Stocks of companies dealing in real assets were slightly positive overall in the fourth quarter but lagged the broader equity markets by a wide margin. Performance among subsectors was mixed. Natural resources stocks were among the strongest in the real assets universe, but even these gains were relatively muted against a backdrop of modest global economic growth. Industrial metals received a boost from a pickup in manufacturing activity and managed a small gain, while gold and other precious metals resumed their slide after a brief third-quarter respite. Real estate securities significantly trailed the broader market during the quarter, due primarily to rising interest rates and concerns that the Federal Reserve would begin to tighten monetary policy.
The Real Assets Fund returned 1.71% in the quarter compared with 7.42% for the MSCI All Country World Index and 2.20% for the Lipper Specialty/Miscellaneous Funds Average. For the 12 months ended December 31, 2013, the fund returned −1.30% versus 23.44% for the MSCI All Country World Index and 7.16% for the Lipper Specialty/Miscellaneous Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were −1.30% and 4.42%, respectively, as of December 31, 2013. The fund's expense ratio was 0.86% as of its fiscal year ended December 31, 2012.
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.
The Real Assets Fund charges a 2%
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.
We increased the portfolio's allocation to natural resources stocks during the period, and they now represent the largest overweight versus the benchmark. One area of focus is energy exploration and production companies that are moving down the cost curve and accelerating growth through the development of their assets, particularly North American shale producers. We also like infrastructure companies as the significant increase in North American oil and gas supply needs to find a way into domestic and international markets. We further reduced exposure to industrial metals on prospects of muted global economic growth. In our domestic real estate portfolio, regional malls were the largest weighting. The portfolio also had a significant weighting in the apartments segment, where strong demand and increased occupancy have boosted rent increases.
We expect modest global economic growth over the next several quarters, but subdued inflation in most of the world's major developed markets is likely to weigh on our asset class. A housing recovery, decent job gains, favorable energy pricing, and reduced fiscal headwinds support gradual U.S. economic growth. Europe has started to recover, but requires major competitive adjustments to sustain positive momentum. Japan's stimulative monetary and fiscal policies have provided a positive economic jolt, but structural reforms are necessary for sustained growth. Slower global economic growth and rising U.S. interest rates present headwinds to many emerging markets, but their overall growth rates still exceed developed markets. Even if the near-term environment presents challenges, we believe the market will reward our disciplined and consistent approach to investing over the long term.