U.S. real estate stocks outperformed the broader U.S. equity market amid generally positive performance from the real estate subsectors. The office and industrial segment led the way, on the back of firm fundamentals for data centers as well as tempered supply. Self-storage real estate stocks also moved higher, as elevated transaction activity continued to fuel bullish market sentiment. Major U.S. equity indexes rallied strongly in the latter part of the first quarter, erasing steep early-year losses stemming from renewed evidence of a sharp economic slowdown in China and lackluster global growth. The volatility in global financial markets led the Federal Reserve to delay interest rate hikes despite signs of increasing health in the U.S. economy, including a strong labor market.
The Real Estate Fund returned 4.26% in the quarter compared with 4.07% for the Lipper Real Estate Funds Index and 5.30% for the Wilshire US Real Estate Securities Index. For the 12 months ended March 31, 2016, the fund returned 3.50% versus 2.42% for the Lipper Real Estate Funds Index and 5.37% for the Wilshire US Real Estate Securities Index. The fund's average annual total returns were 3.50%, 11.64%, and 6.24% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.76% 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 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.
We believe that high-quality assets in high-barrier-to-entry markets run by skilled management teams drive superior performance within the real estate sector over the long term. Our largest industry weighting is in the apartments segment, where strong demand has boosted rent increases. We prefer property managers operating in attractive real estate markets where the cost of homeownership is high. We also have a significant weighting in regional malls, where we own a portfolio of high-quality malls located in real estate markets that tend to produce stable and growing cash flows. During the quarter, stock selection within and an overweight position in office real estate was the largest performance detractor, while our position in shopping centers was the largest relative contributor.
While the market's short-term reactions to interest rate changes have increased volatility in real estate securities over the past few years, we continue to believe that focusing on individual company analysis is the best way to create solid long-term results. With that in mind, the fundamental conditions for an attractive environment for real estate remain intact. Improving economic activity is driving demand for the properties of real estate firms, and new construction supply still appears restrained. Improving economic fundamentals should help foster an environment of higher rents, cash flow, and dividend distributions, which should help temper concerns about rising rates.