The S&P MidCap 400® Index returned 7.54% during the third quarter. Mid-cap stocks outperformed large caps, as measured by the 5.24% return of the S&P 500® Index. The Fund returned 7.48%. The S&P MidCap 400® Index posted a one-year total return of 27.68%, well ahead of the 19.34% gain for the S&P 500®. The three-, five- and 10-year average annual total returns for the S&P MidCap 400® Index were 17.45%, 13.08% and 10.84% respectively. In all cases, these returns are superior to those of the S&P 500® Index.
The top-performing sector in the S&P MidCap 400® Index was energy, which returned 15.59% for the quarter. This was followed by the industrials and telecommunications services sectors, which gained 11.66% and 11.42%, respectively. The bottom performer was consumer staples, which still managed a gain of 0.86%. The defensive consumer staples sector was out of favor in a quarter where investors favored higher-risk, economically sensitive market segments.
The U.S. market overcame some potentially adverse headlines during the quarter. News regarding turbulence in Syria did not shake the developed markets, and investors grew optimistic when the United States saw an opportunity to resolve the issue peacefully. Concerns about the potential for the U.S. Federal Reserve to begin tapering its quantitative easing program contributed to a downturn in August. However, markets reacted positively to the Feds surprising decision on September 18 not to taper, as well as assurances from Chairman Ben Bernanke that the Fed would not trim the asset purchasing program until economic growth had become self-sustaining.
If you're a moderate risk investor seeking competitive long-term investment returns through a broadly diversified portfolio, this Fund may be appropriate for you. It offers a high degree of relative predictability in an uncertain stock market by seeking investment results, before expenses, approximating the aggregate price and dividend performance of the securities included in the S&P MidCap 400 Index.
- Passively managed, the Fund seeks to duplicate the investment composition and overall performance of the stocks included in the S&P MidCap 400 Index.
- Invest at least 80% of its net assets in equity securities in the Index, in weightings that approximate the relative composition of the Index.
- Use proprietary quantitative techniques designed to minimize trading costs.