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Delaware Global Real Estate Opportunities Fund Quarterly commentary March 31, 2017

Within the Fund

Fund performance was negatively affected by adverse stock selection in the United States, Japan, and Hong Kong. Some of this negative relative effect was offset by strong investment performance in Australia and Singapore.

Within the US, the bulk of the Fund’s relative underperformance came from the office and healthcare sectors, in which the Fund is underexposed to two large-cap stocks that outperformed: Boston Properties, in which the Fund had an underweight position, and Ventas, which the Fund did not own. Boston Properties, which owns high-quality urban core office buildings, and whose stock is highly valued with moderate fundamentals, was up significantly for the quarter as investors seemed to anticipate an office recovery based on Trump policies. Ventas, a large diversified owner of healthcare properties, had a solid quarter as investor preference shifted away from concerns about healthcare legislation to the positive effects of demographics and demand.

In Japan, traditional real estate investment trust (REIT) companies outperformed for the quarter as investors, concerned about future growth, preferred low-volatility yield investments. The Fund’s investment in Japanese developers, which underperformed over concerns about growth and sales of condo housing, hurt relative performance. Sumitomo Realty & Development was the Fund’s largest detractor, declining nearly 10%. The Fund was underweight Hong Kong, despite our meaningfully adding to that region throughout the quarter. This underexposure hurt the Fund’s relative performance, as most Hong Kong companies generated strong returns for the quarter. As excess capital from mainland China chased land and condo investments, prices and values increased, despite any legitimate fundamental demand in our view. This massive demand and bid for property was realized in stock prices. As an example, Wharf Holdings, a diversified developer whose shares the Fund did not own, was up more than 30% for the quarter. While the demand remains strong, we are wary of the drivers of home price appreciation. Wages in Hong Kong are growing at a pace far below home price appreciation, and debt costs for borrowers continue to rise. As affordability remains an issue, we are concerned the government will look to limit foreign investments at some point.

The Fund’s overweight allocation and strong stock selection in Singapore helped performance. The government of Singapore lowered stamp duty taxes, which previously had been raised to cool speculative development, and the stocks reacted favorably. City Developments, one of the Fund’s leading contributors for the quarter, rallied more than 25% as its development pipeline is likely to contribute more meaningfully to earnings going forward. In Australia, Charter Hall Group was a strong performer. Charter Hall Group benefits from being a real estate company and having an asset management business that generates substantial fees. As the Australian real estate market continues to perform well, the company has garnered outsized performance fees, which may help drive cash flows. Finally, an overweight to the United Kingdom contributed to Fund performance, as UK stocks continued to bounce back after their significant fall following the Brexit vote in June 2016.

Outlook

As in 2016, we think the significant headlines are likely to continue, particularly in the US as President Trump’s pro-growth agenda is unveiled. Thus far, credit has remained strong and despite the risk of higher potential interest rates, credit investors appear to have a strong desire to allocate additional capital. Should the pro-growth US agenda fail to materialize, we believe early signs could appear in the credit markets. We are watching this closely.

Toward the end of 2016, the UK officially notified the European Union (EU) of its intention to exit the bloc. And so begins a two-year negotiation process that we expect to result in significant posturing from both sides. With the British pound down approximately 13% since the Brexit vote in late June 2016, and real estate stocks discounting some bad news, we anticipate that interesting opportunities may arise in the UK.

The Fund continues to maintain a slight overweight to the US, given solid fundamentals of low supply and reasonable rental growth, while the cost and availability of capital remain favorable. Some retail REITs in the US whose shares fell during the first quarter look particularly attractive to us. The Fund will continue to invest in Europe, due to its gradual but positive fundamental recovery. The UK appears to offer attractive value as the public market is trading at a significant discount to private market values. We continue the Fund’s cautious positioning in Asia and the emerging markets. China has managed its slowdown so far; however, given the increased capital flight and continual government intervention, the risks have increased. China has begun to tighten more aggressively in recent months, yet the market has largely ignored these actions. We are cautious that the more aggressive tightening will cause increased pressure on emerging markets. We plan to maintain the Fund’s underweight to Japan and most of Southeast Asia.

[152822]

The views expressed represent the Manager’s assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

Performance

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Performance data current to the most recent month end may be obtained by calling 800 523-1918 or visiting delawarefunds.com/performance.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return as of quarter-end (03/31/2017)
Current
quarter
YTD1 year3 year5 year10 yearLifetimeInception
date
Class A (NAV)1.42%1.42%1.41%5.10%7.90%1.66%1.96%01/10/2007
Class A (at offer)-4.43%-4.43%-4.47%3.06%6.62%1.05%1.37%
Institutional Class shares1.34%1.34%1.65%5.37%8.11%1.89%2.19%01/10/2007
FTSE EPRA/NAREIT Developed Index2.30%2.30%1.86%6.18%8.18%1.85%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

The Delaware Global Real Estate Opportunities Fund's performance information for periods prior to Sept. 28, 2012, reflects the performance of The Global Real Estate Securities Portfolio (the “Portfolio”) of Delaware Pooled® Trust, which merged into Delaware Global Real Estate Opportunities Fund (the “Fund”) as of that date. The performance information for Class A shares at offer has been adjusted to reflect the Fund’s current maximum sales charge. The Fund also has higher expenses than the Portfolio, including a Rule 12b-1 fee to which the Institutional Class of the Portfolio was not subject. Historical performance results at net asset value and offer prior to Sept. 28, 2012 have not been recalculated to reflect these expenses, but future results will be affected by them. The historical performance of the Portfolio would have been lower had it been subject to the Fund’s expense ratio.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

FTSE EPRA/NAREIT Developed Index (view definition)

Expense ratio
Class A (Gross)1.72%
Class A (Net)1.40%
Institutional Class shares (Gross)1.47%
Institutional Class shares (Net)1.15%

Net expense ratio reflects a contractual waiver of certain fees and/or expense reimbursements from Feb. 28, 2017 through Feb. 28, 2018. Please see the fee table in the Fund's prospectus for more information.

Share class ticker symbols
Institutional ClassDGROX
Class ADGRPX
Class CDLPCX
Class RDLPRX
Top 10 holdings as of 04/30/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
Simon Property Group Inc.3.7%
Welltower Inc.3.1%
Cheung Kong Property Holdings Ltd.3.0%
HCP Inc.2.8%
Goodman Group2.7%
Brookdale Senior Living Inc.2.7%
AvalonBay Communities Inc.2.7%
City Developments Ltd.2.4%
Deutsche Wohnen AG2.3%
Prologis Inc.2.3%
Total % Portfolio in Top 10 holdings27.7%

Institutional Class shares are only available to certain investors. See the prospectus for more information. 

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

A REIT fund's tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.

“Nondiversified” funds may allocate more of their net assets to investments in single securities than “diversified” funds. Resulting adverse effects may subject these funds to greater risks and volatility.

International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations.

Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.

All third-party marks cited are the property of their respective owners.

Not FDIC Insured | No Bank Guarantee | May Lose Value