Adding to the remarkable returns delivered by the equity markets in 2013, the year was capped off by yet another good month. In the US markets, small cap lagged large and the value premium was mixed. The S&P 500 added 2.53% in December, beating the small cap Russell 2000, which returned 1.97%. The large cap value, Russell 1000 Value, finished December dead even with the S&P 500 at 2.53%, trailing the Russell 1000 Growth return of 2.86%.
Among the DFA funds commonly used in our portfolios, the DFA U.S. Vector gained 2.79%, modestly beating its benchmark mid-large cap Russell 3000’s 2.64% return. The DFA Targeted Value and its sister, DFA Tax-Managed Targeted Value funds also beat their benchmarks, delivering returns of 2.62% and 2.86% compared to 1.88% for the small cap value, Russell 2000 Value index.
Overall international stocks trailed the US once again, despite solid returns for December. Among developed international stocks, small cap risk was rewarded, while value was mixed. The broad measure of large International stocks, the EAFE index gained 1.50%, while the EAFE Value weighted index gained 1.34%. However, the EAFE small cap value delivered superior returns of 2.23, outpacing the MSCI World ex-USA Small Cap Value index 1.99% return.
The mid-large cap DFA international funds outpaced their respective indices. The DFA International Value, the tax efficient version, DFA Tax-Managed International Value and the DFA International Vector funds returned 2.17%, 2.15% and 2.24% respectively, well ahead of their benchmark EAFE Value return of 1.34%. The DFA International Small Company portfolio and the DFA International Small Cap Value funds had strong returns of 2.73% and 3.33% respectively, both finishing ahead of the benchmark EAFE Small Cap index return of 2.23%.
Once again, Emerging Markets finished the month as the only negative among major equity groups. The DFA Emerging Markets fund lost 1.06%, while the DFA Emerging Markets Core fund slid 0.89%. Both held their ground better than the benchmark MSCI Emerging Markets index, which lost 1.45%.
2013 was a year in which all eyes were on our nation’s capital. We began the year on the cusp of going over the fiscal cliff. We endured the sequester, the beginning of the Fed QE taper, and even a government shutdown. Through it all, the markets continued their ascent up the proverbial “wall of worry” on their way to delivering returns above historical average by double or more. More commentary will be provided in our 2013 year end market review, scheduled to be published by the end of next week.
