March 2010 Investment Report


  • U.S. equity markets, represented by the Russell 3000 Index, advanced 6.3% in March. As a result, year-to-date returns (5.9%) moved firmly into positive territory. Investor confidence in the economic recovery amid persistent low inflation appears to be the primary driver for equity markets’ continued strength. Investors also seem to be looking past concerns that withdrawal of various federal government stimulus programs will dampen the economy’s upward course.
  • Small-company U.S. stocks performed especially well (8.1%), outperforming large-company U.S. stocks, which gained 6.1%. In contrast to last month, stocks classified as “value” stocks outperformed stocks with strong earnings growth.
  • International developed markets, as represented by the MSCI EAFE Index, gained 6.2%. Investor concerns eased somewhat in Europe as the largest European Common Market countries pledged to provide support to debt-challenged Greece. While Greece’s situation is not fully resolved, there appears to be renewed appetite for risk. On the strength of the global economic recovery, stocks of developing countries, as measured by the MSCI Emerging Markets Index, gained 8.2%.
  • U.S. credit markets advanced slightly during March. High-quality investment-grade bonds, as measured by the Barclays U.S. Credit Index, returned 0.3%, which is roughly equal to interest earned, as lower credit spreads to Treasuries were offset by higher Treasury yields.
  • Treasury bond yields increased, because investor demand waned amid expectations of significant new issuance during the year. In addition, the Federal Reserve’s planned termination of its $1.25 trillion of mortgage-backed securities purchase program placed upward pressure on interest rates. The yield on the 10-year Treasury note ended the month at 3.8%, up from 3.6% at the beginning of the month.

Economics Highlights

  • Employers added 162,000 jobs in March, the biggest monthly gain in three years. One-third of the new jobs came from the government’s hiring of temporary census workers. However, the unemployment rate remained steady at 9.7% as new workers entered the work force and others who had previously quit the labor force returned to seek employment.
  • Housing market data were mixed during the month. Average home prices in 20 major metropolitan markets, as measured by the S&P/Case-Shiller index, increased 0.3% in January on a seasonally adjusted basis. However, housing starts declined more than expected, dropping 5.9% from the prior month, with the large drop attributed to winter storms.
  • Recent data continue to affirm that inflation remains under control. The Consumer Price Index (CPI), a measure of inflation, was flat in February as energy costs declined. Core CPI, which excludes food and energy prices, rose a modest 0.1%.
  • The U.S. dollar continued to strengthen against the euro and Japanese yen. The euro continues to suffer from uncertainties regarding Greece’s debt problems, while concerns over Japan’s excessive debt burden has adversely affected the yen.

Geopolitical Headlines

  • Capping a yearlong political battle, President Obama signed into law a comprehensive overhaul of the U.S. health care system. However, more than a dozen states have filed suit to stop it, claiming that the mandate to require individuals to purchase insurance is unconstitutional.
  • A bipartisan group of senators introduced legislation to impose tariffs on China for undervaluing its currency. Critics claim China has maintained an artificially low currency to keep its exports cheaper.
  • U.S. regulators and European leaders continue to push for increased regulation of their respective financial industries, including complex financial transactions widely referred to as derivatives. Proposed legislation in the U.S. is expected, now that the health care legislation has been completed.

Investment Fund Review

Inflation Protection Fund

Fund March Year-to-Date
Inflation Protection Fund +1.0% +1.0%
Barclays Capital Inflation Linked Index +0.1% +0.5%
Difference +0.9% +0.5%
  • The Inflation Protection Fund returned 1.0% for the month of March and outperformed its benchmark by a margin of 0.9%. The fund’s investments in developing-market inflation-linked bonds performed best, advancing 5.4%. Its commodities and global inflation-linked bond strategies also contributed positively to the fund’s benchmark-relative performance.
  • For the year, the fund outperformed its benchmark, principally due to its allocation to developing market inflation-linked bonds as well as global inflation-linked bonds. The fund's commodities strategy, while delivering slightly negative returns for the year, outperformed its benchmark.

Domestic Bond Fund

Fund March Year-to-Date
Domestic Bond Fund +0.6% +2.8%
Barclays Capital U.S. Universal (ex MBS) Index +0.2% +2.3%
Difference +0.4% +0.5%
  • The Domestic Bond Fund returned 0.6% for the month of March and outperformed its benchmark by a margin of 0.4%. The developing markets and credit opportunity strategies generated the highest absolute returns. The global bond and positive social purpose lending strategies detracted from performance.
  • For the year, the fund outperformed its benchmark by a margin of 0.5%. The credit opportunities, developing market and positive social purpose lending strategies positively contributed to performance. The fund's global bond strategy detracted from performance due to the strength of the dollar.

Domestic Stock Fund

Fund March Year-to-Date
Domestic Stock Fund +5.9% +5.4%
Russell 3000 +6.3% +5.9%
Difference -0.4% -0.5%
  • The Domestic Stock Fund returned 5.9% for the month of March. Underperformance in the month by a margin of -0.4% was primarily attributable to the fund’s exposure to private real estate and private equity investments. The valuations of these diversifying investments typically tend to lag or are uncorrelated with the performance of the public equity markets. Public real estate securities performed best on an absolute basis, returning 9.7%.
  • For the year, the fund lagged its benchmark, which also was due to negative overall contributions from the fund’s private real estate and private equity investments. The fund’s higher-than-benchmark weighting of stocks from mid-sized and small-sized companies has helped performance, although this has been offset by the fund’s managers collectively underperforming their respective benchmarks.

International Stock Fund

Fund March Year-to-Date
International Stock Fund +7.5% +3.0%
MSCI ACWI x US +6.9% +2.0%
Difference +0.6% +1.0%
  • The International Stock Fund returned 7.5% for the month of March. Outperformance in the month by a margin of 0.6% was attributable to the better-than-benchmark performance by a majority of the actively managed portfolios in the fund. In addition, the fund’s dedicated developing-country portfolios were the best performers in the month.
  • For the year, the fund has outperformed its benchmark by a margin of 1.0%, which is due to the strong benchmark-relative performance from most of the investment managers. The fund’s investment in international public real estate strategies has underperformed the fund’s benchmark.

Multiple Asset Fund

Fund March Year-to-Date
Multiple Asset Fund +4.4% +3.8%
Composite Benchmark +4.3% +3.8%
Difference +0.1% +0.0%
  • For the month, the Multiple Asset Fund very slightly outperformed its composite benchmark, due to the relative outperformance of the Inflation Protection Fund, International Stock Fund and Domestic Bond Fund. However, the fund’s performance was hindered by the lower-than-benchmark performance of the Domestic Stock Fund.
  • For the year, the fund matched its benchmark, principally due to the better-than-benchmark performance of the International Stock Fund, Inflation Protection Fund and Domestic Bond Fund. However, performance was partially offset by the lower-than-benchmark performance of the Domestic Stock Fund.

Balanced Social Values Plus Fund

Fund March Year-to-Date
Balanced Social Values Plus Fund +3.5% +3.9%
Composite Benchmark +3.3% +3.4%
Difference +0.2% +0.5%


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