Although the large-cap benchmarks managed modest gains for the quarter, mid-caps recorded losses, and small-caps saw sharp declines. The weakness in smaller-caps reflected a general rise in risk aversion among investors, who worried about slowing growth and turmoil overseas, an appreciating U.S. dollar, the possibility of a change in Federal Reserve policy, and other threats. Mid-cap growth shares outperformed their value counterparts, however. Energy stocks recorded the biggest losses among mid-cap growth shares, as oil prices fell sharply. Industrials and business services shares were also weak. Health care stocks performed best among the major categories and recorded a solid gain.
The Mid-Cap Growth Fund returned −1.98% in the quarter compared with −0.73% for the Russell Midcap Growth Index, −3.98% for the S&P MidCap 400 Index, and −2.23% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended September 30, 2014, the fund returned 12.38% versus 14.43% for the Russell Midcap Growth Index, 11.82% for the S&P MidCap 400 Index, and 10.64% for the Lipper Mid-Cap Growth Funds Index. The fund's average annual total returns were 12.38%, 16.60%, and 11.32% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.78% as of its fiscal year ended December 31, 2013.
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We assemble the portfolio on a stock-by-stock basis, but we currently have a large allocation to information technology, where we believe that there are several positive secular trends at work, including the shift to mobile computing, increased online advertising and commerce, the delivery of software and computing resources over the Internet, and opportunities in data analytics. While multiples within software as a service have become extended recently, valuations for the sector as a whole remain reasonable. With strong balance sheets and shareholder-oriented management teams, many technology stocks have attractive prospects. We are particularly interested in the potential for new technologies to create competitive advantages for firms agile enough to seize them.
As the bull market and economic recovery mature, we are observing a growing body of corporate and investor behavior that we have witnessed late in previous cycles. While we are not predicting another severe downturn, we continue to slowly dial down the cyclical exposure of the portfolio in preparation for an eventual turn in sentiment. In particular, we have grown more cautious toward the consumer discretionary sector, where we expect that gains fed by the high-end consumer cannot endure too much longer. As we noted last summer, we would not be surprised to underperform the benchmark somewhat if the speculative fervor persists, as we have in the late stages of previous rallies. In the meantime, we are focusing on companies with less spectacular but more stable growth prospects, which we believe offer the best long-term opportunities for our shareholders.