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. Mid-caps underperformed, however, as a sharp pullback at the end of the quarter pulled the mid-cap benchmark back from record highs. Mid-cap growth stocks modestly outperformed their growth counterparts. Among significant sectors in the mid-cap growth universe, industrials and business services and consumer staples stocks fared worst, while health care shares managed a modest gain.
The Mid-Cap Growth Fund returned 1.29% in the quarter compared with −1.14% for the Russell Midcap Growth Index and 0.44% for the Lipper Mid-Cap Growth Funds Index. For the 12 months ended June 30, 2015, the fund returned 14.87% versus 9.45% for the Russell Midcap Growth Index and 9.19% for the Lipper Mid-Cap Growth Funds Index. The fund's average annual total returns were 14.87%, 19.35%, and 11.59% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.77% 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 portfolio is assembled on a stock-by-stock basis using our careful fundamental research rather than from a top-down perspective. Nevertheless, the portfolio has long held an overweight in the industrials and business services sector, where we have found many firms that may not stand out for rapidly expanding revenue or profits but are able to compound impressive earnings growth over time. This overweight hurt returns a bit in the quarter as industrials lagged, but our stock selection among the group more than compensated. Our stock selection in financials and information technology also helped. On the down side, our selection among consumer staples and energy firms weighed on returns, although this was partially offset by our underweight in these underperforming segments.
From our value-conscious perspective on growth investing, we believe that stock valuations are slightly above historical averages but hardly indicative of manic enthusiasm. While pockets of froth exist, most of the information technology sector has escaped the wild excesses of the dot-com bubble years. We believe that particular opportunities remain for patient and long-term investors, especially given the growing focus by hedge funds and others on short-term returns. Through our fundamental research, we are finding opportunities in steadily, but not spectacularly, growing mid-cap companies with durable franchises and other advantages.