U.S. stocks rose despite occasional bouts of risk aversion and volatility and uncertainty about when the Federal Reserve might increase interest rates. Mid- and small-cap shares outperformed large-caps, and growth stocks outperformed value stocks across all market capitalizations. Stocks in developed non-U.S. markets generally outperformed U.S. shares, despite a stronger dollar versus several major currencies. Emerging markets equities performed well, but weak emerging markets currencies reduced returns in dollar terms. U.S. bonds moved up amid weak inflation readings and decelerating economic growth. Long-term Treasuries climbed as long-term interest rates declined. High yield bonds advanced as investors again favored their attractive yields as oil markets somewhat rebounded. Developed non-U.S. bonds produced negative returns as non-U.S. currencies declined relative to the U.S. dollar.
The Personal Strategy Balanced Fund returned 2.87% in the quarter compared with 1.95% for the Combined Index Portfolio* and 1.83% for the Lipper Mixed-Asset Target Allocation Moderate Funds Index. For the 12 months ended March 31, 2015, the fund returned 6.98% versus 6.82% for the Combined Index Portfolio* and 6.06% for the Lipper Mixed-Asset Target Allocation Moderate Funds Index. The fund's average annual total returns were 6.98%, 10.06%, and 7.45% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.85% as of its fiscal year ended May 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.
Security selection was the primary driver of relative performance. Security selection within our U.S. large-cap portfolios contributed as each outperformed their style-specific benchmarks. Our non-U.S. equities portfolios also outperformed their style-specific benchmarks. However, emerging markets bonds detracted as the portfolio underperformed its style-specific benchmark. Positioning decisions contributed to relative performance, particularly our underweight to non-U.S. bonds, which underperformed relative to U.S. investment-grade bonds due to the strong dollar. Our underweight to U.S. small-cap equities versus U.S. large-caps, however, weighed on relative performance. The inclusion of non-benchmark diversifying sectors, particularly non-U.S. dollar bonds and real asset equities, weighed on relative performance.
Central bank monetary policies should continue to diverge as the U.S. Federal Reserve begins to normalize interest rate policy sometime in 2015, Europe and Japan deepen quantitative easing to spur inflation and growth, and many emerging markets countries lower interest rates. Moderate growth in the U.S. should continue as the recovery advances, albeit slowly. In developed non-U.S. markets we expect growth to improve as fiscal headwinds diminish, the credit environment mends, energy costs wane, and the euro weakens. However, growth among emerging markets is likely to decline, weighed down by China's move to a consumer-focused economy and sanction-fueled economic woes in Russia. Against this backdrop, we believe that our highly diversified portfolios and diligent fundamental research can enhance our ability to produce good long-term returns.