Ivy LaSalle Global Risk-Managed Real Estate Fund

Ivy LaSalle Global Risk-Managed Real Estate Fund

Market Sector Update

  • Global real estate securities returned positive gains in the third quarter, continuing a strong run for the year. While global real estate securities performed well, the group trailed the broader equity market for the period.
  • Risk asset performance has been supported by positive leading economic indicators around much of the world, which have resulted in improved global economic growth expectations.
  • Real estate operating fundamentals are broadly healthy across much of the globe. Earnings results have been mostly in line or ahead of expectations in the most recent reporting periods, with management teams generally conveying supportive operating results.
  • The Fund’s portfolio includes companies we believe are priced favorably relative to their intrinsic and net asset values, and are well diversified by country, currency and property type. We believe the earnings of these holdings are likely to grow at a slightly faster rate than companies in the Index.

Portfolio Strategy

  • While producing positive results before the effect of sales charges for the quarter, the Fund trailed its benchmark, the FTSE EPRA/NAREIT Developed Index, which is designed to track the performance of listed real estate companies and real estate investment trusts (REITs) worldwide. Relative performance was negatively impacted by stock selection, specifically concentrated in Hong Kong and the United States.
  • A large portion of underperformance in these regions was driven by the lower-risk investment strategy of the Fund. Several property types are screen out of the Fund’s investable universe due to their risk profile. As such, we do not own Hong Kong-based residential companies because of the speculative nature of their development projects. Likewise, the Fund avoids investing in U.S. hotels and data center companies. The short-term nature of the hotel sector’s lease structure and the obsolescence risk of data centers eliminate these companies from inclusion in the Fund’s portfolio. Both of these property types outperformed during the quarter.
  • Performance in Hong Kong was also hampered by a tilt toward the office sector, which despite healthy fundamentals, lagged the region’s residential developers.
  • Underperformance in the U.S. was hindered by an underweight to the industrial sector and an overweight to retail REITs. We believe Class A malls are better quality, long-term assets than other retail REIT property types due to their ability to maintain healthy rent and occupancy rates with high profile retailers, as well as their management teams’ ability to add shareholder value and lower leverage.
  • Regional allocation was modestly positive during the quarter driven by an underweight position to Japan.


  • Global financial conditions remain broadly supportive to the real estate sector. Monetary policies in many economies continue to be accommodative, even as some central banks commence tightening initiatives.
  • Most public real estate companies remain well positioned as they own higher-quality assets, have solid balance sheets and maintain access to capital.
  • We believe the health of real estate fundamentals in the current economic and capital market backdrop should support REIT earnings and dividend growth in the near term. Global property stocks currently offer a cash dividend yield close to 4.0% and are trading at a discount to their Net Asset Values on average.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through September 30, 2017, 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.

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.