Health care stocks posted solid fourth-quarter gains. The broad market, as measured by the S&P 500 Index, generated good performance following a steep third-quarter sell-off, and health care was among the strongest sectors in the snapback rally. Within the Lipper health/biotechnology benchmark every industry group advanced--the biotechnology and life sciences segments recorded double-digit gains, and product and device makers finished just shy of that mark. The pharmaceuticals and services industry groups recorded more modest advances.
The Health Sciences Fund returned 7.44% in the quarter compared with 7.04% for the S&P 500 Index and 8.97% for the Lipper Health/Biotechnology Funds Index. For the 12 months ended December 31, 2015, the fund returned 12.98% versus 1.38% for the S&P 500 Index and 8.55% for the Lipper Health/Biotechnology Funds Index. The fund's average annual total returns were 12.98%, 27.01%, and 16.76% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.77% as of its fiscal year ended December 31, 2014.
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The portfolio underperformed its Lipper peer group in the three-month period ended December 31, 2015. Overall, sector allocation decisions hurt our comparison with the benchmark, while stock selection contributed to relative returns. The services sector accounted for most of the portfolio's shortfall versus the benchmark due to our substantial overweight allocation and stock selection, to a lesser extent. Within the segment, we favor the prospects for our managed care holdings, which we think will benefit from an era of depressed health care utilization as consumers cut back on their health care spending. Life sciences and product and device holdings were solid absolute performers and relative performance contributors.
Given the health care sector's strong gains over the past five years, we have become somewhat cautious about near-term performance. However, we continue to like the prospects for the sector over the long term, given the demographic, technological, and clinical tailwinds in our space. Political rhetoric about drug pricing will likely remain in the news, which could create headwinds for biotechnology and pharmaceutical stocks and potentially increase volatility, but it will also provide us with tactical opportunities to buy and sell stocks. We expect companies will show more restraint on drug pricing in 2016, and we do not envision any major shifts in pricing or policy over the next several years. Enacting any new health care reform legislation should take a substantial amount of time. We believe that the health care universe is diverse and dynamic, and it continues to represent one of the most attractive growth areas in the global economy.