Market Sector Update

• Global real estate securities and the broader equity market declined in the first quarter of 2018. A higher 10-year U.S. Treasury yield, anxiety over aggressive U.S. Federal Reserve (Fed) monetary policy and enthusiasm for the potential of greater corporate earnings growth resulting from the new tax laws all factored into an environment where investors favored investments that are less defensive than real estate for much of the quarter.
• However, in the quarter’s final month, property companies rebounded and outperformed broader equities.
• Real estate securities benefitted as investors shifted their attention to investment vehicles offering cash flow stability as market volatility was more elevated than recent levels. Investor sentiment was impacted by a deceleration in economic growth expectations, tension in global trade relations and concerns over heightened equity valuations.
• Real estate securities benefitted as the health of underlying fundamentals in a supportive economic backdrop drew investors to the space. The late quarter rally improved global real estate security performance.

Portfolio Strategy

• Although the Fund posted negative returns, it outperformed its benchmark for the quarter.
• Relative performance for the quarter was principally driven by positive stock selection results, particularly in Hong Kong, the United Kingdom (U.K.) and Japan, with three regions benefitting from tilts in their respective office markets.
• Several of the Fund’s regional allocations were adjusted during the quarter. The Fund’s position to Australia was increased, transitioning from an underweight to a modest overweight position. The Fund’s overweight position to Hong Kong was also increased. These shifts were funded via an increase in the portfolio’s underweight positions to Singapore and Continental Europe. The portfolio maintained overweight positions to the United States (U.S.) and the U.K. and underweights to Japan and Canada.
• European companies joined in on the action as Unibail-Rodamco announced its acquisition offer of Westfield Corp., U.S. and United Kingdom (U.K.) mall owner. Also, Hammerson announced its acquisition of smaller U.K. retail peer. These proposed acquisitions and activist investments highlight the meaningful net asset value (NAV) discounts in the public mall companies, as well as the importance of higher quality retail assets in today’s retail landscape. The lowerrisk investment strategy of the Fund did not have a materially positive or negative impact 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.

Outlook

• Leading economic indicators remain positive across much of the globe, continuing to suggest healthy levels of global economic growth. While further improvement in economic growth expectations may be moderating, the healthy outlook supports the fundamentals of the real estate sector and offers potential upside to earnings growth for real estate securities.
• Real estate operating fundamentals remain healthy across much of the globe, evidenced by healthy earnings and operating results relayed by management teams in recent reporting periods. 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 currently offer compelling pricing discounts relative to the underlying value of their real estate, as well as to broader market alternatives – particularly compared to their historical pricing relationship with direct real estate.

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 March 31, 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.

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.