Tax-free bonds produced good returns in the fourth quarter of 2014, outperforming taxable bonds for the year and capping a very strong year in absolute terms. Municipal debt prices rose along with long-term Treasuries, whose interest rates continued to fall. The decline occurred despite strong U.S. economic growth and the conclusion of the Federal Reserve's monthly asset purchases in October, and was more a reflection of global macroeconomic considerations, such as general economic weakness and falling bond yields in Europe and Japan. Slowing growth in emerging countries and low U.S. inflation underscored by a sharp drop in oil prices also helped drive favorable fixed income returns.
The Summit Municipal Intermediate Fund returned 0.99% in the quarter compared with 0.90% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and 0.49% for the Lipper Intermediate Municipal Debt Funds Average. For the 12 months ended December 31, 2014, the fund returned 7.05% versus 6.36% for the Barclays Intermediate Competitive (1−17 yr maturity) Bond Index and 5.78% for the Lipper Intermediate Municipal Debt Funds Average. The fund's average annual total returns were 7.05%, 4.40%, and 4.28% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.50% as of its fiscal year ended October 31, 2013.
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Credit selection within the revenue-backed sector, particularly in the transportation and special-tax groups, benefited results during the fourth quarter of 2014. In addition, the portfolio was underweight in shorter maturities and overweight in 10- to 15-year bonds, which aided performance as the yield curve flattened during the period. Our sector allocations were also helpful, with an overweight in health care securities and an underweight in the leasing subsectors of revenue-backed debt. On a negative note, our premium-priced callable bonds showed relatively little movement compared with other types of securities, so as rates declined in October, our holdings in this area trimmed results to some extent.
While yields remain low, we believe that municipal bonds are a high-quality segment of the market that offer good opportunities for long-term investors seeking tax-free income. We remain concerned about the potential for rising rates and believe that short- and intermediate-term rates could continue to increase as we approach the first Fed rate hike. Our portfolios, while remaining conservative in their duration positioning, continue to underweight short-term securities in favor of longer-maturity bonds. In addition, we have a strong bias toward revenue bonds that not only provide incremental yield over state and local general obligation debt, but also are largely insulated from the pension risk that we believe will become more evident over time.