Developed non-U.S. stock markets posted excellent gains in local currency terms and, despite the persistently appreciating U.S. dollar, generated good results in dollar terms for U.S.-based investors. An appreciating dollar detracts from the returns for U.S.-based investors in non-U.S. local currency-denominated securities. In general, growth-focused sectors, including health care, information technology, and consumer discretionary, outperformed value-oriented segments. In the benchmark, the utilities and energy sectors declined and the telecommunication services segment lagged. Across the emerging markets universe, Asian stocks generated a solid return; the Europe, Middle East, and Africa region recorded a more modest advance; and Latin American stocks posted losses.
The International Stock Fund returned 6.34% in the quarter compared with 3.59% for the MSCI All Country World Index ex USA and 4.69% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended March 31, 2015, the fund returned 4.69% versus −0.57% for the MSCI All Country World Index ex USA and −0.17% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were 4.69%, 6.75%, and 6.04% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.83% as of its fiscal year ended October 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 International 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.
Stock selection was the primary driver of the portfolio's strong relative performance, especially in consumer staples, financials, and industrials and business services. We look to own companies that are adept at generating free cash flow, revenues, and earnings growth. Our overweight allocation to the consumer discretionary sector and an underweight to energy also contributed to relative returns. We remain committed to our consumer discretionary holdings (our largest overweight allocation) because of their above-average growth potential. We also have a large overweight to the information technology sector, although stock selection in technology detracted from relative results in the quarter. We are significantly underweight to financials, although it remained the largest sector allocation at 19% of the portfolio. While all of the portfolio's sectors posted positive returns, telecommunication services underperformed due to stock selection.
We remain optimistic about the environment for non-U.S. equities in the intermediate and longer terms, but lackluster economic growth in Europe, Japan, and several major emerging markets are potential near-term headwinds. Although some individual stocks and sectors appear to be richly priced, our bottom-up stock selection process is uncovering companies with favorable risk/reward characteristics. Overall, European earnings growth has slowly improved, as the European Central Bank's quantitative easing program and euro weakness are helping to draw out positive glimmers in the economic data. However, Europe's ability to implement structural reforms that improve long-term growth prospects remains uncertain. In Japan, we believe domestic consumption and wage inflation need to be the next growth engines for a sustained recovery. Emerging markets returns have been reflective of underlying fundamentals at the stock and country level, which in our view, is a positive and overdue development.