U.S. stocks posted strong returns amid considerable volatility, with large-cap shares underperforming small-caps in a break from the general 2014 trend. Within the large-cap market segment, growth stocks slightly underperformed value. Non-U.S. developed market stocks lost ground in U.S. dollar terms as the greenback continued to strengthen against most other currencies. Asian stocks held up better than European shares. Within the broad MSCI Europe, Australasia, and Far East Index, growth stocks outperformed value shares, while small-caps held up better than large-caps. Measured in terms of U.S. dollars, emerging markets fell more than non-U.S. developed markets.
The Global Stock Fund returned 1.49% in the quarter compared with 0.52% for the MSCI All Country World Index and 1.19% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended December 31, 2014, the fund returned 6.40% versus 4.71% for the MSCI All Country World Index and 2.22% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were 6.40%, 10.30%, and 7.08% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.91% as of its fiscal year ended October 31, 2013.
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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.
The fund's regional allocations were little changed, although we trimmed our exposure to Japan as we become somewhat less optimistic about the country's prospects for growth. We marginally added to our allocation in China by increasing the fund's holdings of Chinese Internet and social media companies. Bottom-up stock selection drove these geographic allocation changes. In terms of sector selection, our largest allocations are to the industrials and business services and information technology sectors. In the industrials and business services sector, the fund focuses on companies that can durably increase earnings in industries with attractive growth dynamics. We have high conviction in the technology sector and Internet companies in particular.
We expect an ongoing increase in volatility as a result of the collapse in oil prices and the disparity in economic growth between the U.S. and the rest of the world. The U.S. appears to offer more certainty of outcomes than other markets, but few U.S. stocks are at bargain prices. Valuations are lower in Europe, but the pace of economic recovery in the eurozone has been disappointing and political tensions are rising. As a result, we continue to build our portfolio from the bottom up, seeking stocks where return on capital is poised to improve as a result of improving industry structure, secular demand growth, or company-specific drivers, while maintaining a disciplined view toward risk.