Mid-cap growth stocks were fairly flat in the second quarter. For most of the period, the market was supported by merger activity, a strengthening economy, and better-than-expected first-quarter corporate earnings. Sluggish global growth, a stronger U.S. dollar, and concerns that the Federal Reserve would soon raise short-term interest rates occasionally weighed on the market. As the quarter ended, equities reacted negatively to events in Greece, Puerto Rico, and China.
The Diversified Mid-Cap Growth Fund returned −0.04% in the quarter compared with −1.14% for the Russell Midcap Growth Index and 0.44% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended June 30, 2015, the fund returned 13.31% versus 9.45% for the Russell Midcap Growth Index and 9.19% for the Lipper Mid-Cap Growth Funds Index. The fund's average annual total returns were 13.31%, 18.47%, and 9.86% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.89% as of its fiscal year ended December 31, 2014.
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.
Stock selection in several sectors, such as financials, information technology, and industrials and business services, helped fund performance versus the Russell index. On the other hand, stock selection among consumer staples, consumer discretionary, and energy companies detracted from our relative results. Sector weightings in aggregate had a marginal positive impact on relative performance. In health care, biotechnology stocks have been strong contributors to performance, and we broadly diversify our holdings to reduce risk. We have been purchasing more biotech positions while maintaining the same relatively small aggregate allocation (5% of assets) to the industry. This reflects confidence in our firm's research capabilities.
Although we are not bearish on the equity market, we are not especially enthusiastic about near-term prospects. Shares have appreciated significantly over the last six years-rewarding investors who have stayed the course-but valuations are now above long-term averages. Also, corporate earnings growth has moderated as the expansion has aged, so investment gains in the years ahead are likely to be less robust than what we have seen thus far in this up cycle for the market. Still, stocks have dramatically better long-term prospects than bonds. Underlying fundamentals for corporations remain solid, and the current environment, though unexciting, should enable us to distinguish ourselves through our dedication to rigorous, fundamental research.