U.S. stocks declined in the third quarter as large-cap indexes experienced their first "correction," which is a drop of at least 10% from recent highs, in four years. A steep fall in Chinese stock prices stemming from the country's decelerating economy and uncertainty regarding its policy responses, including a small but unexpected currency devaluation in August, dragged global equity markets lower. Growth stocks held up better than value stocks among U.S. large-caps. Stocks in developed non-U.S. markets fared worse than large-cap U.S. shares, with large-cap equities underperforming small-caps and growth companies falling less than value shares. Emerging markets equities plunged, dropping more than 17%.
The Global Stock Fund returned −8.16% in the quarter compared with −9.34% for the MSCI All Country World Index and −9.29% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended September 30, 2015, the fund returned −0.62% versus −6.16% for the MSCI All Country World Index and −3.47% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were −0.62%, 8.92%, and 5.48% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.89% as of its fiscal year ended October 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.
The Global Stock Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
Bottom-up stock selection drives all of our sector allocations. The fund is significantly overweight in the consumer discretionary and information technology sectors, which are the main segments with companies that are leading change and innovation. We are also overweight in the health care sector, but the fund's health care holdings tend to be stocks that are less widely held than some others in this popular sector. Although the market punished U.S. financial firms after the Federal Reserve did not raise rates at its September policy meeting, we still believe that they will ultimately benefit from higher interest rates and are well positioned for strong performance.
We expect the Fed to hike interest rates before the end of 2015, but we also think that market uncertainty and volatility will remain elevated well into the fourth quarter. We plan to take advantage of the volatility to upgrade the fund's holdings through buying mispriced stocks. Valuations of European companies are increasingly attractive and we think that European economies are becoming healthier, so we anticipate adding to our allocation to the region. Overall, we continue to build the portfolio from the bottom up, seeking stocks whose return on capital is poised to increase due to improving industry structure, secular demand growth, or company-specific drivers, while maintaining a disciplined view toward risk.