The Small Cap Core Fund posted a total return of 8.91% for the quarter, compared with 8.72% for the Fund's benchmark, the Russell 2000® Index. As intended, stock selection provided the most meaningful contributions to performance, particularly in the healthcare and information technology sectors. Stock selection detracted from performance primarily within the materials sector.
The Fund's avoidance of lower-quality stocks also contributed positively to performance, as the stocks identified by our stock selection model as having low-quality characteristics underperformed the benchmark. This was particularly helpful in the health care sector, where low-quality stocks were notable underperformers. Micro-cap stocks, which we slightly overweighted, performed in line with the benchmark and were not meaningful contributors to results. Stocks of companies with lower price-to-book valuation generally outperformed, but some sectors saw higher performance from the more richly valued companies. Valuation based on other metrics had more mixed performance results. We will continue to focus on providing diverse exposure to domestic small-cap stocks, including those within the smallest segments of the market, while maintaining a disciplined process to manage active risk and transaction cost.
If you're a more aggressive investor looking for the growth potential offered by the stocks of smaller companies this Fund may be right for you. The Fund employs a quantitative-managed, core style investment approach. 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 an active quantitative, core equity strategy to select stocks based on a statistical analysis of historical relationships among small-cap 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 core benchmarks, in an effort to reduce the risks associated with any specific stock or industry.