International developed markets stocks fell in the first quarter of 2016. Japanese equities fell 6% in U.S. dollar terms. Japan's economy remained sluggish despite the series of accommodative monetary and fiscal policies and structural reforms known as Abenomics. Policymakers downgraded their growth expectations near the end of the quarter. European equity markets generally declined, although shares in the Netherlands and Portugal bucked the negative trend. Many markets were hurt by weakness among bank stocks amid concerns about negative interest rates, nonperforming loans, especially in Italy, and exposure to the energy sector. Stocks in emerging markets gained in the first quarter, thanks to a March rally. The U.S. dollar weakened against several major currencies, boosting returns for U.S. investors.
The Spectrum International Fund returned −0.85% in the quarter compared with −0.26% for the MSCI All Country World Index ex USA and −1.79% for the Lipper International Multi-Cap Growth Funds Average. For the 12 months ended March 31, 2016, the fund returned −6.84% versus −8.78% for the MSCI All Country World Index ex USA and −5.91% for the Lipper International Multi-Cap Growth Funds Average. The fund's average annual total returns were −6.84%, 2.72%, and 3.12% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.94% as of its fiscal year ended December 31, 2015.
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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 International Fund charges a 2%
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.
We are overweight to emerging versus developed market equities based upon the former's more attractive valuations, which remain below long-term historical averages relative to developed markets. While the potential for further slowing of emerging markets' economic growth and U.S. interest rate normalization remain near-term risks, valuations appear to be discounting longer-term growth potential and company-specific opportunities. We remain overweight international value stocks relative to growth stocks as valuations in more defensive growth sectors, such as consumer staples, appear expensive. We are modestly overweight small-cap stocks outside the U.S. as they may benefit from improving domestic economic environments supported by stimulative monetary policies.
Our global growth expectations remain modest as weak global trade and lower commodity prices weigh on global economies. The U.S. Federal Reserve downgraded its economic growth and inflation expectations for 2016, while remaining committed to interest rate policy normalization at a "gradual" pace. Central bank policies in Europe, Japan, and some emerging markets continue to diverge from the U.S. as they implement quantitative easing measures and negative interest rates to stimulate growth. Key risks to global markets include the impacts of global monetary policy actions, including the potential adverse consequences of negative interest rates on banking sector profitability, increased currency volatility, and political and policy uncertainties facing many countries already weighed down by weaker growth.