U.S. stocks fell in the third quarter amid worries about a China-led global economic slowdown and concerns about the wider impact of looming Federal Reserve interest rate hikes. Energy and materials stocks, many of which are tied to slowing Chinese demand and a stronger U.S. dollar, were particularly weak. Non-U.S. developed markets stocks trailed U.S. shares. Eurozone stocks fared better than most regions but were not immune to the broader pullback, while Japanese stocks fell by double digits. Emerging markets equities lagged developed markets with steeper declines. Global industrials stocks reflected investor concerns about slowing global economic growth and posted sharp losses for the period.
The Global Industrials Fund returned −10.79% in the quarter compared with −10.65% for the MSCI ACWI Index Industrials + Automobiles & Auto Components. For the 12 months ended September 30, 2015, the fund returned −5.36% versus −7.21% for the MSCI ACWI Index Industrials + Automobiles & Auto Components. The fund's 1-year and Since Inception (10/24/2013) average annual total returns were −5.36% and −2.31%, respectively, as of September 30, 2015. The fund's expense ratio was 2.53% as of its fiscal year ended December 31, 2014.
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Our road and rail stocks were the lone industry to register a gain for the quarter, helped by a focus on North American rail stocks leveraged to the moderately growing U.S. economy. Transportation infrastructure, construction and farm equipment, information technology, and industrial machinery were among our weakest industry allocations. From a geographic perspective, North America remains our largest regional exposure, accounting for just over half of the portfolio. This is followed by Europe and Japan, where accommodative monetary policies and weak currencies could provide a tailwind for select high-quality multinational industrial stocks.
There are some clear positives and negatives affecting the global industrials space. On the plus side, central bank policies in Europe and Japan are accommodative, corporate balance sheets are strong, and low energy prices help consumers and countries that are net importers of oil. On the minus side, low prices for energy and other commodities represent a clear headwind as they weigh on capital expenditures, which affect revenues for many industrials companies. The likelihood of less accommodative monetary policy in the U.S. in the coming months poses an additional headwind. The challenging environment highlights the importance of company-specific fundamentals, using our in-depth proprietary research to find companies with sustainable competitive advantages that are getting stronger relative to their peers.