Developed non-U.S. stock markets posted steep losses largely due to the U.S. dollar's strength versus other currencies, which reduced returns for U.S. investors. Asian markets, led by Hong Kong and New Zealand, held up better than European markets. Japanese shares, however, fell more than 2% as the economy went back into a recession following an April 1 sales tax increase. In an attempt to boost the economy and inflation, the government expanded its quantitative easing measures. European stocks struggled as eurozone economies stalled and fears of deflation intensified. In the eurozone, Belgium and Ireland were the only markets able to register slim gains, whereas Portugal and Italy fell sharply.
The International Equity Index Fund returned −4.39% in the quarter compared with −3.65% for the FTSE All World Developed ex North America Index and −3.61% for the Lipper International Large-Cap Core Funds Average. For the 12 months ended December 31, 2014, the fund returned −5.95% versus −4.61% for the FTSE All World Developed ex North America Index and −4.82% for the Lipper International Large-Cap Core Funds Average. The fund's average annual total returns were −5.95%, 5.04%, and 4.37% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.50% as of its fiscal year ended October 31, 2013.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
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 regions. We attempt to replicate the index by investing in stocks across sectors in proportion to their weighting in the index. The fund's consumer discretionary and information technology sectors were the best performers for the past three months as each generated a small positive return, but all other sectors declined. The largest sector, financials, lost about 3%. The energy sector suffered the largest decline, about 18%, as oil fell to its lowest level in more than five years.
While we remain optimistic about the intermediate and longer term outlook for international equities, potential near-term headwinds include the strengthening U.S. dollar and continued global economic weakness. Disappointing European earnings growth and the dispute between Western powers and Russia over Ukraine, calls into question the viability of near-term economic improvement. In Japan, we believe domestic consumption and wage inflation need to improve for a sustained recovery. Prime Minister Shinzo Abe has been pressing corporations to raise wages in support of the Japanese consumer, and indications of durable economic improvements, combined with corporate tax incentives, should help. As always, our mission is to provide low-cost exposure to non-U.S. equities through a diversified portfolio designed to replicate the performance of our benchmark index.