Stocks of companies dealing in real assets declined modestly overall in the first quarter amid mixed results in underlying sectors. Natural resources stocks were generally flat as optimism over a resilient U.S. economy was offset by concerns about slower growth in key emerging markets and continued instability in Europe. Global real estate stocks posted solid gains due to slow but steady U.S. economic recovery, stabilization in Europe, and hopes for renewed growth in Japan. However, industrial and precious metals shares declined sharply due to ample inventories for the former and concerns about a difficult operating environment for the latter. Japan paced strong results among global infrastructure and utilities stocks.
The Real Assets Fund returned −0.27% in the quarter compared with 6.63% for the MSCI All Country World Index and −0.36% for the Lipper Basic Materials Funds Average. For the 12 months ended March 31, 2013, the fund returned 2.37% versus 11.19% for the MSCI All Country World Index and 0.71% for the Lipper Basic Materials Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were 2.37% and 6.10%, respectively, as of March 31, 2013. The fund's expense ratio was 0.90% as of its fiscal year ended December 31, 2011.
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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.
Natural resources stocks, which account for approximately one-fourth of portfolio, posted strong gains. North American oil exploration and production companies, oil and gas equipment and services firms, and utilities were among the strongest industries. Infrastructure and utilities stocks were also solid contributors. We reduced some positions with greater sensitivity to market volatility and took advantage of near-term weakness to add exposure to high-quality infrastructure names in Europe. Economic recovery and an improved labor market benefited our U.S. real estate portfolio, while expectations for renewed growth boosted Japanese real estate shares. Metals stocks struggled with the same concerns as the broader market, but modestly outperformed their underlying benchmark.
Our global growth expectations for the next several quarters remain modest. Gradual improvement in U.S. economic activity is supported by the housing recovery, modest job growth, and an uptick in personal income growth, yet also challenged by fiscal uncertainty. The Federal Reserve's pledge to continue its accommodative policy highlights concerns about its effectiveness and an eventual exit strategy. Growth in emerging markets appears to be stabilizing following moderation in 2012. Europe continues to struggle with austerity, and the recent Italian election stalemate and Cyprus bank deposit tax underscore ongoing eurozone instability and the ad hoc nature of policy responses. Overall, corporate balance sheets and profit margins remain healthy, and earnings growth is consistent with modest economic growth.