U.S. stocks were little changed after an up and down quarter as early optimism about positive economic data and monetary stimulus in Europe and Japan gave way to concerns about the Greek debt crisis. Returns were mixed for non-U.S. stocks, with developed markets recording slim gains and emerging markets falling slightly. Bond returns were broadly negative during the quarter. U.S. bonds were hurt by rising rates, as improving economic expectations increased the likelihood of a rate increase by the Federal Reserve in the fall. Non-U.S. bonds pulled back as European sovereign rates rose from historically low levels. The currency environment stabilized after strong gains by the U.S. dollar from mid-2014 through the first quarter of 2015.
The Global Allocation Fund returned 0.09% in the quarter compared with −0.29% for the Morningstar Global Allocation Index. For the 12 months ended June 30, 2015, the fund returned 2.32% versus −0.82% for the Morningstar Global Allocation Index. The fund's 1-year and Since Inception (05/28/2013) average annual total returns were 2.32% and 6.81%, respectively, as of June 30, 2015. The fund's expense ratio was 1.88% as of its fiscal year ended October 31, 2014.
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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.
Against a backdrop of a weaker U.S. dollar, rising U.S. interest rates, and a search for yield, our allocation to international fixed income and high yield debt benefited performance. Our position in alternative investments also helped as our "fund of hedge funds" strategy, which has a lower correlation to traditional market exposures, performed well against a variety of fixed income and equity benchmarks. Diversifying allocations to currency-hedged international equities and real assets equities weighed on results, but this was partially offset by security selection in our developed non-U.S. large-cap value portfolio.
The U.S. economy should grow in the 3% to 3.5% range in the second half of the year as weakness in the first quarter proves to be a transitory pullback driven by weather, energy capex declines, and the strong dollar. Europe and Japan appear poised to return to economic growth, spurred by aggressive monetary stimulus, and equity valuations are attractive particularly if economies start growing again and earnings normalize. Slower global economic growth has exposed the divergent fiscal, monetary, and political conditions among emerging countries. A stronger U.S. dollar and lower prices for oil and other commodities may widen the gap between winners and losers in emerging economies.