The Income Equity Fund posted a total return of 1.73% for the quarter, compared with 1.81% for the Funds benchmark, the S&P 500® Index. The Funds company selections in the industrials, financials and consumer discretionary sectors detracted from performance. Company selections within the information technology, utilities and materials sectors contributed favorably to performance. The Funds convertible securities, which are more defensive, generally outperformed the benchmark and contributed to the Funds relative performance.
The Fund continues to seek equity-like returns with more income and less volatility than the benchmark and low turnover. Convertible securities are important equity substitutes and help us achieve these objectives. Although the supply of convertibles increased during the first quarter, the availability of the value-oriented convertibles we prefer remained low. Therefore, we continued to invest more heavily in large-cap common stocks, particularly companies with attractive dividend payments. These stocks generally outpaced non-dividend-paying stocks during the quarter.
Looking ahead, we will continue to focus on company selection with consistent emphasis on valuation. We remain hopeful that opportunities in the convertibles market will improve as valuations among some of the recently issued securities adjust to more reasonable levels that meet our investment style.
If you are a moderate-risk investor looking for a relatively high level of current income, but don't want to forego the capital appreciation potential of the stock market, you may like this Fund.
- Select securities with the potential to generate high current yields, such as dividend-paying common stocks, preferred stocks and convertible securities, as well as selected fixed income securities.
- Maintain a conservative, broadly diversified portfolio of companies with strong prospects for growth and appreciation potential.
- Analyze the upside/downside ratio of individual securities in relation to the underlying stocks in an effort to identify those issues that are priced to have more exposure to the upside.