Despite Federal Reserve tapering and geopolitical unrest in the Middle East and Ukraine, large-cap equities in the U.S. generated modest gains in the third quarter as investors focused on favorable domestic economic and corporate fundamentals. Non-U.S. developed and emerging markets stocks fell in U.S. dollar terms. Geopolitical turmoil, concerns about China's economic slowdown, and the potentially deleterious effects of rising U.S. rates contributed to investor anxiety and demand for safe-haven assets. The lackluster global economic environment weighed heavily on industrials stocks.
The Global Industrials Fund returned −5.87% in the quarter compared with −4.74% for the MSCI ACWI Index Industrials + Automobiles & Auto Components. The Since Inception (10/24/2013) total return was 1.00% as of September 30, 2014. The fund's expense ratio was 4.01% as estimated on the fund's fiscal year end, December 31, 2013.
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Component suppliers are an area of emphasis in the portfolio. Industrial technology companies are another focus segment. These companies, which provide robotics, software, and related services, supply products that help to make their customers more productive. Going forward, we believe companies will invest more to increase productivity than to increase capacity. From a geographic perspective, North America accounted for 54% of our portfolio at the end of the period and is our largest overweight versus the benchmark due to the region's strong growth prospects relative to other regional economies. Our next largest overweight is developed Europe, where valuations are compelling despite tepid growth expectations in the eurozone.
The U.S. economy is improving gradually, supported by diminishing fiscal headwinds, increased state and local government spending, moderate job growth, and better private sector demand. However, growth expectations in Europe have moderated and the Continent is still hindered by high debt levels, elevated unemployment, and deflation worries. A weaker yen could provide a near-term economic boost for Japan, but the long term still looks challenging without further financial and structural reforms. Current valuations for emerging markets equities offer opportunities, but there is considerable disparity in the strength of various developing economies and markets. As a result, investors must be more selective in evaluating opportunities.