U.S. stocks rose in the fourth quarter, rebounding from the prior quarter's losses. Corporate merger activity and anticipation of additional stimulus measures in Europe were also strengths in the quarter. The U.S. Federal reserve began to raise short-term interest rates in mid-December, but this widely telegraphed move did not derail the broad equity market. Global financial market volatility is likely in 2016; however, a U.S. monetary policy diverges with the accommodative stances of central banks in Europe and Asia. The S&P 500 Index posted a strong quarterly return with all sectors reporting positive returns.
The U.S. Large-Cap Core Fund returned 7.74% in the quarter compared with 7.04% for the S&P 500 Index and 6.17% for the Lipper Large-Cap Core Funds Index. For the 12 months ended December 31, 2015, the fund returned 8.20% versus 1.38% for the S&P 500 Index and −0.67% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 8.20%, 13.46%, and 15.74% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of December 31, 2015. The fund's expense ratio was 1.15% as of its fiscal year ended December 31, 2014.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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The U.S. Large-Cap Core strategy outperformed the S&P 500 Index during the quarter. Stock selection drove outperformance, while sector allocation decisions slightly detracted from results. The information technology and industrials and business services sectors were both contributors to the strategy. Utilities had the largest negative impact on relative performance due to our overweight position. We favor companies that can generate stable earnings and cash flow growth. Our bottom-up stock selection process relies on a rigorous valuation assessment to find stocks with the most potential for capital appreciation. Because of the concentrated nature of the fund (typically about 50 domestic large-cap growth and value stocks), we want to own high-quality, well-managed, fundamentally sound firms that have great products and services.
In the year ahead, we expect to see a continuation of subdued market returns coupled with higher volatility. We remain cautious and more defensively positioned. Recent weakness in China's economy and emerging markets in general, low energy and low commodity prices, and political risks given that it is an election year remain near-term uncertainties. Given the current market, we continue to concentrate on buying and holding high-quality companies that can demonstrate growth in earnings and dividends through a cycle, as we remain committed to providing risk-adjusted returns over the long term.