter compared with 4.07% for the Lipper Global Real Estate Funds Average and 5.43% for the FTSE EPRA/ NAREIT Developed Real Estate Ix. For the 12 months ended March 31, 2016, the fund returned 0.64% versus −0.47% for the Lipper Global Real Estate Funds Average and 1.27% for the FTSE EPRA/ NAREIT Developed Real Estate Ix. The fund's average annual total returns were 0.64%, 8.03%, and 14.21% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of March 31, 2016. The fund's expense ratio was 1.07% as of its fiscal year ended December 31, 2014.
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 U.S. represents the portfolio's largest absolute weight. The U.S. leasing pipelines remain active, and occupancy rates and rents are increasing in many markets across a range of property types. Commercial real estate should benefit from constrained new supply in conjunction with a measured return to more robust economic activity. The portfolio's next-largest exposure is Japan, where we believe our holdings are well positioned to benefit from an economic recovery and a reversal of deflationary pressures. We also have substantial weightings in Hong Kong and Australia. In Hong Kong, we believe the lack of land available for construction should benefit operating fundamentals over the long run, while in Australia we focus on companies benefiting from a strong retail environment.
Over the past few years, returns on real estate equities have been correlated with investors' expectation for the future path of interest rates. While we cannot predict short-term rate movements, we believe rates are likely to remain low over the near term, given moderate global growth and low inflation, which should create support for real estate values. Many high-quality, investment-grade tenants are locked into leases for the next several years, supporting fundamentals in the sector. While the rate of new projects is slowly increasing, we expect the favorable supply/demand imbalance to continue over the intermediate term in most regions.