Stocks saw their biggest quarterly declines in four years as investors worried about a China-led global slowdown and a possible rise in U.S. interest rates. Small-caps fared worse than large-caps, but small-cap value stocks outperformed their growth counterparts. Energy and materials stocks, which are closely tied to Chinese demand for commodities, performed worst, with the former falling over 34% within the Russell 2000 Value Index. The more heavily weighted industrials and business services sector was also especially weak.
The Small-Cap Value Fund returned −8.14% in the quarter compared with −11.92% for the Russell 2000 Index and −10.10% for the Lipper Small-Cap Core Funds Index. For the 12 months ended September 30, 2015, the fund returned −1.33% versus 1.25% for the Russell 2000 Index and 0.32% for the Lipper Small-Cap Core Funds Index. The fund's average annual total returns were −1.33%, 10.72%, and 6.67% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.96% 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.
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.
Small-cap stocks endured a rough quarter, and while the portfolio did not escape the downdraft, we were glad to see that we met our goal of providing some downside protection for unitholders. Our focus on higher-quality, lower-leveraged companies also helped, as risk-averse investors demanded higher yields on riskier corporate debt, particularly in the energy sector. Stock selection in the industrials segment provided the biggest boost to relative returns, while sector weightings, which have recently come more in line with the benchmark, detracted a bit.
The quarter's poor market performance has left us a bit more optimistic about stock returns going forward, as our sense is that the U.S. economy remains on track. When the Federal Reserve will begin to raise interest rates remains a focus of many investors, but we expect that an increase, when it does come, will have both positive and negative consequences for different firms in our widely diversified portfolio. More generally, we are keeping our focus on individual stock selection rather than relying on a top-down view of the economy to guide shifts in sector allocations or other broad moves. We are finding attractive prospects in a range of sectors, and we will continue to rely on the firm's large and experienced team of industry analysts in conducting the intensive fundamental research that is the basis of our investment strategy.