U.S. stocks generally rose in the second quarter. Markets registered moderate gains in April and May, supported by accommodative global monetary policies, stabilizing oil prices, and reduced expectations for interest rate hikes in the U.S. Markets tumbled in late June after the UK surprisingly voted to leave the European Union (Brexit). Within the benchmark Russell 3000 Growth Index, the energy sector registered the largest gains as oil prices rebounded. Utilities and telecommunication services stocks also advanced. Information technology and consumer discretionary declined modestly and were the weakest sectors. Mid- and small-cap shares outperformed their large-cap counterparts, while value stocks outpaced growth stocks across all market capitalizations.
The Tax-Efficient Equity Fund returned 1.47% in the quarter compared with 0.80% for the Russell 3000 Growth Index and 0.95% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended June 30, 2016, the fund returned −2.18% versus 1.88% for the Russell 3000 Growth Index and −5.16% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were −2.18%, 10.60%, and 7.70% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.86% as of its fiscal year ended February 29, 2016.
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.
Small positions in the utilities and telecommunication services sectors generated strong gains as investors were lured by their defensive qualities and attractive yields. Investors flocked to consumer staples stocks for similar reasons, but we are cautious about the sector because valuations for many companies appear extremely high. Our industrials and business services fell slightly as risk-averse investors shunned cyclical stocks amid concerns about Brexit and slowing global economic growth. Concerns about cyclicality also punished our consumer discretionary stocks. We look for consumer companies with niche-leading business models, excellent cash flow, and other favorable attributes.
With benchmark interest rates near or below 0% in many developed countries, it would seem that central banks' ability to counter the potential global economic deceleration resulting from Brexit is very limited. As a result, we believe that the slow-growth, low total return environment is likely to persist and that investors should expect periodic bouts of volatility. While we continue to believe that equities will remain better long-term investments than extraordinarily low-yielding fixed income securities, we encourage investors to temper their near-term total return expectations. We remain committed to finding and owning quality companies that are growing their earnings steadily but are not too expensive.