Emerging Markets Equity Index
as of March 31, 2014
Fund Commentary
The Emerging Markets Equity Index Fund returned -1.06% in the first quarter, as compared to -0.43% for the Fund’s benchmark, the MSCI Emerging Markets Index. Emerging markets underperformed developed markets for the first quarter as measured by the MSCI World Index return of 1.26%.

The bottom-performing country was Russia, which returned -14.45%. Three other large emerging markets, China, Mexico and Korea, also posted negative returns for the quarter of -5.87%, -4.97% and -2.19%, respectively. These declines were partially offset by Indonesia and Greece, which returned 21.19% and 18.12%, respectively. The top-performing sectors in the Index were information technology and consumer discretionary, which returned 3.94% and 3.86%, respectively. Telecommunications services, energy and materials were the worst performers, returning -5.88%, -4.49% and -3.60%, respectively.

Developed markets generally outperformed emerging markets in the quarter due to a combination of economic, monetary and political factors. The quarter began with a continuation of the downward pressure on several emerging market currencies, as the U.S. Federal Reserve continued to taper its asset purchase program. Investors grew more optimistic in February, as corporate earnings improved and a number of central banks indicated continued monetary support. In early March, a period of unrest and a change in government in Ukraine culminated in the annexation of the Crimea region by Russia. The result was market volatility, as western governments prepared sanctions against various Russian entities and individuals. Markets then recovered somewhat on statements from Russia that it had no plans to annex other parts of the Ukraine.
Investor Profile

If you are a long-term investor seeking access to the total return potential of emerging markets equities, this Fund may be right for you. Emerging markets exposure may be appropriate for investors with an above-average tolerance for market volatility who seek a global component for a broadly diversified investment portfolio.

  • Select stocks on the basis of quantitative analysis with the aim of producing a portfolio that will approximate the performance of the MSCI Emerging Markets Index.
  • Maintain industry diversification, country weightings, market capitalization and other financial characteristics similar to the Index.
  • Buy and sell securities in response to changes in the Index.
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