Non-U.S. stocks produced double-digit gains during the third quarter. Strong performance in the core European countries of France and Germany were only slightly offset by weaker-than-market performance in Japan. The economic conditions in the eurozone improved, and the European Central Banks programs continued to offer some stabilization to the regions bond markets and banking sectors. Continued consumer price increases dragged down stock performance in China, while improving manufacturing data and Brazils mixed economic results and currency stabilization added to performance.
The International Equity Fund posted a total return of 13.46% for the quarter, compared with 11.56% for the Funds benchmark, the MSCI EAFE® Index. Stock selection in the industrials, financial services and consumer staples sectors added to relative results. Stock selection in the materials and telecommunications services sectors detracted from performance. In terms of industries, our positions in select Japan-based exporters (while underweight Japan), financial services providers in core Europe and telecommunications companies led the way. Agricultural products and select technology groups were among the largest detractors.
We expect the worlds leading central banks to continue to ease funding pressures and stimulate economic growth, even as the U.S. Federal Reserve considers a tapering of bond purchases. We also believe company-specific fundamentals should regain prominence, leading to less risk on/risk off trading. These factors should help create a more favorable environment for our stock selection efforts, which emphasize fundamental research to identify stocks the market has mispriced. We seek to hold these undervalued stocks until they reach what our research identifies as their intrinsic value.
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.