The large-cap U.S. benchmarks posted modest gains for the quarter, but small-cap stocks fared poorly and many non-U.S. markets experienced losses, due in part to a decline in other currencies relative to the U.S. dollar. Strife in Ukraine and the Middle East also weighed on sentiment, as did concern about China's economic slowdown and the possibility of a renewed recession in Europe. Technology stocks fared somewhat better than the market as a whole, and within the segment, hardware and media stocks performed best. Semiconductor and telecommunications-related shares performed poorly.
The Global Technology Fund returned 2.90% in the quarter compared with 2.36% for the MSCI All Country World Index Information Technology and 0.92% for the Lipper Global Science / Technology Funds Index. For the 12 months ended September 30, 2014, the fund returned 35.70% versus 23.90% for the MSCI All Country World Index Information Technology and 20.02% for the Lipper Global Science / Technology Funds Index. The fund's average annual total returns were 35.70%, 20.69%, and 14.48% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.95% as of its fiscal year ended December 31, 2013.
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.
We have recently increased the portfolio's exposure to non-U.S. firms. While the shift has been the result of our bottom-up stock selection, it has also reflected our perception that valuations are generally more attractive in both developed and emerging markets outside the U.S. We have made several recent investments in China, where we are drawn to the country's booming Internet and mobile sectors. While we are mindful of the possibility of government intervention in the Chinese market, we believe Chinese authorities will be careful not to mistreat foreign investors and companies in order to retain access to global capital markets and trade agreements.
Our expectations are modest for stock returns over the coming quarters. In particular, valuations seem full for companies highly exposed to the sputtering global economic cycle, so we are being careful to moderate our exposure to companies serving the industrial and automotive supply chains, for example, and we have recently dialed back our semiconductor investments. We have also taken profits on some of the fastest-growing companies in the portfolio, many of which saw their stocks establish new highs after the steep pullback this spring. Instead, we are focusing more on high-quality companies that have been able to grind out consistent earnings growth. These stocks have not been bid up as much as many less profitable or unproven firms, making their valuations more attractive on a relative basis. The good news for tech investors is that the sector has a relative abundance of such firms, which may help tech stocks outperform in what we expect to be a generally unrewarding market environment.