Mid-cap growth stocks rose strongly in the first quarter of 2013 against a backdrop of low interest rates and moderate economic growth. Investors moderated their risk aversion despite tighter fiscal policy stemming from some U.S. federal tax increases in January and automatic budget cuts in March and renewed concerns about the European sovereign debt crisis.
The Diversified Mid-Cap Growth Fund returned 11.21% in the quarter compared with 11.51% for the Russell Midcap Growth Index and 11.62% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended March 31, 2013, the fund returned 12.02% versus 12.76% for the Russell Midcap Growth Index and 10.05% for the Lipper Mid-Cap Growth Funds Index. The fund's 1-, 5-year, and Since Inception (12/31/2003) average annual total returns were 12.02%, 8.04%, and 7.87%, respectively, as of March 31, 2013. The fund's expense ratio was 1.00% as of its fiscal year ended December 31, 2011.
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.
Investments in the health care and financials sectors helped the fund's results versus the Russell benchmark, but stock selection among energy, materials, consumer discretionary, and consumer staples companies hurt our relative performance. Our overweight in the information technology sector also worked against us. Our stock selection is based on a combination of fundamental, bottom-up analysis and quantitative strategies in an attempt to identify companies with superior long-term appreciation prospects. We look for companies with a demonstrated ability to increase revenues, earnings, and cash flow consistently; capable management; attractive business niches; and a sustainable competitive advantage. We favor companies with above-average earnings growth and lower earnings variability.
Given the strong performance of lower-quality companies in the first quarter, we believe that higher-quality companies, which we favor, are more attractive. We believe the environment remains very favorable for our investment management approach. The economy is growing, corporate earnings are likely to remain positive, and the Federal Reserve's monetary policies should remain highly accommodative for some time to come. Also, corporations have substantial cash reserves on their strong balance sheets and have generally been responsible stewards of capital. In addition, equity valuations remain attractive, and speculative activity has been low.