After stumbling in the opening weeks of the period, U.S. stocks resumed their upward trajectory and posted good gains for the second quarter of 2014. Investors focused on gradually improving economic fundamentals and were undeterred by geopolitical tensions in the Middle East and Eastern Europe, slowing growth in China, and disappointing first-quarter U.S. economic data. Non-U.S. developed markets stocks also generated solid gains. Shares in Europe rose as economic growth appeared to improve thanks to receding challenges in the eurozone periphery and stimulative monetary policy from the European Central Bank. Emerging markets stocks bounced back from a lackluster first quarter and outperformed developed markets equities.
The Global Industrials Fund returned 3.07% in the quarter compared with 3.66% for the MSCI All Country World Index Industrials Plus Automobiles and Auto Components. The Since Inception (10/24/2013) total return was 7.30% as of June 30, 2014. The fund's expense ratio was 4.01% as estimated on the fund's inception date, December 31, 2013.
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Our road and rail and airline holdings generated the portfolio's largest gains as trade and travel increase with an improving economy. Utilities also performed well due to a search for yield in a low interest rate environment. Aerospace and defense declined slightly amid a lull in aircraft manufacturing. From a geographic perspective, North America accounted for 55% of our portfolio at the end of the period and is the fund's largest overweight versus its benchmark due to the region's relatively strong growth prospects. Europe is our next largest regional allocation, followed by Japan and smaller positions in the Pacific ex-Japan and Latin America.
The U.S. economy should continue to grow modestly in 2014, supported by broadly accommodative monetary policy, solid corporate fundamentals, improvements in the housing and labor markets, and decent consumer spending. Although it still has a long way to go, Europe appears to be on the road to recovery. Japan's economy has improved in the wake of monetary and fiscal stimulus, although it is too early to tell whether initial attempts at key structural reforms will bear fruit. Current valuations for emerging markets equities offer a number of opportunities, but we are starting to see considerable disparity in the strength of various emerging economies and markets. As a result, investors must be more selective in evaluating the opportunities.