Large-cap U.S. stocks reached all-time highs in February before retreating in March and ending the first quarter with slim gains. Corporate merger activity, reduced energy costs, low interest rates, and massive quantitative easing efforts in the eurozone and Japan overcame concerns about a stronger U.S. dollar and some mixed economic data. Companies with a domestic focus outpaced those that generate a larger portion of revenues overseas as dollar strength hurt profitability for large exporters and multinationals. As measured by various Russell indexes, growth stocks strongly outperformed value stocks across all market capitalizations.
The Tax-Efficient Equity Fund returned 6.00% in the quarter compared with 4.05% for the Russell 3000 Growth Index and 4.61% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended March 31, 2015, the fund returned 16.49% versus 15.76% for the Russell 3000 Growth Index and 14.25% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 16.49%, 15.73%, and 8.99% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.89% as of its fiscal year ended February 28, 2014.
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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 Tax-Efficient Equity Fund charges a 1%
redemption fee on shares held less than 365 days.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
Our health care stocks registered strong modest double-digit gains for the quarter, led by biotechnology names. For several years, we have focused on biotech companies addressing unmet medical needs rather than large-cap pharmaceutical firms. We also have a large exposure to health care providers and service companies. Our information technology stocks generated more modest gains. We are broadly diversified in the sector, with a focus on companies with strong business models in industries with high barriers to entry and lower risk of commoditization. This is usually a "winner take all" space, where an industry leader emerges and eclipses its competitors. Hence, we try to avoid companies whose businesses are subject to competing products or services.
Despite several years of strong gains, we still think this is a good environment for long-term stock investors. Although the Fed is preparing to raise rates in mid-2015, global monetary policy remains broadly accommodative. Central banks in Europe and Japan, most notably, are enacting aggressive stimulus measures. The U.S. economy and corporate earnings are growing at a moderate pace, and equities seem reasonably valued in aggregate. Against this backdrop, we believe stocks are the best assets for investors seeking long-term capital appreciation, particularly when compared with the low nominal and negative real (inflation-adjusted) returns available for many fixed income investments.