Real assets stocks declined in the fourth quarter. Natural resources stocks fell sharply and lagged the broader domestic and global equity markets by a wide margin. Utilities stocks posted good gains as investors searched for yield, but energy and materials stocks plummeted as a stronger U.S. dollar weighed on dollar-denominated commodity prices, and oil prices were pushed lower by concerns about overcapacity and tepid demand growth. After declining somewhat during the third quarter, U.S. real estate securities rose strongly during the fourth quarter, putting an exclamation point on an already good year. The quarter proved a favorable environment for the interest rate sensitive U.S. and global real estate spaces as long-term rates and inflation expectations tumbled along with oil prices.
The Real Assets Fund returned −3.61% in the quarter compared with 0.52% for the MSCI All Country World Index and −1.15% for the Lipper Specialty/Miscellaneous Funds Average. For the 12 months ended December 31, 2014, the fund returned 1.55% versus 4.71% for the MSCI All Country World Index and −7.62% for the Lipper Specialty/Miscellaneous Funds Average. The fund's 1-year and Since Inception (07/28/2010) average annual total returns were 1.55% and 3.76%, respectively, as of December 31, 2014. The fund's expense ratio was 0.85% as of its fiscal year ended December 31, 2013.
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 believe ample supply, tepid demand growth, and a stronger dollar will continue to weigh on prices for oil and other commodities over the near term. As a result, we have lowered exposure to the natural resources space, although we are still finding opportunities in areas of the market that could benefit from lower commodities prices, including specialty chemicals. We also increased the portfolio's allocation to U.S. real estate. Improving economic activity drives real estate demand, and we look forward to continued improvement in property fundamentals as new construction supply still appears restrained. Despite the Federal Reserve indicating that target rates may be edged up in 2015, interest rates have yet to launch on an upward trajectory. Even if a rise in rates occurs, it would not necessarily be bad for real estate securities if spurred by the Fed increasing target rates along with an improving economy.
We expect modest global economic growth over the next several quarters. Diminishing fiscal headwinds, increased government spending, better private sector demand, and moderate job growth support gradual improvements in U.S. economic activity. Federal Reserve policy remains accommodative, and rate hikes not expected until mid-2015. Economic growth in Europe and Japan has faltered, but we are encouraged that policymakers are likely to implement more aggressive stimulus measures. There is a broad divergence of economic and fiscal conditions between emerging countries, with some economies showing modest improvements as other struggle. Key risks to global markets include the effectiveness of global monetary policy to support growth and rising geopolitical tensions in some regions of the world.