U.S. stocks fell in the third quarter as uncertainty about China more than offset generally favorable domestic economic data. China's efforts to stem a stock market sell-off and its unexpected currency devaluation in August highlighted the country's economic slowdown and raised questions about the Chinese government's ability to manage the economy. The Federal Reserve kept the federal funds rate near 0% at its September policy meeting, but the central bank's cautious comments about global economic developments weighed on investor sentiment. All sectors except for utilities in the Russell Midcap Value Index fell in the quarter. Growth and value stocks performed roughly even with each other in the midcap universe.
The Mid-Cap Value Fund returned −9.22% in the quarter compared with −8.04% for the Russell Midcap Value Index, and −9.08% for the Lipper Mid-Cap Value Funds Index−9.11% for the Lipper Multi-Cap Value Funds Index. For the 12 months ended September 30, 2015, the fund returned −3.05% versus −2.07% for the Russell Midcap Value Index, and −2.48% for the Lipper Mid-Cap Value Funds Index−4.05% for the Lipper Multi-Cap Value Funds Index. The fund's average annual total returns were −3.05%, 11.33%, and 8.10% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2014.
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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 portfolio's strategy is to buy and hold good companies whose shares are trading below their intrinsic value. These companies typically have fallen out of favor due to setbacks that we think are more solvable and transient than the market believes. Though overall valuations remain elevated despite the recent pickup in stock market volatility, we have taken advantage of areas of weakness by initiating positions in the petroleum exploration and production and media industries. We also added to some of the portfolio's integrated oil and gas holdings. As of September 30, 2015, the consumer staples sector was the portfolio's biggest overweight, followed by consumer discretionary. On the other hand, financials was the biggest underweight sector, followed by information technology.
The recent rise in shareholder activism and corporate takeovers has had a positive impact on several of our holdings. Because we focus on identifying undervalued or underperforming assets, some of our holdings are bound to draw the notice of acquisition-hungry companies or activist shareholders. We are encouraged to see a decline in correlation, or the tendency of stocks within a sector to rise and fall in unison. The increase in dispersion among individual stock returns has allowed us to find more attractive investment opportunities than in previous years, when stocks tended to trade in lockstep with each other. We look forward to taking advantage of the heightened market volatility, which has lately created more opportunities to buy high-quality companies at cheaper prices.