U.S. stocks posted solid first-quarter returns, although large-cap equities notably underperformed small- and mid-cap companies. Large-cap stocks tend to generate more of their revenues from foreign markets, exposing them more to a stronger dollar that reduces the value of their income from outside the U.S. Across all market capitalizations, growth stocks performed better than value. Non-U.S. developed market stocks generated gains for U.S.-based investors even after accounting for the marked strengthening in the dollar. Within the broad MSCI Europe, Australasia, and Far East Index, large- and small-cap stocks performed similarly, while growth equities outpaced value. In general, emerging markets lagged the returns of non-U.S. developed markets.
The Global Growth Stock Fund returned 5.14% in the quarter compared with 2.44% for the MSCI All Country World Index and 3.50% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended March 31, 2015, the fund returned 11.94% versus 5.97% for the MSCI All Country World Index and 5.72% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were 11.94%, 10.26%, and 19.29% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of March 31, 2015. The fund's expense ratio was 1.16% as of its fiscal year ended October 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 Global Growth Stock 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.
The portfolio has a large overweight allocation, about one-quarter of total net assets, to emerging markets, where we have been finding more companies that can substantially increase their earnings than in developed markets. We are underweight the U.S. and Japan, where we think that poor corporate governance and slowness in implementing structural reforms will restrain returns. Although our overarching philosophy is to be sector-neutral versus the benchmark, our bottom-up fundamental analysis of stocks can result in some overweights or underweights. We increased our allocations to financials and health care over the course of the quarter and were overweight to both sectors at the end of the period.
We believe that the current environment of low global interest rates relative to historical norms will continue for a relatively long time, which bodes well for global equities overall. Although worldwide stock valuations have moved significantly higher over the last three to five years, they appear reasonable when compared with their longer-term averages. We think that there is more room for economic growth and for companies to increase their earnings in Europe and in emerging markets than in the U.S., but we are not bearish on U.S. equities. We will continue to concentrate on buying high-quality companies selling at reasonable valuations regardless of where they are based.