Small-cap growth stocks entered and then exited bear market territory during the quarter in line with the bounce in riskier asset classes, which was led by the reversal of some of the most beaten-down areas of financial markets, including stocks, high yield bonds, and oil. Still, small-caps suffered moderate losses and have now underperformed large-cap companies since 2014, bringing relative valuations down closer to longer-term averages, although still modestly elevated. Absolute valuations (forward P/E) rode the February bounce to levels that are now above average.
The New Horizons Fund returned −4.10% in the quarter compared with −4.68% for the Russell 2000 Growth Index and −3.92% for the Lipper Small-Cap Growth Funds Index. For the 12 months ended March 31, 2016, the fund returned −5.81% versus −11.84% for the Russell 2000 Growth Index and −10.18% for the Lipper Small-Cap Growth Funds Index. The fund's average annual total returns were −5.81%, 12.25%, and 9.06% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.79% as of its fiscal year ended December 31, 2014.
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.
Our bottom-up investment process focuses on picking individual stocks, which drives sector allocations. We strive to select companies that are either early-stage innovators with the potential to grow into large-caps or that can durably grow over time as a result of the advantages of scale, a new technology, or an ability to increase efficiency in their markets. Information technology, consumer discretionary, and the health care sector are the portfolio's largest allocations.
While we expect interest rates will rise, the pace of rate increases by the Federal Reserve is likely to be gradual and measured. The earnings outlook for most sectors (excluding commodity-related segments) appears favorable. We remain confident in our ability to find smaller companies that are poised to grow rapidly and to hold them through the downturns and valuation adjustments that are part of every market cycle.