U.S. stocks generated solid second-quarter returns, with large- and mid-cap equities outperforming small-caps and little difference in the performance of growth and value companies. Non-U.S developed market stocks also posted gains, with Asia-Pacific markets generally outperforming European markets. Within the broad MSCI Europe, Australasia, and Far East Index, small-cap stocks lagged large-cap shares by a significant margin and growth stocks underperformed value companies. Emerging markets stocks outperformed developed markets as investor sentiment toward developing countries continued to rebound from a rocky 2013 and beginning to 2014.
The Global Growth Stock Fund returned 5.85% in the quarter compared with 5.23% for the MSCI All Country World Index and 3.63% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended June 30, 2014, the fund returned 24.68% versus 23.58% for the MSCI All Country World Index and 22.54% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were 24.68%, 14.84%, and 20.91% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of June 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 15% of the fund's assets were invested in developed European countries, which is an underweight allocation. We believe that credit growth in the eurozone won't accelerate significantly, and many of the European companies that we like are fully valued. We continue to overweight emerging markets (about 25% of assets), where we focus on owning well-run companies in nations whose governments are making structural improvements. 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 added to our consumer discretionary holdings and are now overweight. We reduced our allocation to consumer staples and are now underweight.
The U.S. economy is expanding, but we don't think that growth will accelerate as quickly as the market consensus expects. The eurozone economy still isn't meaningfully growing, as evidenced by the European Central Bank's recent decision to implement new accommodative measures. Japan's economic improvement has been better than we expected but much still depends on the government's ability to make further reforms. We believe that emerging markets continue to offer compelling valuations. Returns among the various global regions and sectors have been largely uncorrelated, which is encouraging for active fund managers. We're confident that markets are returning to their normal focus on fundamentals, and we will continue to concentrate on buying high-quality companies selling at reasonable valuations.