As of 09-30-2017

Highlights

  • Domestic equity market performance exceeded that of fixed income investments for the fifth consecutive quarter.
  • A rally in value-oriented stocks relative performance late in the quarter contributed to strong equity investment results.
  • End of quarter positioning continues to favor equity investments relative to fixed income, although at a modestly reduced allocation.

Looking back

Similar to the second quarter of this year, the third quarter brought low positive returns (the Russell 3000 Index returned 4.57%) but a varying market environment. Large cap stocks led small cap stocks in the first two months of the quarter, but small caps did very well in September and finished just ahead of large caps (the small-cap Russell 2000 Index returned 5.67% during the quarter while the mega-cap Russell Top 200 Index returned 4.88%). On the style front, growth stocks outperformed value stocks in July and August, but value stocks offset part of the growth advantage in September (for the quarter, the Russell 3000 Growth Index returned 5.93% and the Russell 3000 Value Index returned 3.27%).

Despite some short-term volatility resulting from geopolitical uncertainty, U.S. Treasury yields finished the quarter largely unchanged and credit-sensitive instruments performed well as economic conditions remained healthy. For the quarter, the Barclays Capital U.S. Aggregate Bond Index finished up 0.85%. Real Estate Investment Trusts (REITs) had a similarly modest performance with negative contributions from owners of property in the Health Care sector in particular hurting results. Over the period the MSCI US REIT Index returned 0.93%. International equity markets had another strong quarter as evidenced by the 5.40% return on the Morgan Stanley Capital International (MSCI) EAFE Index.

Performance

Federated MDT Balanced Fund Institutional Shares returned 4.24% in the third quarter on a net basis, which exceeded the 3.02% return for its benchmark, a 60%/40% blend of the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index.

Performance data quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after tax returns, click on the Performance tab.

Click the Performance tab for standard fund performance.

Performance Contributors

  • Overall domestic equity performance exceeded its benchmark during the quarter, with holdings in shares of companies in the Information Technology, Health Care and Energy sectors the most significant positive contributors.
  • An overweight position in equities helped relative performance as these investments performed better than fixed income instruments.
  • The allocation to international equities was a positive as results exceeded those of domestic equity investments.
  • Fixed income and REIT investments contributed positively to performance with the returns on both exceeding their respective benchmarks.

Performance Detractors

  • A modest reduction in the equity overweight hurt results over the latter part of the period as equity market performance continued to exceed fixed income.
  • Holdings in shares of companies in the Financials, Telecommunication Services and Utilities sectors had the most significant negative contribution to relative performance.

Click on the Portfolio Characteristics tab for fund’s top 10 holdings.

Looking ahead

At the start of the fourth quarter, domestic equities accounted for 53.9% of the portfolio and international equities 8.4%. Fixed-income and cash investments represented 34.4% and 1.2%, respectively, while REITs accounted for 2.1%. Domestic equity investments continue to favor value stocks over growth, although by a smaller margin than last quarter. Fixed-income investments are positioned with a slightly lower duration exposure relative to the benchmark.