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Delaware Global Real Estate Opportunities Fund Quarterly commentary June 30, 2017

Overview

During the second quarter of 2017, most asset classes rallied, including global real estate, broader equities, and fixed income. Certain commodities, including oil, were among the few exceptions. Slow and steady growth generally continued across the globe.

Toward the end of the quarter, the markets started to get a bit more cautious as central banks began to mention withdrawing some form of stimulus over the coming year. The US Federal Reserve began raising rates at the end of 2015 and is now discussing the possibility of reducing the size of its balance sheet later in 2017. The European Central Bank has introduced the idea of reducing the size of its stimulus programs, as has the Bank of England. There is even talk from the Bank of Japan of beginning to pull back stimulus. These discussions, combined with the inability of the US government to deliver on its pro-growth agenda, have resulted in lower growth forecasts by a number of economists and most recently the International Monetary Fund.

Among real estate equities, Europe led returns for the second quarter. As stocks across the euro zone experienced a relief rally after the French election, risk was removed. The United States was up slightly for the quarter but marginally lagged the Fund’s benchmark, the FTSE EPRA/NAREIT Developed Index. However, sectors saw divergent performance as investors continued to worry about the impact of ecommerce on traditional forms of retail. Hong Kong again rallied as the demand for its residential real estate from foreign investors remained strong. Australia was the one country that lagged and posted a negative return for the quarter.

Within the Fund

Fund performance was aided by stock selection in the US, Japan, and Hong Kong. Within the US, Brookdale Senior Living performed particularly well. The stock rallied more than 10% on the combination of better operations from senior housing and rumors of potential privatization. The Fund did hold some weaker-performing US investments that offset some of the gains. As noted, investors have become concerned about ecommerce and Internet retailing, and the Fund’s position in Brixmor Property Group fell more than 15% for the quarter. In Hong Kong, the Fund’s lower exposure to developers and larger exposure to retail real estate investment trusts (REITs) contributed to performance. Because land values in Hong Kong have risen significantly, investors have begun to question companies that are adding new land developments. In Japan, the developer companies significantly outperformed the traditional Japanese REITs (J-REITs). Sumitomo Realty & Development, one of the Fund’s larger holdings, gained 19.1%, as discounted valuations and talk of more shareholder-friendly activity rallied the developer stocks. J-REITs, on the other hand, performed poorly mainly due to a richer valuation. ORIX JREIT, for example, lost more than 6%, muting some of the Fund’s gains in Japan.

Europe as a combined region detracted from Fund performance for the quarter. Continental Europe performed well, and the Fund was underweight in the region compared to the benchmark. Finland, in which the Fund had no exposure, rallied more than 25% primarily due to the privatization of Sponda. Swedish stocks also rallied after the government decided to delay implementation of tax changes that sought to limit the deductibility of interest expense, an effort to curb high levels of leverage. After much political backlash, the government decided to delay implementation, and interest-rate-sensitive asset classes, including real estate equities, rallied strongly. Sweden is now discussing implementing these changes again, and the outcome remains unclear. Real estate equities across Europe rallied significantly following the French election results as investors became more comfortable taking on risk. The Fund’s lower exposure to Europe hurt relative performance.

Outlook

As mentioned last quarter, we think that headline risk will likely continue, as political developments are ongoing and global economies struggle for direction. From Brexit negotiations to US tax code reform (among other promised initiatives) to Asian asset bubbles, we expect to see many discussions related to addressing longer-term structural issues. In our view, however, it does not appear that much will be accomplished in the near term.

We believe that the biggest current risk is the potential removal of stimulus by central banks across the globe. As central banks look to shrink the size of their balance sheets and reduce quantitative easing, this will likely affect growth and inflation. We plan to watch credit spreads closely for any dislocation and for potential investment opportunities. So far there has been minimal widening in credit; however, forward-looking inflation indicators are showing signs of caution. Inflation expectations continue to fall and project that many of the central banks may fall short of their goals. Should this continue, we believe many of the central banks will have to rethink their removal of stimulus. Growth across the globe remains muted; however, real estate equities have shown they can do well in a slow-growth environment as long as credit remains favorable and supply remains contained.

We continue to maintain the Fund’s overweight to the US, given solid fundamentals of low supply and reasonable rental growth, while the cost and availability of capital are still favorable. Some retail REITs in the US look particularly attractive to us after the stocks fell during the second quarter on ill-founded concerns, and we have added to the Fund’s exposure. Some of these stocks are trading at discounts not seen in many years. The United Kingdom appears to offer good value, as the public market is trading at a significant discount to private market values. We continue the Fund’s cautious positioning in developer stocks in many Asian regions 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, yet the market has largely ignored its actions. We are cautious that the more aggressive tightening will cause increased pressure on the emerging markets. We plan to maintain the Fund’s underweight to Japan, given its longer-term structural issues.

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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.

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)

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.

Top 10 holdings as of 09/30/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holding% of portfolio
TOTAL26.5%
Simon Property Group Inc.4.5%
Brookdale Senior Living Inc.3.2%
Deutsche Wohnen SE2.9%
Grainger PLC2.7%
Dexus2.3%
Kimco Realty Corp.2.3%
Regency Centers Corp.2.2%
UDR Inc.2.2%
Green REIT plc2.1%
CK Asset Holdings Ltd.2.1%
Total % Portfolio in Top 10 holdings52.9%

Institutional Class shares available 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.

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