Worries about China's faltering economy and its impact on worldwide economic growth led to a spike in volatility and a double-digit, third-quarter decline for the MSCI All Country World Index ex USA. The Federal Reserve's decision to delay its first short-term interest rate hike since 2006, weakness in energy and commodities, the Chinese yuan devaluation, and concerns about a Greek exit from the eurozone contributed to the selling pressure. In general, developed markets held up better than emerging markets, which suffered large currency losses on top of share price declines.
The International Growth & Income Fund returned −11.22% in the quarter compared with −10.19% for the MSCI EAFE Index and −11.25% for the Lipper International Multi-Cap Value Funds Average. For the 12 months ended September 30, 2015, the fund returned −9.62% versus −8.27% for the MSCI EAFE Index and −10.74% for the Lipper International Multi-Cap Value Funds Average. The fund's average annual total returns were −9.62%, 3.98%, and 3.05% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.85% as of its fiscal year ended October 31, 2014.
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.
The International Growth & Income Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
We construct the portfolio from the bottom up, leveraging our global research platform to uncover undervalued stocks regardless of sector, region, or country. Although we invest primarily in developed market countries, we also maintain modest exposure to emerging markets. The portfolio's consumer staples holdings provided the sole overall boost to results in the difficult quarter, while its large financials position weighed the most on returns.
Valuations in international developed equity markets now appear reasonable to us but are still not broadly cheap. The increased volatility of the third quarter, while offering us opportunities to put more cash to work in our existing positions via more attractive valuations, did not produce a deluge of new opportunities to own fundamentally strong businesses trading at compelling valuations. With the cycle progressing in many markets, we are seeking out companies that operate in stable, less cyclical industries, such as tobacco or medical diagnostics and testing. We still await valuations in the more cyclical parts of the market, such as industrials, to reflect the risks surrounding global economic growth and prolonged, accommodative monetary policy that we think have become more evident in the last few months.