Non-U.S. developed market stocks generated strong returns in the third quarter of 2013. European stocks registered the largest overall gains as investor sentiment received a boost from data, suggesting that the region's protracted economic recession had found a bottom and was starting to improve. Japanese equities rose more than 6%, adding to their already excellent year-to-date returns. Consumer spending was buoyant, and exports grew at their fastest pace in several years, as policymakers continued to take aggressive steps to stimulate Japan's economy. Within the MSCI Europe, Australasia, and Far East (EAFE) Index, value shares outperformed growth stocks, and small-caps significantly outperformed large-caps for the quarter.
The Overseas Stock Fund returned 10.73% in the quarter compared with 11.61% for the MSCI EAFE Index. For the 12 months ended September 30, 2013, the fund returned 21.10% versus 24.29% for the MSCI EAFE Index. The fund's average annual total returns were 21.10%, 7.57%, and 1.49% for the 1-, 5-, and Since Inception (12/29/2006) periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.87% as of its fiscal year ended October 31, 2012.
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 Overseas Stock 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.
Information technology shares posted the portfolio's largest absolute gains for the period, led by Internet software and services stocks. Shares in the industrial and business services and materials sectors were also strong performers. Consumer staples and health care were the portfolio's weakest performers but, nevertheless, recorded modest gains. Positioning changes were relatively minor during the quarter. We added to the portfolio's position in financials, which remains our largest sector allocation, through opportunities in the insurance and commercial banking industries. We also initiated a couple of positions in the information technology sector, purchasing Asian Internet services and advertising names.
We are optimistic about the intermediate- and long-term prospects for non-U.S. equities. Over the short term, however, gains may be muted as prices have risen in anticipation of improved fundamentals. While we believe that many economies are stable or improving, the results may take some time and could be uneven. Although companies in Japan and Europe will likely remain challenged to generate stable revenue growth, investor sentiment in both regions is improving. Anticipation of rising rates in the U.S. has contributed to market volatility and weakness in several emerging markets, but it also suggests improved demand due to an improving U.S. economy, which should be a long-term plus for stocks.