U.S. large-cap stocks were little changed in the second quarter as signs of a stronger U.S. economy, a surge in takeover activity, and better-than-expected earnings gave way to uncertainty as Greece lurched closer to a default in June. Expectations that the Federal Reserve would defer a long-awaited interest rate increase until later this year also lifted investor sentiment, easing worries that the improving economy would spur the central bank to speed up the timing of its first rate hike since 2006. The S&P 500 Index rose 0.3% in the second quarter, with five of 10 sectors in the index posting positive returns, led by health care. U.S. gross domestic product contracted slightly in the first quarter, but subsequent readings have led most analysts to forecast modestly positive economic growth in 2015.
The Value Fund returned 0.31% in the quarter compared with 0.28% for the S&P 500 Index and 0.19% for the Lipper Large-Cap Value Funds Index. For the 12 months ended June 30, 2015, the fund returned 5.07% versus 7.42% for the S&P 500 Index and 3.89% for the Lipper Large-Cap Value Funds Index. The fund's average annual total returns were 5.07%, 17.87%, and 8.52% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund's expense ratio was 0.82% as of its fiscal year ended December 31, 2014.
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Financials and health care represented the largest overweight sectors as of June 30, 2015. Financial stocks have rebounded from the 2008 global financial crisis, but we believe that valuations of select companies still appear reasonable on a normalized earnings basis and that the sector provides good leverage to the improving economy. In health care, the portfolio's largest industry allocation is pharmaceuticals, where holdings are returning cash to shareholders through share repurchases and dividends. The portfolio also owns many health care providers and services companies, which are benefiting from recent industry consolidation and more customers due to passage of the Affordable Care Act. Information technology and consumer discretionary, respectively, remain the largest underweight sectors.
The U.S. bull market entered its seventh year in the first quarter of 2015. Our near-term outlook is cautious given that we have not experienced a meaningful stock market correction in some time. The magnitude of the market's climb in recent years has been surprising given that the Fed is expected to start raising interest rates later in 2015. We would not be surprised to see more subdued stock market returns coupled with higher volatility, which has hovered at below-average levels in recent years. Valuations in the large-cap universe remain elevated, making it difficult to find attractive investment opportunities. Still, we continue to find select companies that are priced below their intrinsic value with relatively limited downside risk. We remain focused on our strategy of buying quality companies at attractive prices and maintaining a longer-term horizon to allow holdings reach their full value.