Small-cap growth stocks rebounded in the fourth quarter after selling off sharply in the third quarter, but ended the year in negative territory with the Russell 2000 Growth Index down about 1%. Small-cap growth stocks outperformed their small-cap value peers for the year. Meanwhile, small-cap stocks underperformed their large-cap counterparts but outperformed mid-caps over the same period. Within the small-cap growth universe, the consumer staples and health care sectors generated the best returns.
The New Horizons Fund returned 5.14% in the quarter compared with 4.32% for the Russell 2000 Growth Index and 3.51% for the Lipper Small-Cap Growth Funds Index. For the 12 months ended December 31, 2015, the fund returned 4.50% versus −1.38% for the Russell 2000 Growth Index and −1.15% for the Lipper Small-Cap Growth Funds Index. The fund's average annual total returns were 4.50%, 15.42%, and 10.73% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. 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.
Small-cap stocks have now underperformed large-cap companies since 2014, bringing valuations down and close to longer-term averages. Small-cap growth valuations are still modestly elevated relative to large-caps, however. Heightened market volatility and U.S. monetary policy tightening have historically been negative factors for the relative performance of small-cap stocks versus large-caps. However, 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.