U.S. stocks were mixed in the third quarter. Despite ongoing geopolitical tensions in the Middle East and Ukraine and the Fed's tapering of its asset purchases, major large-cap indexes continued grinding their way to new all-time highs for most of the period. The advance was supported by generally favorable U.S. economic data and corporate fundamentals, as well as new stimulus measures from central banks in the eurozone and China and falling long-term U.S. interest rates for much of the quarter. Large-cap shares fared better than their smaller peers, and growth stocks outperformed value across all market capitalizations.
The U.S. Large-Cap Core Fund returned 0.36% in the quarter compared with 1.13% for the S&P 500 Index and 0.29% for the Lipper Large-Cap Core Funds Index. For the 12 months ended September 30, 2014, the fund returned 17.58% versus 19.73% for the S&P 500 Index and 17.07% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 17.58%, 15.00%, and 17.00% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of September 30, 2014. The fund's expense ratio was 1.15% as of its fiscal year ended December 31, 2013.
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Our stock selection in the financials sector contributed most to portfolio performance during the quarter. An underweight allocation to the weak energy sector was also beneficial, as was an overweight in health care stocks along with good stock selection within the group. Industrials and business services stocks in the portfolio trimmed results, as the sector was weak overall through the quarter. Our underweighting in information technology and poor stock selection in that sector impaired results. At the end of September, the portfolio was overweight in industrials and business services and financials, and underweight in information technology and consumer discretionary stocks, a result of bottom-up stock selection rather than a strategic approach to any particular sector.
The eurozone economy has weakened more than we anticipated, and the strength of the U.S. dollar has taken its toll on energy prices. In addition, the slowdown in China has had a negative impact on global economic growth. To a great extent, the Federal Reserve's stimulus measures fueled the bull market in equities during the past few years, and now that the Fed is pulling back, equities markets have come under pressure. That said, the recent sell-off in stocks has priced in much of these negative factors and resulted in better share price valuations. We have built up our cash reserves to take advantage of new opportunities as they arise.