Global real estate stocks produced solid results in the fourth quarter, but underlying country returns were mixed. U.S. real estate stocks, which make up the largest portion of the global index, finished higher and outperformed the broad U.S. equities market. While U.S. economic growth remained far from robust, employment continued to recover, and we have begun to see small improvements in wage growth and household formation. Among the larger markets outside the U.S., Japan produced modestly positive returns, while Hong Kong and the United Kingdom both lost ground.
The Global Real Estate Fund returned 4.17% in the quarter compared with 4.40% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and 3.81% for the Lipper Global Real Estate Funds Average. For the 12 months ended December 31, 2015, the fund returned 1.47% versus 0.05% for the FTSE EPRA/ NAREIT Developed Real Estate Ix and −0.46% for the Lipper Global Real Estate Funds Average. The fund's average annual total returns were 1.47%, 7.60%, and 14.01% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of December 31, 2015. The fund's expense ratio was 1.07% as of its fiscal year ended December 31, 2014.
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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 U.S. represents the largest absolute weight in the portfolio. We hold a diverse range of commercial real estate companies with a focus on regional malls, apartment real estate investment trusts (REITs), and industrial REITs. 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 have a substantial weighting in Hong Kong, where we focus our efforts on companies with high-quality properties in attractive locations.
Developers have been slower to launch construction of new commercial real estate projects relative to previous economic recoveries, allowing occupancy gains and rental growth to support cash flows, net asset values, and dividends. Though supply is gradually increasing and some pockets of the market are looking unattractive, we believe that good operating fundamentals should persist for the foreseeable future. In the short run, if interest rates remain low, we shouldn't see much downward pressure on valuations. Regardless, fundamentals will drive real estate values over the long term, and we will focus on seeking the best opportunities around the world.