Large-cap U.S. stocks generated modest returns in the third quarter, while U.S. mid- and small-cap shares fell. Non-U.S. developed market stocks lost considerable ground in U.S. dollar terms as the greenback rapidly strengthened against most other currencies. Asian stocks did not decline as much as European shares. Within the broad MSCI Europe, Australasia, and Far East Index, small-cap stocks lagged large-cap shares by a significant amount, while growth stocks held up marginally better than value shares. Health care was the only sector in the index that posted a positive return. Measured in terms of U.S. dollars, emerging markets did not fall as much as non-U.S. developed markets.
The Global Growth Stock Fund returned −1.27% in the quarter compared with −2.20% for the MSCI All Country World Index and −2.84% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended September 30, 2014, the fund returned 14.40% versus 11.89% for the MSCI All Country World Index and 8.82% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were 14.40%, 10.84%, and 19.68% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of September 30, 2014. The fund's expense ratio was 1.18% as of its fiscal year ended October 31, 2013.
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 Global Growth Stock 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.
At the end of the quarter, approximately 19% of the fund's assets were invested in developed European countries, which is an underweight allocation versus the benchmark. We increased our European exposure as valuations became more attractive. We maintained a significant overweight (about 26% of assets at quarter-end) to emerging markets, where election outcomes so far in 2014 have been favorable to investors. Although our overarching philosophy is to be sector-neutral versus the benchmark, our bottom-up fundamental analysis of stocks can result in some overweights or underweights. Over the course of the quarter, we opportunistically added to our holdings of cyclical stocks in Europe, driving up our allocations to the industrials and consumer discretionary sectors.
Investors appear to share our positive but measured outlook for the U.S., where earnings growth rates are likely to be modest despite a cyclical upturn in growth. The eurozone remains an area of potential upside, but the near term outlook for Europe is concerning. In Japan, while Abenomics has undoubtedly improved the short- to medium-term outlook, we have longer-term concerns about demographic and cultural obstacles. We remain encouraged by the dispersion of returns within emerging markets, which is more realistic than the situation in 2013, when investors sold all emerging markets almost uniformly. We will continue to concentrate on buying high-quality companies selling at reasonable valuations.