Global equity markets produced mixed results in a volatile first quarter of 2016. Investors concerned about slowing global growth and fears of a possible recession sparked a broad-based sell-off in the first six weeks of the year. However a turnaround in the second half of the quarter helped erase some of the deepest losses in many markets. Developed European markets generally declined as many markets were hurt by weakness in bank stocks and concerns about negative interest rates, nonperforming loans (particularly in Italy), and exposure to the energy sector. In developed Asia, Japanese stocks sank amid sluggish economic growth. Emerging market stocks, led by Latin America, produced positive returns thanks to a vigorous rally in March.
The Global Stock Fund returned −3.27% in the quarter compared with 0.38% for the MSCI All Country World Index and −2.18% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended March 31, 2016, the fund returned −1.65% versus −3.81% for the MSCI All Country World Index and −5.38% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were −1.65%, 7.65%, and 4.53% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.89% as of its fiscal year ended October 31, 2015.
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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 Global Stock 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.
The Global Stock Fund underperformed the MSCI All Country World Index for the quarter. Stock selection drove underperformance. Information technology and health care detracted from results. The consumer discretionary sector contributed positively to relative stock performance due to stock picking, and we added several new positions that were showing strength in the challenging quarter. At the regional level, holdings in North America drove relative underperformance. Stock selection in developed Europe and Japan both contributed positively. Health care has been a strong area of performance for many years, but our enthusiasm for the sector has tempered of late due to broadly richer valuations and uncertainty about the drug pricing environment. We downsized our exposure to financials because we are concerned about what we believe will be a persistent low interest rate environment. We have increased our exposure to the energy sector, but we continue to maintain a significant underweight. From a regional perspective, we maintained largely similar exposures to the previous quarter.
We tend to take advantage of periods of intense volatility as seen in the first quarter by repositioning the portfolio into our best ideas. The downturn gave us a number of opportunities to buy new names where we like the longer-term story but may have previously been too expensive. Overall, we remain optimistic about equities, and we think there is enough growth in the world that would be beneficial to our portfolio by focusing on stocks that are gaining share.