Fund performance
Excluding sales charges, Class A shares of Columbia Select Large-Cap Value Fund underperformed the fund’s benchmark, the Russell 1000 Value Index, for the quarter ending June 30, 2014, returning 3.77% vs. 5.10%. Stock selection was decidedly positive in a number of industries, particularly oil exploration and production, but those results were more than offset by lagging individual performers in food, banking, pharmaceuticals, information technology and refining. For up-to-date performance information, please check online at columbiamanagement.com.
Market overview
Energy stocks took center stage in the second quarter, with oil prices driven higher primarily by fears that escalating unrest in Iraq could disrupt global supply and demand. Uncertainty over any resolution of the Ukraine conflict added to geopolitical tensions. Here at home, expectations for an accelerating U.S. economy remained largely unmet during the quarter, with insubstantial gains amid a continuing climate of weak productivity and payroll gains, rising inflation and anti-business fiscal policy. First-quarter U.S. gross domestic product (GDP) was revised lower, to -2.9% on an annualized basis. Roughly two-thirds of the revision was attributable to health care spending, according to the Bureau of Economic Analysis, which reflects the effect of high deductibles causing price-sensitive consumers to postpone services. Adding to the discouraging news were signs that second-quarter earnings would come in below expectations.
Despite these factors, overall market volatility remained at historical lows, and most major equity markets around the world recorded solid single-digit returns. Oil exploration and production stocks were among the best performers during the quarter, while refiners suffered due to fears of cost increases driven by the possibility of ending the ban on U.S. crude exports. Several sectors showed similar divergence. In information technology, for example, many semi-conductor stocks delivered hefty double-digit returns for the quarter, while some communications and networking stocks lost similar amounts.
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