The U.S. equity market continued its upward trend during the fourth quarter as investors were encouraged by U.S. dollar strength, more certainty in Federal Reserve policy, and the potential for higher consumer spending due to falling gasoline prices and low interest rates. There was cause for concern as the conflict between Russia and Ukraine persisted, and weak economic data from Europe and Japan dampened global growth prospects. The Fed's bond-buying program ended in October, and many investors believe that actual monetary tightening won't occur until the second half of 2015. Interest rates have remained low, making the equity market attractive relative to other asset classes.
The U.S. Large-Cap Core Fund returned 4.85% in the quarter compared with 4.93% for the S&P 500 Index and 4.16% for the Lipper Large-Cap Core Funds Index. For the 12 months ended December 31, 2014, the fund returned 11.89% versus 13.69% for the S&P 500 Index and 11.33% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 11.89%, 14.72%, and 17.16% for the 1-, 5-, and Since Inception (06/26/2009) periods, respectively, as of December 31, 2014. The fund's expense ratio was 1.15% as of its fiscal year ended December 31, 2013.
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Our overweight allocation to the industrials and business services sector, and stock selection in the group, contributed positively to portfolio performance during the fourth quarter. Stock selection in the consumer discretionary area was likewise beneficial, although our underweight exposure there was a slight drag on results. The major drawbacks to our return for the quarter were energy stocks, but this was somewhat mitigated by an underweight allocation to the poorly performing sector. Stock selection in consumer staples and materials also hampered results. Our primary sector exposure at the end of 2014 was industrials and business services, followed by financials and health care.
Given the continued strength in the equity market, notwithstanding recent volatility, we remain cautious in the near term as it has been some time since we have seen a significant correction. The market's appreciation has generally outpaced fundamentals, making valuations a somewhat neutral factor. We expect the U.S. economy to continue to strengthen while remaining somewhat muted compared with previous recoveries. Ongoing issues in China, along with sluggishness in Europe, also threaten to impair global growth. Despite the runup in valuations, we are focusing on companies that are attractively valued and offer the potential for growth despite our macroeconomic concerns.