The Financial Services Fund returned 11.91% in the quarter compared with 12.07% for the Russell 3000 Financial Index and 11.30% for the Lipper Financial Services Funds Index. For the 12 months ended March 31, 2013, the fund returned 18.92% versus 19.13% for the Russell 3000 Financial Index and 18.35% for the Lipper Financial Services Funds Index. The fund's average annual total returns were 18.92%, 3.81%, and 6.68% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.98% as of its fiscal year ended December 31, 2011.
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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.
Companies in the capital markets industry contributed the most to fund performance in absolute terms, helped by favorable financial market conditions. Securities brokers and dealers did best, as they stand to benefit from a cyclical rebound and an increase in trading volumes, mergers and acquisitions, and corporate issuance of equity securities to raise capital. Companies that own and operate securities exchanges and asset managers also did very well. In the insurance industry, our property and casualty companies fared best. Favorable earnings signaled that price increases are helping to drive organic growth and profit margins higher. Shares of regional banks also performed well, as a few reported solid loan growth.
Financial stocks are continuing to rebound from the lows of the 2008-2009 financial crisis. While valuations are generally higher, and thus less attractive, than they were at the beginning of last year, we still find valuations of select financials to be reasonable on a normalized earnings basis. Financials should continue to benefit from an improving U.S. economic environment and continued firming in the housing market. However, the low interest rate environment hinders banks' ability to earn money on the loans they make. In addition, we remain mindful that the inability of governments of major developed countries to manage their fiscal policies effectively could pose a significant risk to the financials sector in general.