The Oakmark Equity & Income fund declined 13 percent in the third quarter, trailing the benchmark Lipper Balanced Fund Index by 4 points. The fund's managers attributed this underperformance to carrying a greater percentage of stocks and a lower percentage of bonds than the typical balanced fund. Over the long-term, the fund still outperforms the index: It has generated a 10 percent return since its inception in 1995 vs. the index return of 6 percent.
"Even though we find high-quality bonds to be materially overpriced, we continue to find interesting value opportunities in equities," managers Clyde McGregor and Edward Studzinski wrote in their quarterly letter to shareholders. "Broadly speaking, businesses are performing better than the aggregate economic indicators, and this is reflected in the anomalously high profit margin percentage of GDP. We do not expect the economy to maintain this configuration indefinitely, but we have little ability to forecast this with any precision. We can, however, continue to seek out businesses that are prospering now and seem likely to do so in most environments."
To read their full letter, click here.
Oakmark Equity & Income is a component of the Bradway Strategic Portfolio, which consists primarily of investments with top money managers.
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