U.S. stocks produced strong gains in the fourth quarter, supported by steady U.S. economic growth and new stimulus efforts in the eurozone and Japan. Small-cap stocks outperformed large- and mid-cap stocks. Value stocks narrowly outpaced growth stocks in the large- and mid-cap universes, while the opposite was true among small-caps. Stocks in developed non-U.S. markets declined in dollar terms due to the further weakening of non-U.S. currencies, particularly the euro and the yen. Shares in emerging markets also declined as the dollar strengthened and as falling oil prices weighed on major oil producers.
The Spectrum Growth Fund returned 1.86% in the quarter compared with 5.24% for the Russell 3000 Index and 4.46% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended December 31, 2014, the fund returned 5.60% versus 12.56% for the Russell 3000 Index and 10.06% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were 5.60%, 12.56%, and 7.50% 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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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 Spectrum Growth Fund blends domestic and non-U.S. growth and value funds across the market capitalization spectrum. Our inclusion of non-benchmark diversifying sectors detracted from relative results, notably our exposure to non-U.S. equities and real asset equities, as each lagged U.S. equities for the period. Stock selection also weighed on relative returns, particularly within the U.S. large-cap underlying portfolios. Allocation decisions also detracted somewhat from relative performance, particularly our overweight U.S. large-cap stocks relative to U.S. small-caps. However, an underweight to real asset equities contributed to performance. We increased our overweight to non-U.S. versus U.S. equities, and we are overweight to emerging markets versus developed markets equities. We are underweight U.S. small-cap stocks, which appear richly priced relative to large-caps. Within the U.S., we favor growth stocks over value; in non-U.S. markets, we favor value over growth.
Our global growth expectations remain modest over the next several quarters. Gradual improvement in U.S. economic growth is supported by diminishing fiscal headwinds, increased state and local government spending, improving private sector demand, and moderate job growth. In contrast, Japanese and European growth momentum has moderated recently, with Japan slipping back into recession and Europe remaining hindered by elevated debt loads, high unemployment, and deflation worries. Slowing growth in China, Brazil, and other emerging economies also weighs on global trade. These divergent conditions bolster our belief that our highly diversified portfolios and diligent fundamental research can enhance our ability to produce good long-term returns.