The FTSE® EPRA®/NAREIT® Global Index returned 5.70% during the first quarter. Real estate securities underperformed the broader market, as measured by the 6.50% return of the MSCI All-Country World Index. U.S. real estate securities returned 7.92%, outperforming developed international and emerging markets real estate securities, which returned 4.90% and 2.78%, respectively. The Global Real Estate Index Fund posted a return of 5.39%.

Global developed markets delivered positive returns but lagged the U.S. market during the quarter. The equity rally was driven in part by central bank actions, as U.S. and European monetary authorities maintained their stimulative policies. Japan announced plans to take significant actions to combat deflation, driving down the value of the yen and sending Japanese stocks higher. Economic data was also generally positive within the United States, and a lack of negative news in Europe for much of the quarter helped to calm the markets.

Concern over Cyprus sparked volatility in March, however, as investors feared a return of Europe’s debt crisis. These worries were alleviated when lenders agreed to bailout terms with Cyprus at the end of March, although the country was forced to implement severe capital controls to avoid massive bank runs. News from Europe may continue to impact U.S. equity returns, but crisis fears could be balanced by continued stable growth and monetary stimulus.

• Seek to duplicate the investment composition and overall performance of the stocks included in the FTSE®EPRA®/NAREIT® Global Index.
• Invest at least 80% of its net assets in equity securities in the Index, in weightings that approximate the relative composition of the Index.
• Use proprietary quantitative techniques designed to minimize trading costs.