Global equities climbed in the quarter amid signs that the U.S. economy was recovering from a weather-driven contraction in the first quarter and hopes that new stimulus measures in Europe would boost eurozone economies. Investors were also encouraged by signs the crisis in Ukraine was de-escalating. Developed non-U.S. equity markets narrowly lagged large-cap U.S. shares. Among Asian markets, Hong Kong performed best. Japanese stocks rose more than 6% in dollar terms, though its economy struggled in the wake of last April's sales tax hike. Stocks in Spain and Belgium outperformed in the eurozone, but shares in Greece and Ireland fell sharply. Outside of the eurozone, Norway and the UK were top performers. Equities in developing markets fared better than their peers in developed markets.
The Spectrum Growth Fund returned 4.74% in the quarter compared with 4.87% for the Russell 3000 Index and 4.52% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended June 30, 2014, the fund returned 25.30% versus 25.22% for the Russell 3000 Index and 24.42% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were 25.30%, 17.69%, and 8.61% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2013.
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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 Spectrum Growth Fund focuses on growth-oriented domestic and non-U.S. stocks across the capitalization spectrum but also includes exposure to value stocks. Security selection within a number of underlying portfolios detracted from performance. Out-of-benchmark holdings contributed slightly to relative performance. Our exposure to international equities, which lagged U.S. markets, detracted from results, while our holding in real assets was a positive factor as the sector outperformed the broad equity market index. We believe stock valuations are generally reasonable on an historical basis, though small-caps seem rich to us. We favor non-U.S. equities and are overweight to emerging markets stocks as valuations seem more attractive than in developed markets. We reduced our overweight to U.S. growth stocks, while maintaining an overweight to non-U.S. value stocks which look attractive.
We expect modest global growth over the coming months. The U.S. economy should continue to gradually progress as fiscal constraints abate, job growth picks up and consumer finances improve. While Europe's economy should gradually improve as challenges in the eurozone periphery recede, concerns remain over the slow progress toward economic reforms by some member states, still high unemployment, and declining inflation. Japan's fiscal and monetary policies have revived its economy and improved the inflation outlook, but structural reforms among other factors will be required for further progress. Emerging markets remain vulnerable to potentially higher interest rates stemming from U.S. Federal Reserve tapering. Over the long term, we believe our highly diversified portfolios and diligent fundamental research can enhance our ability to produce good returns.