May 2013 Investment Report


  • U.S. equities represented by the Russell 3000 Index increased 2.4% during May. Despite declining 1.4% on the last day of the month, it was the seventh consecutive monthly gain for the index. U.S. Federal Reserve (the Fed) chairman, Ben Bernanke, added confusion to the market by first explaining the risks of removing monetary stimulus too soon, and then later explaining the Fed may slow the pace of its stimulus efforts within the next few months.
  • Investors favored the higher risk to reward profile of small company stocks as measured by the Russell 2000 Index (+4.0%) over large company stocks (+2.2%) as measured by the Russell 1000 Index. Among small company stocks, those with strong earnings growth outperformed those classified as value. After gaining 14.0% during the first four months of the year, Real Estate Investment Trusts (REITs) declined 5.9% during the month as measured by the Wilshire U.S. Real Estate Securities Index.
  • Developed country international equities as measured by the MSCI EAFE Index decreased 2.4% in U.S. dollar terms. Economic uncertainty and a strengthening U.S. dollar detracted from performance. Emerging Markets as measured by the MSCI Emerging Markets Index also declined 2.3% during the month. After gaining 13.0% during the first four months of the year, International REITs as measured by the FTSE EPRA/NAREIT ex-U.S. Index declined 9.3% during May.
  • The U.S. Treasury yield curve steepened as yields increased in May. The 2-year U.S. Treasury Note yield increased by 0.09% to 0.30%, and the 10-year U.S. Treasury Note yield increased by 0.46% to 2.13%. The long bond (30-year U.S. Treasury) increased 0.40% in yield to 3.28%. The rising yield curve was attributed to strength in U.S. economic indicators and market perceptions that the U.S. Federal Reserve may soon begin reducing the exceptional monetary stimulus of its Quantitative Easing program.
  • U.S. Treasury securities as measured by the Barclays U.S. Treasury Index decreased 1.7% in May. Investment-grade debt as represented by the Barclays U.S. Credit Index decreased 2.4% for the month, underperforming Treasuries due mostly to a longer average duration. Below-investment-grade debt as measured by the Barclays U.S. Corporate High-Yield Index decreased 0.6%, outperforming investment-grade bonds due to its higher yield and shorter duration. Developing nation local currency debt as measured by the JPMorgan Government Bond Index-Emerging Markets decreased 7.5% in May on an un-hedged U.S. dollar basis due to a combination of rising yields and declining currencies in developing nations. Overall, the bond market suffered its worst loss since the depth of the Great Recession in October 2008.
  • The U.S. dollar as measured by the U.S. Dollar Index increased 2.0% in May. During the month, the euro decreased 1.3% relative to the dollar and the Japanese yen decreased 3.0%. Currencies of developing nations were especially weak, and the Mexican peso, Brazilian real and South African rand decreased 5.3%, 6.5% and 11.1%, respectively. The potential for reduced Quantitative Easing in the U.S. placed upward pressure on U.S. yields, reducing the relative attractiveness of developing nation securities and their respective currencies.
  • Commodities as represented by the Dow Jones UBS Commodity Index decreased 2.2% in May. Precious metals and soft commodities (sugar, coffee and cotton) were the weakest commodity sectors and declined 6.1% and 6.8%, respectively.

Economics Highlights

  • The Congressional Budget Office (CBO) released estimates that the federal budget deficit for the next 10 years will be $642 billion, down from earlier estimates of $845 billion. In addition, the CBO expects federal debt will amount to more than 70% of Gross Domestic Product (GDP) over the next decade.
  • The Nikkei Stock market experienced the sharpest single day drop (7.3%) in the past decade. Market observers attributed the decline to weak Chinese manufacturing data and comments from Fed Chairman Bernanke. Japanese stocks have risen 60% since late November when Japan’s Prime Minister, Shinzo Abe, promoted efforts to increase the money supply through a government bond buying program.
  • Fed Chairman Bernanke indicated the Fed could start scaling back its $85 billion-a-month bond-buying program as the U.S. economy begins to improve.
  • S&P/Case-Shiller price index reported that national housing prices rose 10.2% over the last four quarters, the largest year-over-year gain since 2006. The recovery in the housing market has been a large driver of economic growth.
  • U.S. GDP for the first quarter of 2013 was revised down to an annual growth rate of 2.4% from the previous reported 2.5%. Consumer spending accounts for approximately two-thirds of GDP and rose at an annualized pace of 3.4% during the first quarter. Cuts in government spending were the largest drag on economic growth.

