Real estate stocks were weak during the third quarter, with the sector trailing the S&P 500 Index and the broader market. Investors' ongoing concerns about the Federal Reserve's eventual tightening of monetary policy contributed to falling stock prices in segments of our sector that are more vulnerable to higher interest rates. Although several major stock market indexes reached multiyear or all-time highs in mid-September, shares sagged as the quarter ended amid concerns about the underlying strength of the economy and the probability of a federal government shutdown and debt ceiling showdown in October.
The Real Estate Fund returned −2.34% in the quarter compared with −2.80% for the Wilshire Real Estate Index and −3.24% for the Lipper Real Estate Funds Index. For the 12 months ended September 30, 2013, the fund returned 3.99% versus 5.47% for the Wilshire Real Estate Index and 0.80% for the Lipper Real Estate Funds Index. The fund's average annual total returns were 3.99%, 6.16%, and 9.75% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.78% as of its fiscal year ended December 31, 2012.
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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 Real Estate Fund charges a 1%
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.
Industry performance within our investment universe was mixed, with self-storage and lodging stocks relatively strong and health care and apartment shares somewhat weaker. The self-storage area benefited from improved fundamentals and shorter-term leases, while the lodging industry reacted favorably to rising consumer demand. Health care real estate stocks continued to suffer from ongoing weakness in the industry, and apartment stocks paused for breath after a period of strong growth. That being said, the apartment group could possibly benefit from rising rates if they curtail demand for housing because of higher mortgage rates. An underweight in the health care segment helped fund performance during the period.
The U.S. economy continues to improve at a moderate pace with contained inflation, a gradual housing recovery, and growing strength in the labor market. However, despite favorable fundamental and economic data, investors have increasingly turned their attention to future actions of the Federal Reserve's asset purchase program. Fed Chairman Ben Bernanke indicated a desire to scale back the central bank's asset purchase program, but the Fed's lack of confidence in the pace of the recovery prompted his decision to delay tapering the asset purchases. The remote possibility of a default on U.S. sovereign debt also weighed on the sector. We continue to view real estate fundamentals favorably; improving demand, reasonably constrained supply, and good access to capital markets bode well for our sector in the coming months.