Ivy Lasalle Global Real Estate Fund

Ivy LaSalle Global Real Estate Fund
06.30.19

Market Sector Update

  • Global real estate securities produced modestly positive gains in the second quarter, outpacing global bond indices but trailing global equities. Global risk assets bounced between gains and losses for most of the period before trending higher in June to build on the robust gains of the first quarter.
  • The combination of escalating trade tensions and softer economic data reignited fears of a material slowdown in global economic growth, weighing on the performance of risk assets during the early portion of the period. These fears were met with a combination of accommodative commentary and action from central banks around the globe. Late quarter progress in trade negotiations further supported risk assets, particularly those of a more cyclical nature and more directly impacted by lingering trade disputes.
  • Real estate securities have produced year-to-date returns, benefitting from the combination of healthy operating fundamentals and an easing of financial conditions. Real estate securities and global equities both have produced returns returned greater than 15% for the first half of 2019.

Portfolio Strategy

  • The Fund had a negative return and slightly lagged its benchmark for the quarter.
  • On a relative basis, the Fund’s performance was impacted by negative regional allocation and stock selection results. Regional allocation results were impacted by an underweight position to Singapore, which outperformed in the period, and overweight positions to the U.K. and Hong Kong, which both underperformed this quarter. Singapore real estate securities benefitted from the combination of further easing of financial conditions and improvement of real estate fundamentals in the region. Performance of U.K. real estate securities was hurt by increased expectations for the potential of a no-deal Brexit scenario following the resignation of Prime Minister Theresa May. In addition, outperformance in Japan and continental Europe helped to offset a portion of underperformance in the period.
  • Stock selection results were impacted by underperformance in the U.S. and Australia, and stemmed largely from an overweight position to the higher-quality regional mall sector and an underweight position to the industrial sector. Performance of the regional mall companies has been hindered this year as sector sentiment has turned more negative with an acceleration of retailer store closings, as well as weaker outlooks from numerous retailers. Industrial performance has been supported by the ongoing strength of operating fundamentals within the sector.
  • The Fund's country allocations were adjusted during the period. The Fund’s overweight positions to the Hong Kong and Japan were increased during the quarter. The Fund’s underweight position to continental Europe was reduced during the period. These changes were funded by increasing the Fund’s underweight positions to the U.S., Australia and Canada. The Fund’s underweight position to Singapore and overweight position to the U.K. were maintained.

Outlook

  • Leading economic indicators continue to align with a more muted, but positive pace of expansion as fiscal and monetary stimulus efforts have offered support to the economic environment for most of the year. Lingering global trade tensions and further softening of economic data has prompted additional fiscal stimulus policy measures around the globe, helping to ease financial conditions.
  • Global real estate operating fundamentals appear to be stable across many markets based on management teams and sector-related reporting. The expectation for modest, but positive economic growth and an easier interest rate environment should remain sufficient to drive demand for real estate. We believe cash flow growth to remain healthy for the foreseeable future based on healthy growth prospects and select instances of external growth.
  • With the strong performance in 2019, global real estate securities are trading largely in line with their historical average trading pattern with alternatives - private real estate, bonds and equities, while certain sectors and countries within the asset class continue to offer significant pricing discounts.

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 June 30, 2019, 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.

On Nov. 5, 2018, the Ivy LaSalle Global Risk-Managed Real Estate Fund merged into the Ivy LaSalle Global Real Estate Fund.

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.