Developed market international equities posted gains in the fourth quarter, thanks to a strong October rally that outweighed losses in November and December. Bargain-hunting investors flooded back into the equity market in October looking for underpriced or mispriced assets after the third-quarter sell-off. But by early November, investor optimism began to wane. Asian markets were very strong, with Japanese shares rising more than 9% in dollar terms, as third-quarter economic data showed that Japan narrowly avoided another recession. In the eurozone, stock returns for U.S. investors were milder, as a stronger dollar versus the euro reduced returns in dollar terms. Eurozone economic growth remained sluggish, and investors were disappointed that the European Central Bank's latest stimulus measures, which were announced in early December, were not as aggressive as expected.
The International Equity Index Fund returned 3.55% in the quarter compared with 4.95% for the FTSE All World Developed ex North America Index and 2.88% for the Lipper International Large-Cap Core Funds Average. For the 12 months ended December 31, 2015, the fund returned −0.74% versus −0.02% for the FTSE All World Developed ex North America Index and −3.39% for the Lipper International Large-Cap Core Funds Average. The fund's average annual total returns were −0.74%, 3.13%, and 2.99% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.45% as of its fiscal year ended August 1, 2015.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The International Equity Index Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The fund strives to match the performance of the FTSE All World Developed ex North America Index, which includes the major developed market countries in Europe and the Asia/Pacific region. We attempt to replicate the index by investing in stocks in proportion to their weighting in the index. Financials, consumer discretionary, and industrials and business services are the largest sectors of the fund and benchmark. All the sectors in the index produced positive results for the quarter. Information technology, industrials and business services, and telecommunications services recorded solid gains and outperformed the broader index. Under pressure from falling oil prices, the energy sector continued to underperform.
Our global economic growth expectations remain modest over the next several quarters. Signs of improvement in Europe are supported by aggressive quantitative easing (QE), lower energy costs, and an improving credit environment. Consumer spending is picking up, bank lending is reviving, and the weaker euro is helping offset the impact of the global commodity bust on exports. Although the Bank of Japan has also stepped up its QE measures to fuel economic growth and spur inflation, our outlook for Japanese equities remains subdued. Weak wage growth and the threat of deflation continue to weigh on the Japanese economy. While steps have been taken to improve corporate governance and shareholder returns, structural reforms to the economy have been slow to materialize.