Real assets stocks declined in the third quarter. Natural resources stocks fell sharply and lagged the broader domestic and global equity markets by a wide margin. Energy and materials stocks declined as the stronger greenback weighed on dollar-denominated commodity prices, and oil prices were pushed lower still by a lull in concerns about supply disruptions in the Middle East and Russia. U.S. real estate stocks fell for the period after higher long-term bond yields triggered a sell-off in September. Overseas real estate shares also declined amid heightened geopolitical turmoil and slower economic growth in key markets, particularly Europe and China.
The Real Assets Fund returned −7.24% in the quarter compared with −2.20% for the MSCI All Country World Index and −0.82% for the Lipper Specialty/Miscellaneous Funds Average. For the 12 months ended September 30, 2014, the fund returned 7.17% versus 11.89% for the MSCI All Country World Index and −3.52% for the Lipper Specialty/Miscellaneous Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were 7.17% and 4.91%, respectively, as of September 30, 2014. The fund's expense ratio was 0.85% as of its fiscal year ended December 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 Real Assets 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.
In the natural resources space, we like energy exploration and production companies and midstream/infrastructure companies exposed to North American shale oil deposits. We are also focused on commodity-related companies whose input costs are declining while product sales are increasing, including packaging and specialty chemicals firms. In real estate, the housing sector has been turning in mixed numbers in the last few months, as prices and sales of existing homes have improved while construction and sales of new homes continues to lag. Industrial real estate holdings weighed on returns as this was the worst-performing subsector during the quarter. We believe the portfolio's Japanese real estate companies are well positioned to benefit from economic recovery and a reversal of deflationary pressures.
We expect modest global economic growth over the next few quarters. The U.S. economy is improving gradually, supported by diminishing fiscal headwinds, increased government spending, moderate job growth, and better private sector demand. Japanese and European growth has moderated, with Europe still hindered by high debt, elevated unemployment, and deflation worries. Slowing growth in China, Brazil, and other emerging economies weighs on global trade and materials prices, though we would not be surprised to see a cyclical upswing in energy prices due to geopolitical unrest and seasonal factors. A strengthening U.S. economy should lead to higher real estate rents, better cash flow, and healthy dividend distributions. We believe that conditions will improve outside the U.S., and we maintain a favorable long-term view of real estate fundamentals.