Market Sector Update

• Global real estate securities were lower in the third quarter, with the sector lagging the solid returns of the broader equity market for the period.
• For a large portion of the third quarter, real estate securities and broader equities continued to advance benefitting from the combination of a supportive economic backdrop and positive operating results. As the quarter progressed investors began to refocus their attention to the health of the overall economic outlook, looking past lingering trade tensions and political uncertainty.
• In the quarter’s final weeks, this shift in sentiment drove an increase in interest rates, which weighed on the earlier performance of the real estate sector and favored more economically sensitive broad market segments.
• Share prices for global real estate securities are modestly ahead for the year and lead bond indices, but the asset class has trailed the broader equity market in 2018.

Portfolio Strategy

• The Fund outperformed its benchmark, FTSE EPRA/NAREIT Developed Index, for the quarter, based on Class I shares. Relative outperformance was driven by positive stock selection, stemming from strong results in the U.S., Hong Kong and Japan.
• Regional allocation results were modestly negative, somewhat offsetting the positive impact of selection results during the quarter. Underweight positions to Singapore and Canada weighed on results in the period. Singapore performance rebounded after a weak first half of 2018, while Canadian company performance has benefitted from better than expected economic growth and firming oil prices.
• Positive stock selection was driven by outperformance in the Asia Pacific region, particularly in Hong Kong. Strong Hong Kong results stemmed from a tilt to the region’s office and non-discretionary retail sectors.
• Several of the Fund’s country allocations were adjusted during the quarter. The Fund’s overweight position to Australia was transitioned to an underweight. This change was used to shift the Fund’s U.K. market weight position to an overweight and increase overweight positions to Hong Kong and Japan. The Fund’s overweight to the U.S. was also modestly reduced. Despite the modest reduction in U.S. exposure, the Fund remains meaningfully overweight the country. Underweight positions to Singapore, Canada and Continental Europe were maintained during the quarter.
• Given the Fund’s lower-risk investment strategy, the portfolio is tilted toward companies we believe are better quality assets, lower leverage and have management teams capable of adding shareholder value. The benefit of the Fund’s strategy was evident in the latter half of the period as global markets were negatively impacted by rising trade tensions which resulted in companies with higher-risk attributes lagging those of a lower-risk nature, and in turn, adding a further benefit to Fund results.

Outlook

• Global economic growth expectations were largely unchanged during the quarter. Leading economic indicators have come off peak levels, but continue to suggest continued economic expansion. Ongoing global trade and political tensions remain a risk.
• Interest rates, from both a nominal and real perspective, have trended higher this year. Tighter financial conditions and higher borrowing costs can create headwinds for risk assets. At this time, tighter financial conditions have not reached a level that has significantly impacted the pricing of direct real estate.
• In addition, a broadly positive economic environment, any impact from tighter financial conditions is likely to be mitigated to some degree by the benefits such an economic environment provides. With regard to the real estate sector, a more positive economic backdrop drives the potential for further demand for space and consumption, providing potential upside to company cash flows.
• Real estate operating fundamentals are healthy across much of the globe, most recently demonstrated by broadly positive operating results relayed in the latest quarterly and half-year reporting periods. Management teams in several regions have suggested the possibility of a modest near-term acceleration. Given the health of real estate fundamentals in the current economic and capital market environment, we continue to expect solid levels of earnings and dividend growth from real estate securities.
• Global real estate securities continue to offer attractive pricing compared to their historical trading pattern with private real estate.

The opinions expressed are those of the Fund’s managers at Class I shares and 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, 2018, 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.

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

Co-Portfolio Manager Stanley J. Kraska, Jr. retired from LaSalle Investment Management Securities on Sept. 4, 2018.

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, it 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. There is no guarantee that the Fund will not decline in value in comparison with funds that do not use a risk-managed approach. 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.