Domestic small-cap growth stocks rose through late June as central banks in the eurozone and Japan unveiled new stimulus efforts earlier in the year. Also, the dollar weakened due to diminishing expectations for U.S. interest rate increases in 2016, and commodity prices rebounded sharply. Near the end of June, global equities plunged in response to a referendum in which UK citizens voted in favor of leaving the European Union (EU). As our reporting period ended, however, world markets rebounded amid hopes for new stimulus measures from central banks in the UK and elsewhere.
The QM U.S. Small-Cap Growth Equity Fund returned 3.86% in the quarter compared with 3.41% for the MSCI US Small Cap Growth Index and 3.66% for the Lipper Small-Cap Growth Funds Index. For the 12 months ended June 30, 2016, the fund returned −4.96% versus −8.85% for the MSCI US Small Cap Growth Index and −8.45% for the Lipper Small-Cap Growth Funds Index. The fund's average annual total returns were −4.96%, 10.87%, and 9.53% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.82% as of its fiscal year ended December 31, 2015.
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 fund's relative performance versus the MSCI index benefited from our stock selection in the consumer discretionary, health care, and industrials and business services sectors. On the other hand, our stock selection in financials and energy eroded our performance advantage. Sector allocations in aggregate detracted slightly too. As our longer-term investors know, we favor stocks that appear inexpensively valued relative to their respective industries and to the universe of small-cap growth stocks. We seek companies with high-quality characteristics, which includes a high return on capital employed, good earnings quality, and stability of earnings.
In the U.S., the direct implications of the UK's decision to leave the EU appear to be minor, but there seems to be a consensus that this will cause global economic growth-especially in the UK and Continental Europe-to decelerate. One positive side effect of all these developments is a reduced likelihood of interest rate increases this year by the Federal Reserve. Continued low interest rates are likely to provide a boost to the housing market and consumer demand. The stubborn low-growth environment around the world is likely to further delay Fed rate hikes. Overseas, other central banks are expected to take all necessary measures to lessen the impact of any potential slowdown due to events in the UK.