Global equity markets rebounded late in the period following the surprising outcome of the UK referendum on June 23 to leave the European Union-the so-called "Brexit"-which precipitated a steep sell-off. However, the rebound was uneven. Developed non-U.S. markets posted losses, while emerging markets equities recorded gains. Stocks in North America and developed markets in Asia advanced, but developed European markets recorded losses. From a sector perspective, the large financials, consumer discretionary, and industrials and business services sectors declined, while the more value-oriented sectors, such as energy, health care, consumer staples, and materials, posted good gains. Most major currencies in developed markets weakened versus the U.S. dollar, which reduced returns for dollar-based investors.
The International Stock Fund returned −0.33% in the quarter compared with −0.40% for the MSCI All Country World Index ex USA and −0.69% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended June 30, 2016, the fund returned −8.29% versus −9.80% for the MSCI All Country World Index ex USA and −7.75% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were −8.29%, 2.19%, and 3.23% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.83% as of its fiscal year ended October 31, 2015.
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.
The International 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 portfolio benefited from its overweight to growth-focused sectors including information technology and health care and from its underweight to financials. However, stock selection in the industrials and business services and consumer discretionary sectors hurt our comparison with the benchmark. We look to own companies that generate steady, above-average free cash flow, revenues, and earnings growth. During the quarter, we added to cyclical sectors, such as financials, and defensive sectors, such as health care, as the market's view of global growth oscillated between concern and complacency. We have used the underperformance of the health care sector to add to positions in some of our favorite long-term holdings.
We are confident that global economic growth will remain modestly positive and that stock prices are currently pricing in less growth than we envision. Within this volatile environment, we want to own high-quality growth companies that we feel are "mispriced" by the market. European economic growth forecasts remain tepid, which could crimp corporate earnings. We remain focused on companies that can generate steady revenue, earnings, and cash flow growth. Despite the difficult market environment, we still believe that there are good long-term opportunities in emerging markets.