Despite some large daily swings, stocks roughly traced a V shape in the quarter, declining through the middle of February and then rising for the remainder of the period. Further global monetary easing and a rebound in oil prices led to gains in the second half of the quarter, which more than compensated for earlier losses for the mid- and large-cap benchmarks. Smaller shares recorded losses overall, but small-cap value shares handily outpaced their growth counterparts and recorded a modest gain.
The Small-Cap Value Fund returned 3.17% in the quarter compared with 1.70% for the Russell 2000 Value Index and 1.52% for the Lipper Small-Cap Core Funds Index. For the 12 months ended March 31, 2016, the fund returned −2.78% versus −7.72% for the Russell 2000 Value Index and −6.28% for the Lipper Small-Cap Core Funds Index. The fund's average annual total returns were −2.78%, 7.26%, and 5.78% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.92% as of its fiscal year ended December 31, 2015.
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 Small-Cap Value Fund charges a 1%
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.
The portfolio saw strong results from its utilities holdings, as investors sought out the sector's dividend yields, which became more attractive as long-term bond yields declined and expectations for interest rates increases moderated. The financials sector, which forms a significant part of the portfolio but an even larger share of the benchmark, detracted as low interest rates weighed on bank shares. Reflecting our general approach, most of the portfolio's outperformance during the quarter came from individual stock selection rather than large sector bets.
The Federal Reserve and other central banks continue to push back against the deflationary forces in the global economy, and the market's direction in the coming months seems likely to be determined by the outcome of their struggle. The steep drop in global markets in late 2015 and early 2016 after an incremental rate increase from the Fed indicated the significant downward pressures still at work, and a further increase this spring or summer may send stocks lower again. We do not attempt to time such market swings, however, and we believe that diversified investors can find stock-specific opportunities in almost all market environments. Small-cap stocks struggled especially in the market's pullback in early 2016 and have lagged year-to-date. While we would not be surprised to see the pattern of small-cap underperformance continue in the coming months, we believe the asset class still holds potential for patient investors to find mispriced and misunderstood companies with long-term potential.