Geopolitical Headlines

  • The Obama administration was the focus of three controversies reported in the media during the month. The first involved the administration’s handling of the September 2012 attack on the U.S. consulate building in Benghazi, Libya. Second, it was revealed that the IRS was inappropriately targeting applications from conservative groups seeking tax-exempt status. Finally, the U.S. Justice Department seized, without notice, phone records for reporters and editors at the Associated Press for investigation into an unspecified matter.
  • JP Morgan shareholders endorsed Jamie Dimon’s dual role as chairman and CEO, despite opposition voting from some institutional shareholders who were concerned with corporate governance. Mr. Dimon’s dual role came under scrutiny due to a trading scandal in early 2012.
  • A massive tornado touched down in Moore, Oklahoma, killing 24 people and injuring hundreds. The storm’s winds topped 200 mph as it traveled a 17-mile path. Preliminary estimates of damages are $2 billion.

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

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

M/M = Month-over-month (% change since last month)
Q/Q = Quarter-over-quarter (% change since last quarter)
Y/Y = Year-over-year (% change since the same month, last year)
SA = Seasonally adjusted
SAAR = Seasonally adjusted annual rate

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 -3.67% -2.51%
Barclays Capital U.S. Government Inflation-Linked Bond Index -4.67% -4.23%
Difference +1.00% +1.72%
  • The Inflation Protection Fund suffered its worst loss since October 2008 declining 3.67% in May, but significantly outperformed the fund’s benchmark return of -4.67%. The value of U.S. Treasury Inflation Protected Securities (TIPS) declined along with other fixed income instruments as investors began anticipating the end of efforts by the Federal Reserve (the Fed) to apply economic stimulus through its bond-purchasing program. During the month, three of the fund’s four diversifying strategies added value relative to the fund’s benchmark, while the fourth diversifying strategy detracted from benchmark-relative performance. The fund’s newest diversifying strategy, floating rate senior secured loans, posted a fractional gain contributing the most to benchmark-relative performance. The fund’s 10% exposure to commodities declined 0.8% and the fund’s allocation to inflation-linked bonds from developed countries declined 2.7%. However, the fund’s allocation to inflation-linked debt from developing countries lost 8.6%, primarily due to a reduction in the value of developing country currencies relative to the U.S. dollar. Market observers attributed the decline to remarks from Fed Chairman Bernanke and economic data released by many of the countries indicating slower growth.
  • For the year-to-date, the fund has returned -2.51% but has outperformed its benchmark by 1.72%. Three of the fund’s diversifying strategies contributed positively to benchmark-relative performance. The best performing strategy was the fund’s allocation to floating rate senior secured loans, which has gained 2.5% so far in 2013. The fund’s allocation to inflation-linked bonds of developed countries has also added value, gaining 0.2% year-to-date. The fund’s other diversifying strategies marginally detracted from performance.

Fixed Income Fund

Fund May Year-to-Date
Fixed Income Fund -2.36% -0.14%
Barclays Capital U.S. Universal (ex MBS) Index -1.75% -0.37%
Difference -0.61% +0.23%
  • The Fixed Income Fund declined 2.36% in May, which was also the worst performance for the fund since October 2008. The fund underperformed its benchmark return by 0.61%. Bonds denominated in currencies other than the U.S. dollar detracted the most from benchmark-relative performance. The fund’s 10% allocation to bonds from developing countries declined 6.8% and the portfolio’s allocation to bonds from developed countries declined 3.0%. These losses are primarily attributable to weakness in foreign currencies relative to the U.S. dollar. Partially offsetting the negative benchmark-relative performance of these two strategies were the fund’s allocation to below investment-grade bonds and positive social purpose loans, which collectively declined about 0.5%.
  • For the year-to-date, the Fixed Income Fund has declined 0.14% and has slightly outperformed the fund benchmark by 0.23%. The fund’s two allocations to below investment grade debt have gained more than 4% and positively contributed to benchmark relative performance. The fund’s allocation to positive social purpose loans have gained 2.9% and contributed positively to benchmark-relative performance. The fund’s allocation to global bonds and bonds from developing countries detracted from performance declining 1.8% and 2.8%, respectively.

