U.S. stocks generated strong gains in the fourth quarter of 2014, with large-caps posting a sixth consecutive year of positive returns. The market found support in steady U.S. economic growth and renewed stimulus efforts in the eurozone and Japan. S&P 500 sector performance was mixed. Energy stocks tumbled as oil prices fell below $60 per barrel, a level not seen in more than five years. Telecommunication services and materials stocks fell to a lesser extent. On the plus side, utilities advanced by double digits, and consumer-oriented sectors benefited from lower energy costs and expectations for increased consumer spending. Small-cap stocks outpaced their mid- and large-cap counterparts.
The Tax-Efficient Equity Fund returned 6.28% in the quarter compared with 5.17% for the Russell 3000 Growth Index and 5.15% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended December 31, 2014, the fund returned 9.63% versus 12.44% for the Russell 3000 Growth Index and 11.08% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 9.63%, 15.54%, and 7.82% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.89% as of its fiscal year ended February 28, 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.
The Tax-Efficient Equity Fund charges a 1%
redemption fee on shares held less than 365 days.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
Our health care stocks generated double-digit gains for the period. For several years, we have focused on the promising growth potential of biotech companies in the health care sector. This emphasis was rewarded during the quarter as these stocks posted some our best absolute returns. Our energy stocks were not immune to the broader factors weighing on the sector, which included a stronger dollar, tepid demand growth, and ample supply, and our shares fell sharply. We do not attempt to forecast the direction of oil prices or adjust our energy sector allocation in response to short-term oil price movements. Rather, we look for companies that we believe can extract resources at low costs and should emerge from the current environment in a stronger long-term competitive position.
We remain reasonably optimistic about the long-term environment for equities. The U.S. economy should continue to grow modestly, supported by broadly accommodative monetary policy, solid corporate fundamentals, and decent consumer spending. We believe that the core of the equity market remains reasonably valued and the outlook for equities is positive, although returns are likely to moderate somewhat from the exceptional gains seen in the recent past. We believe equity investors would do well to maintain a diversified portfolio of companies with good long-term business prospects that trade at reasonable valuations, keep performance expectations in check, and wait patiently for sustainable gains to accumulate over time.