U.S. stocks gained in the quarter, but volatility was high amid overseas terrorist attacks, geopolitical instability, and uncertainty over monetary policies in the U.S. and abroad. The Federal Reserve raised interest rates for the first time since 2006. U.S. investment-grade bonds edged lower, while losses were more pronounced in the commodities-heavy high yield segment. International developed markets debt fell in U.S. dollar terms, while U.S. dollar-denominated emerging markets debt gained modestly.
The Spectrum Income Fund returned 0.38% in the quarter compared with −0.57% for the Barclays U.S. Aggregate Bond Index and −0.48% for the Lipper Multi-Sector Income Funds Average. For the 12 months ended December 31, 2015, the fund returned −2.02% versus 0.55% for the Barclays U.S. Aggregate Bond Index and −1.68% for the Lipper Multi-Sector Income Funds Average. The fund's average annual total returns were −2.02%, 3.77%, and 5.16% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.67% as of its fiscal year ended December 31, 2014.
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Exposure to diversifying sectors not included in the portfolio's primary benchmark helped results during the quarter. Dividend-paying equities were particularly beneficial, as were emerging markets bonds denominated in U.S. dollars and local currencies. Credit selection in our portfolio of international developed markets bonds benefited performance versus the benchmark, and while the inclusion of high yield debt hurt results, positive security selection helped to mitigate the damage.
The U.S. economy grew at a 2.0% annualized rate in the third quarter, supported by resilient consumer spending. Weaker global growth and a stronger dollar are likely to weigh on business inventory spending and exports, but expansionary fiscal spending should support growth in 2016. European economic growth is modest, supported by accommodative monetary policies, low energy prices, and reduced fiscal headwinds. Japan's economy narrowly avoided a recession last year, but growth remains uneven and somewhat fragile. There is considerable disparity among emerging markets. Many commodity exporters will continue to feel the pain of weak oil and materials prices, while net commodity consumers should be in better shape.