May 2012 Investment Report


  • U.S. equities represented by the Russell 3000 Index decreased 6.2% during May. Disappointing unemployment numbers and continued global concerns regarding European debt drove the markets lower. After strong positive returns in the first quarter, May had the second consecutive monthly decline for U.S. stocks and the largest drop for the S&P 500 Index since September.
  • Developed international equities as measured by the bellwether MSCI EAFE Index decreased 11.5% in U.S. dollar terms. Concern about the Spanish banking sector was the latest chapter in the European debt crisis and adversely affected markets, as uncertainty regarding the banks’ ability to remain solvent increased. Equities of developing countries also fell, as reflected in the 11.0% May decline in the MSCI Emerging Markets IMI Index.
  • The interest rate yield curve flattened in May. Short term interest rates (less than three years) changed fractionally. The yield on the 10-year U.S. Treasury Note declined by 0.36% (36 basis points) to end the month at 1.56%—a level near historic lows. The long bond (30-year U.S. Treasury) declined 47 basis points in yield to 2.64%. Short-term rates remain anchored at low levels by the Federal Reserve policy of maintaining low interest rates to aid economic recovery. Longer-term rates declined because of investor concerns about the health of the global economy. Investors generally consider U.S. Treasury securities as “riskless” assets.
  • Treasury securities as measured by the Barclays U.S. Treasury Index increased 1.7% in May. Investment-grade debt as represented by the Barclays U.S. Credit Index increased 0.7%. Below-investment-grade debt as measured by the Barclays U.S. High Yield Index decreased 1.3%, underperforming the investment grade index by 2.0%.
  • The U.S. Dollar Index strengthened during May, reflecting risk-averse investors’ preference for the perceived safety of U.S. dollar assets. The Dollar Index, which compares the U.S. dollar to six other major currencies, increased 5.4%. Within that index, the euro declined 6.6% versus the dollar, and the Japanese yen gained 1.9% for the month. The currencies of developing countries also fell, with the Mexican peso declining 9.5% against the U.S. dollar.
  • Commodities as represented by the Dow Jones UBS Commodity Index declined 9.1% for the month. Petroleum declined 15.6%. Livestock was the strongest contributor to the index, rising 3.3% for the month.

Economics Highlights

  • Consumer confidence as measured by the Thomson Reuters/University of Michigan Index of Consumer Sentiment rose in May despite challenging job numbers. The final index climbed to 79.3 from 76.4 the prior month—the ninth straight monthly increase. The rise in the Thomson Reuters index contrasted with the Conference Board’s Consumer Confidence Index, which declined from 68.7 in April to 64.9 in May.
  • The U.S. economy added 69,000 jobs in May, significantly below the median forecast of 150,000. The unemployment rate increased to 8.2% from 8.1%.
  • European sovereign debt and banking sector concerns escalated. Bankia, Spain’s third-largest bank, requested an additional $24 billion in financial support from the Spanish government, which effectively nationalized the bank earlier in May. Standard & Poor’s downgraded several Spanish banks to below investment grade.
  • Eurozone unemployment reached 11.0%—its highest level since the creation of the common euro currency 13 years ago. The unemployment rate exceeds 20% in Greece and Spain.
  • China’s manufacturing expansion continued at a lower rate in May, as the official purchasing managers index decreased to 50.4 from 53.3.

Geopolitical Headlines

  • Socialist party candidate François Hollande was elected President of France, winning over incumbent Nicolas Sarkozy in a run-off election.
  • In Greece’s elections, almost 70% of voters supported political parties that opposed continuing the austerity terms of the two financial bailouts the country has received since 2010. The parties were unable to form a coalition, forcing another general election in June.
  • Mitt Romney became the presumptive Republican nominee for U.S. President with his victory in the Texas primary victory.

Sources: Bloomberg News, the Economist, the Wall Street Journal, CNBC, CNN, Associated Press and Bridgewater

Key Monthly Economic Statistics

This table contains a list of key monthly economic statistics. Each statistic is listed with a link to a Web page that provides a thorough description of the economic indicator.

  Positive Statistics
  Neutral Statistics
  Negative Statistics

Source:–economic statistics; Econoday–description of the economic indicators

Investment Fund Review (Net of Fees Performance)

For returns of one year, three years, five years, 10 years and Since Inception periods, please visit our Historical Funds Performance page.

