Real assets stocks generated a slight overall gain in the first quarter of 2015, but underlying returns were mixed. Natural resources stocks declined modestly but at a markedly slower pace than the precipitous fall experienced in the latter half of 2014. Although the recent stabilization is encouraging, a stronger U.S. dollar, slowing global growth, and an unfavorable supply/demand dynamic continue to weigh on commodities and energy stocks. U.S. real estate securities extended last year's impressive performance with further gains during the first three months of 2015. Performance during the quarter was driven by further improvement in fundamentals, increased M&A activity, and a continued decline in long-term bond yields.
The Real Assets Fund returned 1.02% in the quarter compared with 2.44% for the MSCI All Country World Index and −2.25% for the Lipper Specialty/Miscellaneous Funds Average. For the 12 months ended March 31, 2015, the fund returned −2.03% versus 5.97% for the MSCI All Country World Index and −9.51% for the Lipper Specialty/Miscellaneous Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were −2.03% and 3.78%, respectively, as of March 31, 2015. 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.
We believe that ample supply, tepid demand growth, and a stronger dollar will continue to weigh on prices for oil and other commodities over the near term. As a result, the portfolio remains underweight in the natural resources space, although we are looking for opportunities in areas of the market that could benefit from lower commodities prices. Fundamentals for U.S. REITs are favorable and should benefit from an improving economic environment and lower energy prices. We reduced the portfolio's allocation to the sector, however, as valuations appear rich following a period of very strong returns and because the sector is sensitive to rising interest rates. We increased the portfolio's allocation to global REITs, where we see a more favorable risk/reward dynamic.
Although we are encouraged by positive growth trends in the U.S., Europe and select emerging markets, muted expectations for overall global economic growth will continue to weigh on energy and materials prices. The real estate environment continues to look reasonably attractive. An improving U.S. economy is driving demand for real estate, and we look forward to improvement in property fundamentals as new construction supply still appears restrained. We expect the Federal Reserve will begin to normalize its rate policy later in the year. A rising rate environment would not necessarily be bad for real estate securities if accompanied by an improving economy.