A strong stock market rally early in the second quarter reversed in June amid renewed concerns over the fate of Greece and heightened volatility in Chinese stocks. Non-U.S. developed markets ended the second quarter with small gains as measured by the MSCI All Country World Index ex U.S.A. From a sector perspective, telecommunication services, energy, and financials were the strongest performers in the benchmark. The worst-performing sectors included information technology, health care, and industrials and business services. Within emerging markets, stocks in Latin America and the Europe, Middle East, and Africa region recorded gains, but Asian emerging markets declined.
The International Stock Fund returned 1.14% in the quarter compared with 0.72% for the MSCI All Country World Index ex USA and 1.55% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended June 30, 2015, the fund returned 0.80% versus −4.85% for the MSCI All Country World Index ex USA and −2.01% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were 0.80%, 10.04%, and 6.30% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 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.
Overall, stock selection generated a positive contribution to the portfolio's relative performance, especially in consumer discretionary, materials, and information technology. We look to select companies that are adept at generating free cash flow, revenues, and earnings growth. Our underweight allocation to the financials sector and an overweight position in information technology hurt on comparison with the benchmark. The largest regional allocation (about 50% of the portfolio) is in developed European markets including the UK, where stock selection and a modest overweight allocation benefited absolute and relative results. Within the region, we have been opportunistically buying in the UK and Switzerland, as well as the eurozone, although to a lesser degree. Stock selection across emerging markets holdings detracted from relative results, although we remain constructive on the long-term prospects for Brazil, China, and India.
We are optimistic about the environment for non-U.S. equities in the intermediate and longer term. We think the European Central Bank's quantitative easing, a weaker euro, and an eventual resolution to the turmoil in Greece will all prove helpful for European stocks going forward, although corporate earnings growth remains the primary ingredient for longer-term outperformance. Japan is a market where investors have shown their willingness to pay premium prices for growth companies. It remains a very stock-specific market, and we have been finding select opportunities to buy high-quality growth companies in Japan. 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.