Stocks recorded strong returns for the quarter, but markets were volatile after a period of relatively stable gains. After enduring some of their largest daily declines in over two years, most of the major benchmarks reached new highs shortly before the end of the year. Breaking with the pattern for the year as a whole, small-caps performed best for the quarter. Media and telecommunications shares underperformed the broader market, primarily due to weak performance among telecommunications services stocks, which represent over half of the Lipper benchmark. Media stocks, which make up a fifth of the benchmark, performed roughly in line with the S&P 500.
The Media & Telecommunications Fund returned 0.82% in the quarter compared with 1.13% for the Lipper Telecommunication Funds Average. For the 12 months ended December 31, 2014, the fund returned 4.14% versus 1.76% for the Lipper Telecommunication Funds Average. The fund's average annual total returns were 4.14%, 17.92%, and 14.30% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2013.
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The portfolio remains much more focused on media stocks than telecom shares. We perceive that opportunities are much more limited among telecom firms, which are facing significant regulatory and competitive issues. We would probably increase our allocation to this defensive segment, however, if we developed conviction that an economic downturn was imminent. Within media, our focus is on nontraditional firms that are exploiting the Internet and other new technologies to seize market share. We see significant opportunities in the e-commerce industry, which has a long and visible path for future growth. We're attracted to platform business models that have leadership positions in price, service, and selection. The portfolio also has a healthy weighting in social networking, an industry that is still in its early adolescence.
We expect that 2015 is likely to resemble 2014 for media and telecom investors, with a muted economic environment offering modest returns for most stocks in our universe. Relatively full valuations will also likely keep a lid on gains, although we do perceive some pockets of attractive valuations. Traditional media firms will continue to struggle with a soft advertising market, but even more so with the switch in viewership to other sources; indeed, we expect that 2015 will be an important year for online video. As a result, we are focusing on high-quality companies with strong brands that are less susceptible to declining advertising spending. Mergers and acquisitions are likely to continue within the telecommunications and cable industries, although probably at a reduced pace following a number of important deals in 2014.