Multi-Manager Emerging Markets Equity
as of December 31, 2013
Fund Commentary
Emerging market equities, as measured by the MSCI Emerging Markets Index, posted a return of 1.83% during the fourth quarter. From a regional perspective, Asia fared best with a return of 3.65%, followed by Europe, Middle East and Africa (EMEA) with a return of 0.19% and Latin America with a return of -2.33%. Any gains came in the first part of the quarter, as the market retreated in November and December. Technology-based economies, such as Taiwan and South Korea, performed well during the period. Conversely, many of the laggards, such as Thailand and Indonesia, suffered from political unrest and/or concerns about fiscal health. From a sector perspective, technology, utilities and health care were the best performing sectors in emerging markets, offset by weakness in energy, consumer staples and telecommunications services. For the year, the MSCI Emerging Markets Index returned -2.60%.

The Multi-Manager Emerging Markets Equity Fund outperformed during the quarter, with a return of 2.91% compared with the benchmark return of 1.83%. Stock selection was strong in multiple areas, particularly in Latin America and India. The Fund underperformed in the Middle East and Pacific region. From a sector perspective, the Fund performed particularly well within the financial area.

During the quarter, we made one sub-adviser change within the Fund. Trilogy Global Advisers was removed as a sub-adviser and replaced with Oaktree Capital Management. Oaktree employs an opportunistic, fundamentally driven investment approach with a valuation overlay. Oaktree began managing assets in the Fund in mid-November. Since its introduction to the Fund, Oaktree has performed ahead of the benchmark.
Investor Profile

If you're a long-term investor looking to diversify your investments by pursuing the growth potential of emerging and frontier market equities, then this Fund may be right for you. It is intended for investors who are aware that foreign markets may involve additional risks, such as social and political instability, reduced market liquidity and currency volatility.

Investing in emerging markets entails extra risk. The securities markets of emerging countries are less liquid, more volatility, and less regulated than the markets of more developed countries. This risk is magnified in frontier countries since they generally have smaller economies or less developed capital markets than traditional emerging markets.

  • Invest at least 80% of net assets in equity securities of emerging and frontier markets — emerging and frontier markets are defined as markets in MSCI Emerging Markets Index and MSCI Frontier Markets Index.
  • Select complementary managers from a broad universe of investment managers.
  • Blend managers into a single fund in an effort to provide an attractive combination of risk and return.
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