Real assets stocks declined in the second quarter of 2015, with underlying returns almost uniformly negative. Natural resources stocks fell but at a slower pace than the sharp losses seen in the latter half of 2014. Although the recent stabilization in prices for oil and other commodities is welcome, a stronger U.S. dollar, slower global growth, and unfavorable supply/demand dynamic continue to weigh on commodities and energy stocks. U.S. and global real estate securities moved sharply lower during the long term as interest rates rose. While real estate's overall fundamentals did not materially change, investors reacted to the prospects of Fed tightening expected to begin later this year.
The Real Assets Fund returned −5.04% in the quarter compared with 0.52% for the MSCI All Country World Index and −5.18% for the Lipper Specialty/Miscellaneous Funds Average. For the 12 months ended June 30, 2015, the fund returned −14.23% versus 1.23% for the MSCI All Country World Index and −10.74% for the Lipper Specialty/Miscellaneous Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were −14.23% and 2.51%, respectively, as of June 30, 2015. The fund's expense ratio was 0.83% as of its fiscal year ended December 31, 2014.
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 moved from an underweight allocation to natural resources to a small overweight. We believe we are now in the midst of a short-term trading rally for oil as rig counts have collapsed, U.S. oil production is beginning to plateau and roll over, and seasonal global demand is picking up. We are looking for opportunities in energy exploration and production companies and commodities-related companies with low costs and accelerating growth. North American shale producers and specialty chemical companies are good examples of our current focus. We trimmed our exposure to U.S. real estate on the prospects for higher interest rates and increased our exposure to global real estate due to lower relative rates and optimism about nascent economic recoveries in Europe and Japan.
Despite the potential for temporary cyclical dislocations, we continue to believe the natural resources market is in the initial years of a secular downcycle in commodities. We maintain the structural integrity of the portfolio in the context of our longer-term downcycle view, while being mindful of these potentially volatile trading rallies and will make tactical portfolio shifts as appropriate. A rising interest rate environment is a headwind for U.S. real estate, but we believe the pace of rate increases will be gradual as the Fed keeps a close watch on economic data. Overall, real estate fundamentals look solid as modest economic growth drives demand and supplies remain somewhat constrained.