Kristi Rowsell - December 31, 2013
Dear Fellow Shareholders,
Equity investors will remember 2013 fondly. Stock market returns across the globe were strong, especially in developed markets, many of which reached new highs. The returns of The Oakmark Funds were equally strong with all of the Funds performing in excess of their respective benchmarks.
It is also gratifying to see returning investor confidence. Equity mutual funds reported significant net purchases in 2013 for the first time since 2010 – and, really, since 2007 if one excludes Exchange-Traded Funds. Although 2014 is unlikely to generate 2013’s returns, one can’t help but feel that improving economic conditions should help equities remain a rewarding asset class. Unemployment rates are inching down, the housing market is recovering, and interest rates are likely to remain at historic lows for some time. We believe these factors should provide comfort to those who are feeling cautious. As you’ll read in this quarter’s letters, we continue to believe that our holdings in The Oakmark Funds remain attractively valued today, especially compared to bonds or cash.
The end of the year is always a good time to review your investments and determine if you are on track to meet your personal goals. To ensure that you are maximizing your chances to build your nest egg, we suggest you use as many funding strategies as possible. For example, perhaps you can increase your 401(k) contribution this year or contribute the maximum to an Individual Retirement Account. Also, consider starting an automatic investment plan for monthly contributions or raising the amount you already contribute. Making regular purchases at predetermined intervals addresses the emotional hurdle of deciding when to buy shares and ensures you’ll follow through with your plans. Buying at regular intervals also can make short-term market declines work for you because your same investment buys more shares when prices are down. And, retirement accounts add the advantage of tax deferral so that earnings can compound over time without detracting annual tax payments. These funding strategies can help build the nest egg you need for long-term financial security.
Personal Investments in the Funds
Each year, we use this letter to disclose the amount of shares personnel at Harris Associates own in all of The Oakmark Funds. We believe that investing beside our shareholders shows good stewardship and reflects that our interests are aligned with those of our shareholders. Owning a significant amount of shares in Oakmark Funds resonates well at Harris Associates because one of our essential criteria for investing in a company is that managements have a significant ownership stake. It is one way we look for evidence that managements are incented to think and act like owners over the long term.
We are pleased to report that the employees of the Funds’ adviser, Harris Associates L.P., the Funds’ officers, its trustees and their families have invested over $375 million in shares of The Oakmark Funds as of December 31, 2013. This investment exemplifies our personal conviction that Harris’ investment philosophy for the Oakmark portfolios is appropriate for wealth generation over the long term.
Thank you for your continued investment and confidence in The Oakmark Funds. We welcome your comments and questions. You can reach us via email at ContactOakmark@oakmark.com.
President of The Oakmark Funds
President of Harris Associates L.P.
Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. The investment return and principal value vary so that an investor’s shares when redeemed may be worth more or less than the original cost. The performance of the Oakmark International Small Cap Fund does not reflect the 2% redemption fee imposed on shares redeemed within 90 days of purchase. To obtain the most recent month-end performance data, view it here.
The above information should not be considered tax advice. Please consult your tax advisor for detailed information applicable to your unique situation.
The discussion of the Funds’ investments and investment strategy (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) represents the Funds’ investments and the views of the portfolio managers and Harris Associates L.P., the Funds' investment adviser, at the time of this letter, and are subject to change without notice.