Global emerging equity markets delivered marginally positive returns over the quarter in U.S. dollar terms, although they slightly underperformed developed markets. Several emerging market countries are major exporters of natural resources and continued strength in commodity prices was supportive, with the oil price breaching $50 per barrel for the first time in several months. The prices of industrial metals strengthened, as did gold, which saw a particularly sharp move at the end of the quarter on perceived safe-haven buying following the surprise Brexit vote. While the vote hit investor sentiment initially, emerging markets generally shrugged off the Brexit concerns and recovered the ground lost by the end of the quarter.
The Emerging Markets Stock Fund returned 4.70% in the quarter compared with 0.80% for the MSCI Emerging Markets Index and 2.11% for the Lipper Emerging Markets Funds Average. For the 12 months ended June 30, 2016, the fund returned −5.63% versus −11.71% for the MSCI Emerging Markets Index and −10.14% for the Lipper Emerging Markets Funds Average. The fund's average annual total returns were −5.63%, −1.72%, and 3.87% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 1.24% 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 Emerging Markets 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.
We maintain our positive long-term stance on emerging market equities, which should continue to grow in importance in the global economy. While Brexit brings some global growth concerns, we expect the growth gap between emerging and developed economies to again improve in favor of the emerging world. The portfolio continues to have a growth tilt, with overweight positions to consumer-related firms, financials, and information technology. We are underweight to sectors where we believe there is a relative lack of growth opportunities, such as energy, materials, and telecommunication services.
Economic growth across many developing markets should continue to be higher than in the developed world in the near future, even though the gap is lower than in the past. Those countries that push forward with reforms should do well, while countries that do not will struggle. Valuations are compelling and remain at a discount relative to their history and to their developed- market peers. Our view is that we are likely to see a much more uneven world going forward, with less correlation and greater divergence in performance among countries and individual stocks within them. We will remain focused on quality companies as we continue to believe that those leading firms will weather the tough environment and will, in fact, improve their competitive positioning.