International Equity
as of December 31, 2013
Fund Commentary
Non-U.S. stocks produced solid gains during the fourth quarter, led by strong performance in Europe, where economic conditions improved following the region's emergence from an extended recession. In Japan, the economy continued to improve against a backdrop of monetary easing, which weakened the yen and boosted performance among the nation's exporters. Meanwhile, expectations for growth in China continued to decline, fueling fears of a “hard landing,” and Brazil continued to struggle with sluggish growth and rising inflation.

The International Equity Fund posted a total return of 6.16% for the quarter, compared with 5.71% for the Fund's benchmark, the MSCI EAFE® Index. Stock selection in the industrials, consumer staples, and consumer discretionary sectors aided relative results. Stock selection in the energy, information technology and materials sectors detracted from performance. Additionally, positioning in Japan, the United Kingdom and Germany contributed strongly to performance, while holdings in Italy, Sweden and Brazil weighed on relative results. We continued to position the Fund to take advantage of securities selling at a significant discount to our estimate of their intrinsic value. Recently, we have found such mispriced securities in the mining, aerospace and financial services sectors.

We believe the market may enter a period of more normalized earnings growth and return expectations, and correlations among index constituents may return to more traditional levels. These factors, combined with stock prices appearing overly discounted due to recent macroeconomic influences, should create a better environment for stock selection. We remain optimistic about our active security selection, which emphasizes fundamental research to identify mispriced stocks. We seek to hold these undervalued stocks until they reach what our research identifies as their intrinsic value.
Investor Profile

If you are a growth-oriented investor who is interested in the opportunities and portfolio diversification international investing offers, you may find this Fund suitable. You should have a more aggressive risk profile and be able to tolerate the above-average volatility and special risks that investing in foreign markets entails.

Philosophy
  • Seek outstanding companies through fundamental research that is based on a deep understanding of industry and sector dynamics.
  • Combine creativity in stock analysis and selection with intelligent portfolio construction.
  • Seek to provide consistent results through disciplined risk management.
 
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