U.S. stocks rose modestly for the quarter as a strong rally in the latter half of the period erased earlier losses. Worries that a slowing global economy might drag the U.S. down caused markets to get off to a poor start in 2016. However, market sentiment rebounded in mid-February amid higher oil prices and improved U.S. economic data. Within the benchmark Russell 3000 Growth Index, the small utilities and telecommunication services sectors recorded the strongest gains. Consumer staples, industrials and business services, and materials shares were solidly positive. The health care and energy sectors performed poorly, however, declining 10% and 8%, respectively.
The Tax-Efficient Equity Fund returned −3.46% in the quarter compared with 0.34% for the Russell 3000 Growth Index and −3.90% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended March 31, 2016, the fund returned −3.17% versus 1.34% for the Russell 3000 Growth Index and −5.29% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were −3.17%, 10.34%, and 6.96% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.87% as of its fiscal year ended February 28, 2015.
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.
Natural gas distributors account for our small allocation to the utilities sector, which generated strong gains for the three-month reporting period. Our health care stocks fell for the period. For several years, we have focused on the promising growth potential of biotechnology companies addressing unmet medical needs rather than large-cap pharmaceutical firms. However, this can be a volatile space in which to invest. Not all of our investments will be winners, but our companies continue to make strong advances in getting important new medicines approved and on the market helping patients. The financials and industrials and business services sectors represent our largest overweight allocations versus the benchmark, while consumer staples and information technology are our largest underweights.
Given today's modest economic growth and fair equity valuations, it is reasonable to expect equity market returns in the years ahead to be lower than historical norms. Compared with low-yielding fixed income investments, however, we expect equities to have better risk-adjusted potential. While absolute returns in the next few years are not likely to be as favorable as they have been in the last few years, we believe that, in a slow-growth world, the market will be more discerning of corporate earnings and fundamentals. This should be good for our strategy and our relative performance, given our focus on quality companies that generate steady growth over time. Specifically, we believe that companies that can generate earnings growth in a slow-growth environment will stand out. Our broad diversification focus on absolute and relative valuations and careful attention to position sizes should help mitigate risks.