Large-capitalization stocks posted solid first-quarter gains. In general, growth stocks outperformed value shares across all market capitalizations, but large-caps trailed the returns of small- and mid-cap stocks. From a sector perspective, health care and consumer discretionary generated outsized returns within the broad-based S&P 500 Index, while utilities, energy, and financials declined. Growth in the U.S. economy slowed sharply in the first quarter, though harsh winter weather appears to have played a substantial role.
The U.S. Large-Cap Core Fund returned 3.06% in the quarter compared with 0.95% for the S&P 500 Index and 0.84% for the Lipper Large-Cap Core Funds Index. For the 12 months ended March 31, 2015, the fund returned 13.60% versus 12.73% for the S&P 500 Index and 10.08% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 13.60%, 14.47%, and 16.98% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of March 31, 2015. The fund's expense ratio was 1.15% as of its fiscal year ended December 31, 2013.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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The portfolio holds a concentrated blend of domestic large-cap growth and value stocks based on fundamentals-driven, bottom-up stock selection. In the first quarter, stock selection in the industrials and business services, information technology, and health care sectors produced solid relative performance contributions. The largest detractor from our performance relative to the benchmark was stock selection in the consumer staples sector. The portfolio's largest overweight allocation is to industrials stocks, where we are finding attractive opportunities in aerospace and defense as well as commercial services and supplies companies. Our overweight allocation to health care is largely due to the compelling risk/reward characteristics of some health care providers and services and pharmaceuticals companies.
We remain optimistic about the outlook for domestic large-cap stocks given the ongoing low interest rate environment, which makes stocks more attractive than other investment alternatives. Large-cap stocks have recorded strong gains for the last several years, and valuations have become somewhat extended. Although earnings growth will be challenging in the first half of the year, we believe it will improve in the second half. The Federal Reserve is on course to begin monetary tightening later this year, which we think is indicative of growing confidence in the U.S. economy. However, the Fed is likely to raise interest rates at a measured pace (slower growth in the months ahead would warrant a more gradual pace of rate increases than in previous tightening cycles), and moderately rising interest rates should not be a negative for stock performance.