Health care stocks generated strong first-quarter gains that handily outperformed the broad market as measured by the Standard & Poor's 500 Index. Within the health care sector, the largest industry groups posted the best gains. The pharmaceuticals, biotechnology, services, and products and devices stocks in the Lipper Health and Biotechnology benchmark advanced by double digits in the first quarter. Even the small life sciences segment posted a solid gain that outperformed the S&P 500.
The Health Sciences Fund returned 14.00% in the quarter compared with 0.95% for the S&P 500 Index and 12.32% for the Lipper Health/Biotechnology Funds Index. For the 12 months ended March 31, 2015, the fund returned 41.92% versus 12.73% for the S&P 500 Index and 37.51% for the Lipper Health/Biotechnology Funds Index. The fund's average annual total returns were 41.92%, 28.92%, and 19.57% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.79% as of its fiscal year ended December 31, 2013. Investors should note that the fund's short-term performance is highly unusual and unlikely to be sustained.
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The portfolio's biotechnology holdings, which account for approximately one-third of assets, generated solid absolute and relative performance and outperformed the biotech segment in the Lipper benchmark due to stock selection. However, our underweight allocation to biotechnology stocks detracted from relative returns. We remain focused on biotech companies that develop innovative therapies, and believe that best investments in the health care space will come from companies that develop medicines that prevent disease, relieve symptoms, and provide cures. Our pharmaceuticals and services holdings (each represents about one-quarter of the portfolio) also generated strong absolute and relative results. We have an overweight allocation to the services segment because we like the prospects for managed-care companies that can benefit from an extended period of low health care utilization. Stock selection in the products and devices and life sciences industries, when combined represent about 15% of the portfolio, detracted from relative performance.
Returns for health care stocks have been much stronger than we expected. Therefore, we believe that health care will perform more in line with the broad market going forward. However, if the market experiences a downswing, we think health care can outperform given the defensive nature of many companies in the sector. The health care universe is diverse and dynamic, and we believe that it represents one of the most attractive growth areas in the global economy. The development of new drugs and therapies to address major medical needs and breakthrough products being developed by biotechnology companies should continue to help support growth in the sector.