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. Asian markets, led by Hong Kong and New Zealand, held up better than European markets. Japanese shares, however, fell more than 2% as the economy went back into a recession following an April 1 sales tax increase. In an attempt to boost the economy and inflation, the government expanded its quantitative easing measures. European stocks struggled as eurozone economies stalled and fears of deflation intensified. In the eurozone, Belgium and Ireland were the only markets able to register slim gains, whereas Portugal and Italy fell sharply. Emerging markets equities declined in aggregate, underperforming developed non-U.S. markets.
The Spectrum International Fund returned −2.61% in the quarter compared with −3.81% for the MSCI All Country World Index ex USA and −2.22% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended December 31, 2014, the fund returned −3.07% versus −3.44% for the MSCI All Country World Index ex USA and −4.95% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were −3.07%, 6.51%, and 6.07% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 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. More than half of our holdings outperformed their style-specific benchmarks, but nearly all declined as most all non-U.S. equity markets fell for the three-month period. In our view, non-U.S. equities values remain modestly attractive relative to U.S. equities, which are at or above historical averages; however, moderating economic growth among non-U.S. economies could reduce their attractiveness. We favor emerging markets stocks over developed markets equities, but 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 as well as subdued earnings.
While we remain optimistic about the intermediate and longer-term outlook for international equities, potential near-term headwinds include the strengthening U.S. dollar and continued global economic weakness. Disappointing European earnings growth and the dispute between Western powers and Russia over Ukraine call into question the viability of near-term economic improvement. In Japan, we believe domestic consumption and wage inflation need to improve for a sustained recovery. Prime Minister Shinzo Abe has been pressing corporations to raise wages in support of the Japanese consumer, and indications of durable economic improvements, combined with corporate tax incentives, should help. In emerging markets, growth paths are diverging with the drop in commodity prices hurting some exporters while others stand to benefit from falling costs.