The broad U.S. stock market generated mixed results for the quarter against a backdrop of ongoing geopolitical tensions in the Middle East, Ukraine, and Hong Kong, as well as the Federal Reserve's tapering of asset purchases. Large-caps posted generally positive returns, while small- and mid-caps posted losses. Growth stocks generally outperformed value across all market capitalizations. Non-U.S. stock markets declined for the quarter. In the eurozone, where the economic recovery has been faltering, some countries have technically slipped back into recession. In Asia, shares in Japan, Singapore, and Hong Kong edged lower. Developing markets equities declined but outperformed developed non-U.S. markets.
The Spectrum Growth Fund returned −2.09% in the quarter compared with 0.01% for the Russell 3000 Index and −0.84% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended September 30, 2014, the fund returned 12.69% versus 17.76% for the Russell 3000 Index and 15.37% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were 12.69%, 13.47%, and 8.52% for the 1-, 5-, and 10-year periods, respectively, as of September 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.
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The Spectrum Growth Fund blends domestic and non-U.S. growth and value funds across the market capitalization spectrum. Non-benchmark diversifying sectors detracted from relative performance, particularly non-U.S. allocations and real asset equities, as these segments lagged U.S. equities for the period. Stock selection weighed on relative returns, most notably within the Equity Income and Value Funds, which underperformed their style-specific benchmarks. Allocation decisions helped relative performance, especially our overweight to U.S. large-caps relative to small-caps and U.S. large-cap growth relative to value. Our underlying allocation decisions are tilted toward non-U.S. over U.S. equities and emerging markets over developed markets equities. We are underweight U.S. small-cap stocks, which appear richly priced relative to large-caps. Within the U.S., we favor growth stocks over value, and in non-U.S. markets, we favor value over growth.
Looking toward 2015, our global growth expectations are modest. The U.S. is likely to be the strongest, as diminishing fiscal headwinds, higher spending by state and local governments, rising consumer and business demand, and moderate job growth support a gradually improving economy. In contrast, European growth remains pressured by high debt loads, unemployment, and deflation worries. In Japan, growth and inflation has stalled due to the impact of last April's sale tax increase, stubbornly low real wages, and the lack of progress on structural reforms. Slowing growth in China, Brazil, and other emerging economies continues to weigh on global trade. These divergent conditions bolster our belief that our highly diversified portfolios and diligent fundamental research can enhance our ability to produce good long-term returns.