U.S. large-cap stocks fell in the third quarter as uncertainty about China more than offset generally favorable domestic economic data. China's efforts to stem a stock market selloff and its unexpected currency devaluation in August highlighted the country's economic slowdown and raised questions about the Chinese government's ability to manage the economy. The Federal Reserve kept the federal funds rate near 0% at its September policy meeting, but the central bank's cautious comments about global economic developments weighed on investor sentiment. The Standard & Poor's (S&P) 500 Index slid -6.44% in the quarter, with only the utilities sector posting positive returns. Energy and materials were the worst-performing sectors, down 18% and 17% respectively, as commodities prices plunged on expectations of weaker demand from China.
The Value Fund returned −9.81% in the quarter compared with −6.44% for the S&P 500 Index and −8.91% for the Lipper Large-Cap Value Funds Index. For the 12 months ended September 30, 2015, the fund returned −4.46% versus −0.61% for the S&P 500 Index and −5.34% for the Lipper Large-Cap Value Funds Index. The fund's average annual total returns were −4.46%, 13.18%, and 7.12% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.82% as of its fiscal year ended December 31, 2014.
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Financials and health care were the portfolio's largest overweight sectors as of September 30, 2015. Financial stocks have rebounded from the 2008 global financial crisis, but we believe that valuations of select companies still appear reasonable on a normalized earnings basis and that the sector provides good leverage to the improving U.S. economy. In health care, the portfolio's largest industry allocation is pharmaceuticals, where holdings are returning cash to shareholders through share repurchases and dividends. The portfolio also owns many health care providers and services companies, which are benefiting from industry consolidation and more customers due to passage of the Affordable Care Act. Information technology remains our largest underweight sector, followed by consumer discretionary.
The U.S. stock market's third-quarter loss is not surprising given the magnitude of its advance over the past six years. In the near term, we expect to see muted equity returns coupled with higher volatility, which has lately created more opportunities to buy high-quality companies at cheaper prices. Valuations in large-cap stocks are now trading closer to their historical averages. While certain areas of the market remain overvalued, we are finding select companies that are priced below their intrinsic value with relatively limited downside risk. We are encouraged to see that correlations among stocks in the S&P 500 Index have declined, signaling that investors are more willing to discriminate among individual securities. As always, we remain focused on our strategy of buying quality companies at attractive prices and maintaining a longer-term horizon to give our holdings time to appreciate to a level approaching fair value.