Ivy Lasalle Global Real Estate Fund

09.30.20

Market Sector Update

  • Global real estate securities advanced in the third quarter, as risk assets continued to rebound from earlier lows resulting from the COVID-19 pandemic. The FTSE EPRA NAREIT Developed Index, the Fund’s benchmark, gained 2.3% for the period.
  • Risk assets benefitted from the combination of ongoing policy support, incremental improvement in economic data and positive vaccine and therapy developments. As the period progressed, fears of a second wave of COVID-19 and its potential subsequent impact outweighed continued improvement in economic data around much of the globe.
  • Global real estate securities remain below start of year levels, despite second and third quarter advances, while broader equities have recovered to start of year levels. Real estate securities have lagged as retail, lodging and office sectors have weighed heavily on the index as those sectors have been most exposed to COVID-19’s unique effect on physical locations.

Portfolio Strategy

  • The Fund delivered a positive return and outperformed its benchmark for the quarter.
  • Relative performance for the period benefitted stemmed from positive stock selection effect in all three geographic regions, with particular strength in the U.S, Europe, Japan and Hong Kong.
  • Overweight positions to self-storage in the both the U.S. and U.K. contributed to relative performance as the sector benefitted from evidence of improvement in operating fundamentals and continued investor demand. U.S. results also benefitted from an overweight to the cell tower sector and a positioning within the healthcare sector.
  • In Continental Europe, relative performance stemmed largely from an underweight to the regional mall sector in additional to general mall pressures related to a virus resurgence. In addition, performance in Japan and Hong Kong benefitted from select overweight positions to development companies, while results in Japan were also supported by select overweight positions within the industrial and office sectors.
  • The Fund’s country allocations were adjusted during the quarter. The Fund’s overweight position to the U.S. Canada were increased, and its underweight position to the Continental Europe was increased. The Fund’s overweight position to the U.K. was shifted to a modest underweight position and its overweight position to Japan was reduced. A modest overweight position to Hong Kong and underweight positions to Australia and Singapore were maintained.

Outlook

  • Looking ahead, the economic reopening continues to broaden which aligns with our baseline economic outlook. As the reopening process broadens, developments with the virus continue to dictate the economy’s exact path. A resurgence in new COVID-19 cases in select countries around the globe has brought forth fears of a second wave in those locations, which could dampen the possibility of a sharper economic recovery if unchecked.
  • However, positive developments on the virus vaccine and therapy fronts continue, and financial conditions remain at levels which offer additional support to real estate and real estate security values. The impact from the pandemic is driving significant differentiation by real estate sector for both short term and long-term growth prospects.
  • From a valuation perspective, the global real estate security universe continues to offer attractive value relative to alternatives. The category is attractive relative to its historical trading range with broader equities, as real estate share prices have underperformed equity share prices significantly despite comparable reductions to earnings expectations. In addition, global real estate securities are attractively priced relative to historical relationship with government and corporate bonds.
  • Strong capital foundations of the vast majority of real estate securities, coupled with highly supportive financial conditions, positions the sector to deliver attractive investment returns as the economy continues to strengthen.

The opinions expressed are those of the Fund’s managers are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Sept. 30, 2020, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

All information is based on Class I shares.

The FTSE EPRA Nareit Developed Index is an unmanaged index that tracks the performance of listed real estate companies and real estate investment trusts worldwide. It is not possible to invest directly in an index.

The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect the economies of many nations or the entire global economy, individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, the impact of infectious illnesses in emerging market countries may be greater due to generally less established healthcare systems. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. Investment risks associated with investing in real estate securities, in addition to other risks, include rental income fluctuation, depreciation, property tax value changes and differences in real estate market values. Because the Fund invests more than 25% of its total assets in the real estate industry, the Fund may be more susceptible to a single economic, regulatory, or technical occurrence than a fund that does not concentrate its investments in this industry. International investing involves additional risks, including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. The Fund is non-diversified, meaning that it may invest a significant portion of its total assets in a limited number of issuers, and a decline in value of those investments would cause the Fund's overall value to decline greater than that of a more diversified portfolio. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.