The blue chip benchmarks were roughly flat for the second quarter, as relief over resilient corporate earnings growth and enthusiasm about a reaccelerating U.S. economy gave way to worries over the ongoing Greek debt crisis. Small-caps fared better overall, although much of the outperformance was concentrated in fast-growing technology and biotech companies, which have sparse representation in the small-cap value benchmark; as a result, small-cap stocks trailed growth counterparts by a significant margin. Among significant sectors in the small-cap value universe, the health care sector performed best, while materials and utilities stocks saw substantial losses.
The Small-Cap Value Fund returned −0.61% in the quarter compared with 0.42% for the Russell 2000 Index and −0.12% for the Lipper Small-Cap Core Funds Index. For the 12 months ended June 30, 2015, the fund returned −1.78% versus 6.49% for the Russell 2000 Index and 3.89% for the Lipper Small-Cap Core Funds Index. The fund's average annual total returns were −1.78%, 14.57%, and 8.32% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.96% as of its fiscal year ended December 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 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.
Our investment process relies on the careful fundamental stock research of our analysts, which often involves meeting with company management. Recently, the portfolio's sector allocations have moved more in line with the benchmarks', although it remains significantly underweight in financials, which highlights the importance of our selection of individual stocks within a segment. We saw good results from our stock selection overall in the quarter, driven by the relatively good performance of consumer staples, financial, and energy holdings. Our selection among health care and information stocks detracted somewhat.
The market's tone has grown considerably more volatile in recent weeks, and investors, indeed, have several reasons to be nervous, including the turmoil in Chinese stock markets, the long-feared meltdown in Greece, the possibility of Puerto Rico defaulting on its widely held debt, the competitive challenges posed by the strong U.S. dollar, and a potential negative market response to the Fed's first increase in interest rates. On the other hand, the U.S. economy appears to be on solid footing, and the strengthening labor market should continue to support consumer-oriented stocks, in particular. While we can make our own assumptions as to how these crosswinds will play out, we continue to rely on our large team of analysts to help us find the individual opportunities that we believe are available in a range of market conditions. In some cases, poor economic conditions can even be helpful for long-term returns by resulting in industry consolidation. Recently, for example, we have made several new investments in energy firms. Although we have no strong conviction on the direction of oil prices, we are confident that the consolidation that is taking place among shale-based oil and gas producers, as evidenced by the dramatic decline in the drilling rig count, is setting the stage for improved long-term results.