Developed non-U.S. stock markets posted steep losses largely due to the U.S. dollar's strength versus other currencies, which reduced returns for U.S. investors. In the eurozone, the economic recovery has been faltering and some countries have slipped back into recession. In the third quarter, every market in Europe declined in dollar terms, with the largest markets (including Germany, France, and Italy) posting losses of 8% or more. Austria and Portugal were among the worst performers, declining more than 20%. In Asia, Japan, Singapore, and Hong Kong edged lower for the quarter. Hong Kong shares fared poorly in September amid student-led, pro-democracy protests. Emerging markets equities declined but, in aggregate, outperformed developed non-U.S. markets.
The Spectrum International Fund returned −5.37% in the quarter compared with −5.19% for the MSCI All Country World Index ex USA and −5.80% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended September 30, 2014, the fund returned 5.48% versus 5.22% for the MSCI All Country World Index ex USA and 3.07% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were 5.48%, 7.89%, and 7.79% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.94% 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 International Fund charges a 2%
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 Spectrum International Fund invests for long-term capital appreciation primarily in mid- and large-cap companies across both developed and emerging markets. Half our holdings outperformed their style-specific benchmarks, but all declined except the Africa & Middle East Fund, the only positive contributor to results. Our largest allocations, including investments in the European Stock, International Growth & Income, and International Stock Funds, were the largest relative performance detractors. In our view, non-U.S. equities remain attractively valued relative to U.S. equities, which are at or above historical averages. However, we favor emerging markets stocks over developed markets equities. We are wary of the potential for slowing emerging markets economic growth and interest normalization by the U.S. Federal Reserve, which could lead to increased volatility. We remain overweight to non-U.S. value versus growth stocks based on valuations, although strong recent outperformance of value stocks has narrowed the gap. However, moderating economic growth in Europe and Japan could reduce the attractiveness of value stocks.
Europe's nascent economic recovery has slowed considerably, and Japan has seen the progress ignited by "Abenomics" dampened by its formidable structural challenges. Emerging markets vary in strength in terms of economic growth, inflation, and fiscal positions. In many, reform-minded politicians have driven markets higher despite softness in natural resources demand and the specter of a strengthening dollar. Despite the recent downward revisions to global growth, we remain convinced the global economy will continue trending upward and that business conditions and industry dynamics remain broadly favorable. Although the path forward for equities will continue to be somewhat volatile, we believe it remains attractive for long-term investors.