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Commentary - June 30, 2010
During the second quarter, the complete range of investor emotion was on display. The optimism that drove the market for much of 2009 and during the first quarter of 2010 dissipated rapidly in the latter half of April. This pessimism persisted through the end of the quarter resulting in negative returns for all of the broad market equity indices. Investors became more concerned with the ramifications of a European debt crisis coupled with a wide swath of negative domestic economic data in housing, employment, consumer spending and industrial production. The Russell 2000® Growth Index declined more than 9% in the quarter with all sectors posting negative returns. The best performing sectors included consumer staples (-6%), industrials The Roxbury Small-Cap Growth Fund declined during the second quarter and slightly underperformed the Russell 2000® Growth Index. Our stock selection was positive in energy and information technology, but did not provide enough excess return to offset underperformance in consumer discretionary and healthcare. Over the last twelve months ending June 30, 2010, the Roxbury Small-Cap Growth Fund has outperformed the Russell 2000® Growth Index by more than 400 basis points. The strength of our outperformance was due to strong stock selection in healthcare, information technology and telecommunications. We continue to be optimistic about the relative performance of higher quality growth stocks in the small-cap universe. In fact, we are beginning to see the signs of quality and growth leading the way. The second quarter saw non-earners and the lowest ROE companies in the Russell 2000® Index decline more than 15%. In the second quarter the Russell 2000® Growth Index outperformed the Russell 2000® Value Index and continues to stand at its most compelling valuation on a P/E to growth rate basis versus its value counterpart. Companies that continue to manage their business effectively through an economic slowdown or possible double-dip recession are likely to see the largest gains in their future earnings streams. It is these high quality, growing companies that we seek to identify and own at appropriate valuations. We are confident that our time-tested investment philosophy and process will lead us to the most promising companies of the future. Very truly yours, Robert C. Marvin, CFA, CPA Brian P. Smoluch, CFA David G. Swank, CFA, Nick A. Blankl, CFA Performance quoted represents past performance for the Fund’s institutional class shares and there is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. The performance shown does not take into effect any sales charges and would be lower if sales charges were reflected. Current performance may be higher or lower than the performance data quoted above. Please click here or call 800-497-2960 to obtain current and the most recent month-end performance data. Small-cap securities tend to be more volatile and less liquid than large-cap securities. |