The Small Cap Value Fund posted a total return of 1.64% for the quarter, compared with 1.78% for the Funds benchmark, the Russell 2000® Value Index. Stock selection detracted from results in the financials sector, particularly among our higher-quality property and casualty insurers, which failed to keep up with the rest of the group. Stock selection contributed to performance in the technology sector, where the Funds higher quality holdings in the semiconductor and communication equipment industries were particularly helpful. Overall, the first quarter results favored lower quality, more-volatile stocks, creating a headwind for the Fund, which is biased toward higher quality companies. Valuation was mixed, a reflection of the general reversal in investor preferences from growth stocks to value stocks across the broader small-cap market. As intended, sector and style differences were not primary drivers of performance, but they were modest positive contributors.
We will continue to focus on seeking reasonably priced and profitable small company stocks, while avoiding stocks with lower-quality characteristics and maintaining our focus on style objectives.
If you're a more aggressive investor looking for the value potential offered by the stocks of smaller companies those the adviser believes are worth more than is indicated by current market prices this Fund may be right for you. It is intended for equity investors with an above-average tolerance for volatility who want to diversify their investments and plan to invest for the long term without concern for current income.
- Follow a quantitative, active equity strategy to select stocks based on a statistical analysis of historical relationships among value characteristics, stock prices and market capitalization ranges.
- Use a screening process designed to reduce exposure to stocks with negative fundamental indicators.
- Maintain a highly diversified portfolio, consistent with small-cap value benchmarks, in an effort to reduce the risks associated with any specific stock or industry.