International equity markets posted negative returns in the third quarter. Worries about the faltering Chinese economy and its impact on worldwide economic growth was the primary impetus for the heightened volatility and widespread losses in the quarter, but the Federal Reserve's decision in September to delay its first short-term interest rate hike since 2006 contributed uncertainty. Ongoing weakness in energy and commodities, the Chinese stock market rout and yuan devaluation, and concerns about a Greek exit from the eurozone all fueled investor anxiety and contributed to the selling pressure.
The Spectrum International Fund returned −10.74% in the quarter compared with −12.10% for the MSCI All Country World Index ex USA and −9.62% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended September 30, 2015, the fund returned −7.11% versus −11.78% for the MSCI All Country World Index ex USA and −5.79% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were −7.11%, 4.24%, and 4.33% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.94% 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 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.
We increased our overweight to emerging market equities as valuations have fallen below long-term historical averages relative to developed markets because of the significant underperformance. While the potential for further slowing of emerging market economies and U.S. Federal Reserve interest rate normalization remain near-term risks, valuations appear to be deeply discounting longer-term growth potential. Continued weakness in energy and broader commodity prices may continue to weigh on commodity exporters while consumer-driven and service-oriented economies benefit. Outside the U.S., we remain overweight to value stocks as valuations are attractive in sectors that typically contain many lower-priced stocks. For example, European financials should benefit from improving economic and credit growth.
T. Rowe Price portfolio managers remain optimistic about the investment environment for global equities in the intermediate and longer terms. However, they anticipate that growth in developed markets will continue in a stop-and-start fashion. The difficult, long-term adjustments needed to increase competitiveness in Europe and Japan are in their early stages. Overall, Europe offers long-term growth potential, but lower European stock valuations properly reflect disappointing corporate earnings. We are encouraged by the rising emphasis on shareholder-friendly corporate governance taking place in Japan, including a newfound focus on return on equity. In emerging markets, returns are now more reflective of underlying equity and sovereign fundamentals, which we view as a positive development.