Developed market stocks posted losses in the first quarter. Although markets rallied strongly in the second half of the three-month period, those gains didn't offset the losses in the first half of the period. Japan and other developed Asian markets underperformed the UK and most developed European markets. Overall, emerging markets handily outperformed, led by double-digit gains in Latin America and emerging Europe. Emerging Asian markets produced mixed performance, with China and India declining, while South Korea and Taiwan generated solid results. Sector performance was disparate within the MSCI All Country World Index. The energy, materials, utilities, and telecommunication services sectors provided strong gains, while health care and financials posted large losses. The U.S. dollar weakened versus most currencies, which benefited returns for dollar-based investors holding non-U.S. securities.
The International Stock Fund returned −0.26% in the quarter compared with −0.26% for the MSCI All Country World Index ex USA and −1.79% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended March 31, 2016, the fund returned −6.93% versus −8.78% for the MSCI All Country World Index ex USA and −5.91% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were −6.93%, 2.70%, and 2.91% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 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 remained overweight to growth-focused sectors, including consumer discretionary, information technology, health care, and industrials, and underweight to slower-growth sectors, such as consumer staples, materials, utilities, and financials. Overall, stock selection generated a positive relative performance contribution, but allocation decisions detracted from our comparison with the benchmark. We look to own companies that generate steady, above-average free cash flow, revenues, and earnings growth. We are finding what we view as the best growth companies in the industrials, technology, and consumer discretionary sectors. At the end of March, nearly 50% of the portfolio was invested in developed European markets including the UK, emerging markets exposure totaled approximately 20%, and Japan accounted for about 15% of the portfolio.
Our global economic growth expectations remain modest over the next several quarters. Signs of improvement in Europe are supported by aggressive quantitative easing, low energy costs, and an improving credit environment. However, high unemployment, elevated debt levels, geopolitical uncertainties, and lingering structural issues remain near-term concerns. Falling oil and commodity prices have created broad disparities across the emerging markets universe. This has helped some countries that benefit from lower resource costs but continued to weigh on the commodity-related exporters. We remain optimistic on the intermediate- and longer-term prospects for international markets, but our near-term outlook remains somewhat guarded given the recent weakness in global trade, lowered forecasts for global economic growth, and heightened volatility.