Small Cap Value Fund First Quarter 2017

The S&P 500 continued to rise and is now up 11% since the election. Meanwhile, the bond market stabilized in the quarter following a rough fourth quarter. After the strong tailwinds we received in the second half of 2016, a more nuanced environment in the quarter was not unexpected. Oil prices dropped 6 percent in the quarter causing energy to be the weakest sector in our index. Given our overweight this was a drag on performance. Our energy stock selection was a non factor.

Bond proxies slightly outperformed in the quarter after their underperformance late last year. This dramatically underweighted group still sells at a relative price to earnings ratio (p/e) premium over non bond proxies that is 36% above the long term relationship and is extremely expensive in our view. On the positive side, our stock selection in technology was strong, leading to our outperformance versus our benchmark.