U.S. small-cap equities advanced during the quarter, with the Russell 2000® Index gaining 10.21%. Small caps continued to outperform both large-cap and mid-cap indices, taking the Russell 2000® Index to a year-to-date gain of 27.69%. Health care, technology and energy were the three best-performing sectors during the quarter. Utilities lagged, gaining less than 1% during the quarter. Sector performance is reflected in style performance, with the technology heavy Russell 2000® Growth Index gaining 12.80%, compared with the Russell 2000® Value Index return of 7.59%.
The Multi-Manager Small Cap Fund outperformed the benchmark during the quarter, returning 10.87% compared with the Russell 2000® Index return of 10.21%. Both stock selection and sector selection contributed to outperformance during the quarter. The technology sector was an area of particular strength, where the Fund benefited from its overweight to the sector and also outperformed the market within the segment. The Fund also performed well within the financial sector. The heathcare sector was the weakest area for the Fund during the quarter.
Sub-adviser performance was strong during the quarter. Growth investor Summit Creek continued to perform well, benefiting from the continued outperformance of the growth segment of the market. Technology was the key driver of Summit Creeks results during the quarter. Riverbridge also performed strongly during the period, benefiting from favorable results in the consumer segment of the portfolio. Value manager Hotchkis & Wiley was the weakest performer during the quarter, underperforming the Russell 2000® Index but beating their value style benchmark.
If you're a long-term investor looking to diversify your investments by pursuing the growth potential of small-company stocks, then this Fund may be right for you. It is intended for investors who are aware that small-company stocks are generally riskier than large-company stocks due to greater volatility and less liquidity.
- Invest in small-cap stocks through a variety of external small-cap managers who have distinct investment styles and strategies.
- 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.