Inflation Protection Fund

Fund May Year-to-Date
Inflation Protection Fund -0.1% +2.9%
Barclays Capital U.S. Government Inflation-Linked Bond Index +1.8% +4.8%
Difference -1.9% -1.9%
  • The Inflation Protection Fund produced a slight loss in May, but meaningfully underperformed its benchmark due to investor pessimism regarding the potential effect on the health of the world economy resulting from the European debt crisis. The fund’s 10% allocations to bonds from developing countries and commodities declined 5.0% and 9.3% respectively.
  • For the year, the fund has gained 2.9% but is underperforming its benchmark, as all three of the fund’s diversifying strategies have negatively affected relative performance. Investor sentiment has turned decidedly negative. Investors view U.S. Treasury Inflation Protected Securities, which exclusively comprise the fund’s benchmark, as one of the world’s safest assets. The fund’s 10% allocation to commodities has declined 6.7% year-to-date and contributed the most to the fund’s below-benchmark performance.

Fixed Income Fund

Fund May Year-to-Date
Fixed Income Fund -0.3% +3.5%
Barclays Capital U.S. Universal (ex MBS) Index +0.8% +3.0%
Difference -1.1% +0.5%
  • The Fixed Income Fund declined 0.3% in May, underperforming its benchmark by 1.1%. The fund’s benchmark-relative performance suffered from its significant underweighting of U.S. Treasury securities, which outperformed all other fixed income sectors because of increased investor pessimism about the state of the world economy. The fund’s 10% allocation to bonds from developing countries declined 4.9% and its holdings of bonds denominated in foreign currencies also declined, as the U.S. dollar strengthened amid investors’ risk-aversion.
  • For the year, the Fixed Income Fund has gained 3.5% and its performance remains ahead of the fund’s benchmark. PIMCO, the fund’s largest manager, exceeds its performance benchmark for the year by 2.3% and represents the most significant contributor to the fund’s excess performance. The fund’s strategies focused on U.S. credit securities have also added value relative to the fund’s benchmark. The fund’s allocations to international bonds have detracted from performance because of U.S. dollar strength. Most of the fund’s international bonds are denominated in foreign currencies.

U.S. Equity Fund

Fund May Year-to-Date
U.S. Equity Fund -6.1% +4.5%
Russell 3000 -6.2% +5.2%
Difference +0.1% -0.7%
  • The U.S. Equity Fund declined 6.1% in May and slightly outperformed the fund’s Russell 3000 Index benchmark. The fund’s allocations to alternative investments positively contributed to its performance, and the fund’s higher-than-benchmark allocation to small and mid-sized companies detracted from performance, as the Russell 2000 Index of small companies declined 6.6%.
  • For the year, the U.S. Equity Fund has gained 4.5% and has underperformed its benchmark by 0.7%. The fund’s greater-than-benchmark allocation to small and mid-sized companies and its allocation to alternative investments have both negatively contributed to the fund’s below-benchmark-relative performance. The fund’s allocation to publicly traded real estate investment trusts (REITs) has gained 8.5% for the year and has positively contributed to benchmark-relative performance.

International Equity Fund

Fund May Year-to-Date
International Equity Fund -11.2% -0.1%
MSCI ACWI ex US -11.3% -2.5%
Difference +0.1% +2.4%
  • The International Equity Fund declined 11.2% in May and slightly outperformed its benchmark return. The fund suffered from a general decline in world stock markets as well as an increase in the value of the U.S. dollar. The fund’s strategies did not materially contribute to nor detract from its slight benchmark-relative outperformance.
  • The International Equity Fund’s 11.2% decline in May has erased the fund’s gains for the first four months of the year. In fact, the fund ended May with net asset value slightly below its January 1, 2012 level. Benchmark-relative performance, however, remains strong, with 2.4% outperformance. The primary contributors to the positive relative performance include the fund’s 7% allocation to international REITs, which have gained about 9% so far in 2012. In addition, most of the fund’s managers are outperforming their respective benchmarks largely due to their less-than-benchmark allocations to stocks from Europe, which have declined more than other international stocks.

Multiple Asset Fund

Fund May Year-to-Date
Multiple Asset Fund -5.2% +3.1%
Composite Benchmark -4.7% +3.2%
Difference -0.5% -0.1%
  • For May, the Multiple Asset Fund fell 5.2% because of the meaningful declines in the U.S. and world stock markets resulting from investor pessimism over the European debt crisis and its potential impact on world markets. The fund underperformed its benchmark by 0.5%, which is attributable to the below-benchmark returns from the Fixed Income Fund and the Inflation Protection Fund.
  • For the year, the Multiple Asset Fund has gained 3.1% and has slightly underperformed the 3.2% return of the fund benchmark. The Fixed Income Fund and International Equity Fund have positively contributed to benchmark-relative performance, whereas the Inflation Protection Fund and U.S. Equity Fund have negatively contributed to benchmark-relative performance.

Balanced Social Values Plus Fund

Fund May Year-to-Date
Balanced Social Values Plus Fund -3.4% +3.4%
Composite Benchmark -3.7% +2.9%
Difference +0.3% +0.5%


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