Stocks recorded strong returns for the quarter, but markets were volatile after a period of relatively stable gains. After enduring some of their largest daily declines in over two years, most of the major benchmarks reached new highs shortly before the end of the year. Breaking with the pattern for the year as a whole, small-caps performed best for the quarter, and mid-caps outperformed large-caps based on Russell indices. Mid-cap growth stocks slightly lagged their value counterparts. Health care and consumer discretionary shares performed best within the mid-cap growth universe, while energy shares fell sharply.
The Mid-Cap Growth Fund returned 8.60% in the quarter compared with 5.84% for the Russell Midcap Growth Index, 6.35% for the S&P MidCap 400 Index, and 5.82% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended December 31, 2014, the fund returned 13.16% versus 11.90% for the Russell Midcap Growth Index, 9.77% for the S&P MidCap 400 Index, and 7.91% for the Lipper Mid-Cap Growth Funds Index. The fund's average annual total returns were 13.16%, 17.42%, and 10.94% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.78% as of its fiscal year ended December 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 portfolio is assembled stock-by-stock based on our fundamental research, but we have recently increased our exposure to the health care sector, and we are particularly interested in service firms that have less exposure to the economic cycle. Both our stock selection and our significant overweight in the segment boosted results. While our small position in the poorly performing energy sector also boosted results, our stock selection among energy firms detracted modestly.
Over the past year, we have noted our growing sense that that the investment cycle is nearing a turning point, not surprisingly, given that the current bull market is already somewhat above normal in terms of duration and magnitude compared with its postwar peers. Precisely timing the turn in the market is always thorny, however. And the Federal Reserve's aggressive monetary easing has further complicated the task. As a result, while we have not dramatically increased cash levels or taken other drastic steps, we have been slowly adopting a more defensive stance in the portfolio. For example, we have reduced our exposure to highly volatile biotechnology stocks and redirected it to more stable health care services stocks. We have taken similar steps in the industrials and technology sectors. More generally, we have deepened our already considerable focus on steady growth companies rather than those able to demonstrate a few quarters of rapidly expanding profits or revenues. While no fully invested strategy can protect investors from a significant downturn, and we are not anticipating a repeat of the 2008 sell-off, we believe this careful approach offers the best long term opportunities for our shareholders.