Domestic small- and mid-cap stocks rallied through late June, in part, because of central bank stimulus measures in Japan and Europe and the U.S. Federal Reserve's decision to delay additional interest rate increases. Near the end of June, global equities plunged in response to a referendum in which UK citizens voted in favor of leaving the European Union. As our reporting period ended, however, world markets rebounded amid hopes for new stimulus measures from central banks in the UK and elsewhere.
The QM U.S. Small & Mid-Cap Core Equity Fund - I Class returned 3.66% in the quarter compared with 3.57% for the Russell 2500 Index. The Since Inception (02/26/2016) total return was 10.60% as of June 30, 2016. The fund's expense ratio was 0.86% as of the most recent Prospectus.
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 QM U.S. Small & Mid-Cap Core Eq Fund - I Class charges a 1%
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 favor stocks that appear inexpensively valued relative to their respective industries and equity universes. We also seek companies with high-quality characteristics, which include a high return on capital employed, good earnings quality, and stability of earnings. While we may occasionally have small overweights or underweights, we believe sector neutrality versus the benchmark helps us avoid risks due to large moves in any individual sector. Another means of controlling risk is broad diversification: We had about 350 holdings at midyear, and the size of our largest positions was 0.6% of assets. Position size depends on a stock's valuation, riskiness, earnings stability, and quality. For example, we tend to have smaller positions in higher-risk companies, such as small-cap pharmaceuticals and biotechnology firms.
In the U.S., the direct implications of the UK's decision to leave the EU appear to be minor, but there seems to be a consensus that this will cause global economic growth-especially in the UK and continental Europe-to decelerate. One positive side effect of all these developments is a reduced likelihood of interest rate increases this year by the Federal Reserve. Continued low interest rates are likely to provide a boost to the housing market and consumer demand. The stubborn low-growth environment around the world is likely to further delay Fed rate hikes. Overseas, other central banks are expected to take all necessary measures to lessen the impact of any potential slowdown due to events in the UK.