U.S. stocks generated mixed performance in the third quarter of 2015. Major large-cap indexes reached new all-time highs for much of the period despite continued unrest in the Middle East and Ukraine and the Federal Reserve's ongoing tapering of its asset purchases. The advance was supported by generally favorable U.S. economic data and solid corporate fundamentals, as well as optimism about new stimulus measures from central banks in the eurozone and China.
The Spectrum Growth Fund returned −8.87% in the quarter compared with −7.25% for the Russell 3000 Index and −8.19% for the Lipper Multi-Cap Core Funds Index. For the 12 months ended September 30, 2015, the fund returned −3.09% versus −0.49% for the Russell 3000 Index and −1.88% for the Lipper Multi-Cap Core Funds Index. The fund's average annual total returns were −3.09%, 10.28%, and 6.38% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.78% as of its fiscal year ended December 31, 2014.
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The Spectrum Growth Fund blends domestic and non-U.S. growth and value funds across the market capitalization spectrum. The inclusion of diversifying sectors drove relative underperformance. Most notably, exposure to value-oriented international and emerging markets equities, as well as real assets equities, detracted as these sectors underperformed the Russell 3000 Index for the period. On the positive side, security selection in the International Discovery, Growth Stock, and New Horizons Funds boosted relative returns as these funds outperformed their respective benchmarks. Our tactical overweight position to U.S. large-caps relative to U.S. small-caps also added value as large-caps outperformed for the period.
The U.S. stock market's third-quarter loss is not surprising given the magnitude of its advance over the past six years. In the near term, we expect to see muted equity returns coupled with higher volatility, which has lately created more opportunities to buy high-quality companies at cheaper prices. Valuations in large-cap stocks are now trading closer to their historical averages. While certain areas of the market remain overvalued, we are finding select companies that are priced below their intrinsic value with relatively limited downside risk.