U.S. equities rose in the first quarter of 2013, lifting several major indexes to multiyear highs, if not new records. Despite tighter fiscal policy stemming from some U.S. federal tax increases in January and automatic budget cuts in March, shares advanced as the economy continued expanding, the labor market improved somewhat, and the Federal Reserve persisted with its asset purchase plans to suppress interest rates. Merger activity also lifted sentiment. Mid-cap shares outperformed both smaller and larger shares, but mid-cap value stocks handily outpaced their mid-cap growth counterparts.
The Mid-Cap Growth Fund returned 11.90% in the quarter compared with 13.45% for the S&P MidCap 400 Index, 11.51% for the Russell Midcap Growth Index, and 11.62% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended March 31, 2013, the fund returned 12.59% versus 17.83% for the S&P MidCap 400 Index, 12.76% for the Russell Midcap Growth Index, and 10.05% for the Lipper Mid-Cap Growth Funds Index. The fund's average annual total returns were 12.59%, 9.64%, and 12.96% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2011.
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.
Consumers amassed a mountain of debt in the last decade following a period of prosperity built on easy credit and a housing bubble. Following the financial crisis, consumer spending growth has been tepid, and while we have seen modest improvements in recent spending, we anticipate that spending growth will remain muted as households pay down debt. As a result, we are cautious in investment in the consumer discretionary sector, and overall allocation is lower than it has been historically. One of our recent investment themes within the sector, however, has been the better relative prospects we expect to see for companies serving lower-income customers. In addition, we continue to focus on so-called "category killers," or firms that dominate their markets. We look for companies with strong brands and innovative managements that will be able to prosper as they seize market share from less-nimble competitors.
We have been closely monitoring the impact of Federal Reserve policy on the economy and markets, and we share the concerns of many that the central bank is taking substantial risks by keeping interest rates at such abnormally low levels. Signs have grown recently, however, that at least some members of the Fed are growing wary of its massive bond purchases, leading to speculation that monetary policy might begin to change direction later this year. We do not believe that investors should fear such a turnaround, as we suspect that a moderate and controlled upward drift in interest rates would be good for the economy and stock market.