U.S. stocks posted strong returns amid considerable volatility, with large-cap shares underperforming small-caps in a break from the general 2014 trend. Within the large-cap market segment, growth stocks slightly underperformed value. Non-U.S. developed market stocks lost ground in U.S. dollar terms as the greenback continued to strengthen against most other currencies. Asian stocks held up better than European shares. Within the broad MSCI Europe, Australasia, and Far East Index, growth stocks outperformed value shares, while small-caps held up better than large-caps. Measured in terms of U.S. dollars, emerging markets fell more than non-U.S. developed markets.
The Global Growth Stock Fund returned 1.88% in the quarter compared with 0.52% for the MSCI All Country World Index and 1.19% for the Lipper Global Multi-Cap Growth Funds Average. For the 12 months ended December 31, 2014, the fund returned 8.39% versus 4.71% for the MSCI All Country World Index and 2.22% for the Lipper Global Multi-Cap Growth Funds Average. The fund's average annual total returns were 8.39%, 10.26%, and 19.17% for the 1-, 5-, and Since Inception (10/27/2008) periods, respectively, as of December 31, 2014. The fund's expense ratio was 1.18% as of its fiscal year ended October 31, 2013.
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.
We maintained an underweight allocation to developed European markets relative to the benchmark, although we marginally added to our European allocation over the course of the quarter. The dollar's strength relative to the euro, which we expect to continue for some time, should provide a tailwind for eurozone corporate earnings. The portfolio has a large overweight allocation (about 26% of assets) to emerging markets, where we have been finding more companies that can substantially increase their earnings than in developed markets. 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 technology and health care over the course of the quarter.
The U.S. economy is showing definite signs of a return to health, but relative to historical recoveries from deep recessions, the U.S. is only performing adequately. However, the recovery in the U.S. is far stronger than in the eurozone or Japan, which both continue to struggle to break out of stagnant growth and avoid deflation. As a result of the sluggish global economy, we think that long-term interest rates will stay relatively low even after the Federal Reserve begins to raise short-term rates. We remain encouraged by the dispersion of returns within emerging markets, which we believe more accurately reflects the outlook for individual countries and companies. We will continue to concentrate on buying high-quality companies selling at reasonable valuations.