Most of the major indexes recorded modest gains in the quarter and reached new or multiyear highs as investors balanced favorable corporate earnings against economic and geopolitical concerns. Value stocks handily outperformed growth shares for the quarter, but small-caps trailed their larger counterparts. Energy and utilities stocks performed best within the small-cap value universe, while industrials and consumer discretionary shares recorded modest losses.
The Small-Cap Value Fund returned 0.95% in the quarter compared with 1.12% for the Russell 2000 Index and 1.22% for the Lipper Small-Cap Core Funds Index. For the 12 months ended March 31, 2014, the fund returned 20.80% versus 24.90% for the Russell 2000 Index and 23.19% for the Lipper Small-Cap Core Funds Index. The fund's average annual total returns were 20.80%, 24.14%, and 10.21% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.98% as of its fiscal year ended December 31, 2012.
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.
The Small-Cap Value Fund charges a 1%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The portfolio's significant overweight in industrials is primarily a residual effect of research on individual stocks, as well as less favorable views toward several other sectors. However, we are encouraged by the early signs of a resurgence in American manufacturing and what that could mean for the prospects of the sector. The portfolio's largest allocations are to the machinery and road and rail industries.
The relative health of the U.S. economy has been one factor in the outperformance of small-cap stocks, which are typically less reliant on international markets. As small-cap valuations have increased, however, we have found it somewhat more difficult to find new investment opportunities, particularly as we seek to replace the many strong performers in the portfolio that have appreciated up into the mid-cap arena. The absence of a meaningful pullback in stock prices in well over a year has also provided few chances to take advantage of indiscriminate selling and invest opportunistically in good companies. On the positive side of the ledger, the heightened interest in small-cap companies has played out to our advantage in a recent surge of acquisitions of firms held in the portfolio. A number of holdings have become targets of either strategic or financial buyers, which has provided us the opportunity to liquidate the investment at a healthy premium.