Large-cap U.S. stocks were roughly flat for the second quarter as optimism about resilient corporate earnings growth and enthusiasm about a reaccelerating U.S. economy gave way to worries over the ongoing Greek debt crisis. The economy shrugged off a first-quarter slump due to weather conditions and West Coast port closures and posted good job growth, healthy wage gains, and solid consumer spending. The U.S. economy looks to be on solid enough footing to withstand the fallout from Greece, which is unlikely to bring about a broader European financial contagion. As measured by various Russell indexes, growth stocks were roughly on par with value stocks among large- and mid-caps and led among small-caps.
The Tax-Efficient Equity Fund returned 0.44% in the quarter compared with 0.27% for the Russell 3000 Growth Index and 0.81% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended June 30, 2015, the fund returned 13.86% versus 10.69% for the Russell 3000 Growth Index and 11.41% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 13.86%, 18.55%, and 8.79% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. 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.
Our health care stocks led absolute returns for the quarter, with several biotechnology names among our biggest contributors. For several years, we have focused on biotechnology companies addressing unmet medical needs rather than on large-cap pharmaceutical firms. We also have a large exposure to health care providers and service companies. Our industrials and business services companies fell in aggregate in the last three months. We like attractively valued companies that are world-class in their respective niches. We also favor high-quality industrials with less cyclicality, exhibiting steady earnings throughout varying economic conditions.
Although we are not bearish on the equity market, we are not especially enthusiastic about near-term prospects for stocks. Shares have appreciated significantly over the last six years and rewarded 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 the current market cycle. Still, stocks have dramatically better long-term prospects than bonds. Whether the market rises, falls, or stays flat, we will use our proprietary global research platform to identify attractive investment opportunities.