U.S. Equity Fund

Fund May Year-to-Date
U.S. Equity Fund +2.53% +14.95%
Russell 3000 +2.36% +15.55%
Difference +0.17% -0.60%
  • The U.S. Equity Fund gained 2.53% in May and outperformed the fund’s Russell 3000 Index benchmark by 0.17%. The fund’s greater than benchmark allocation to the stocks of small and mid-sized companies contributed to the positive benchmark-relative performance as the Russell 2000 Index of small companies returned 4.0% compared to the S&P 500 Index return of 2.3%. The fund’s allocation to real estate investment trusts (REITs) detracted from performance declining 5.5% as the rise in interest rates and the anticipated end of Fed stimulus adversely affected high dividend paying stocks and created new challenges for REITs that have been raising capital relatively inexpensively. The fund’s 8% allocation to alternative investments also modestly detracted from benchmark-relative performance as it typically does during periods of strong public market performance.
  • For the year-to-date, the fund has gained 14.95% and it trails its benchmark return by 0.60%. The fund’s 8% allocation to alternative investments has gained about 3% and accounts for most of the benchmark-relative performance shortfall. Strong benchmark-relative performance from several of the fund’s active managers has positively contributed to performance and their excess return partially offsets the negative contribution from the alternative investment allocations.

International Equity Fund

Fund May Year-to-Date
International Equity Fund -1.72% +5.25%
MSCI ACWI ex US -2.27% +4.82%
Difference +0.55% +0.43%
  • The International Equity Fund declined 1.72% in May and outperformed its benchmark return by 0.55%. The stock markets of countries in the Pacific Rim contributed most to losses in the international markets as the Australian and New Zealand markets fell nearly 13%, and the Japanese market declined 5.7%. A decrease in the value of the Australian dollar and New Zealand dollar compared to the U.S. dollar was responsible for more than half of the losses in the value of their respective stock markets as both currencies lost nearly 8% of their value relative to the U.S. dollar. Market observers attribute the decline to a potential reduction in commodities exports and less investor interest in higher yielding Australian bonds in anticipation of higher U.S. interest rates. The fund’s excess performance during May is primarily attributable to significant portfolio underweighting of stocks from the Pacific Rim by three of the fund’s managers.
  • For the year-to-date, the International Equity Fund has gained 5.25% and has outperformed its benchmark return by 0.43%. The fund’s allocation to small international companies has gained 7.6% and has positively contributed to the fund’s benchmark-relative performance. The fund has also benefited from its below benchmark allocation to the stocks of developing countries as the MSCI Emerging Markets Index has declined 2.4% so far this year. The fund’s allocation to international real estate investment trusts has gained 2.2% and has modestly detracted from benchmark-relative performance.

Multiple Asset Fund

Fund May Year-to-Date
Multiple Asset Fund -0.09% +7.34%
Composite Benchmark -0.30% +7.26%
Difference +0.21% +0.08%
  • For May, the Multiple Asset Fund (MAF) declined a modest 0.09% and outperformed its fund benchmark by 0.21%. In a reversal from April’s results, the Fixed Income Fund (FIF) was the only strategy that underperformed its benchmark and MAF’s other three strategies all outperformed their respective benchmarks and more than offset the negative contribution of FIF.
  • For the year-to-date, the Multiple Asset Fund has gained 7.34%, and has outperformed its benchmark return by 0.08%. FIF, the Inflation Protection Fund, and the International Equity Fund have all positively contributed to benchmark-relative results, and the U.S. Equity Fund has detracted from relative performance.

Balanced Social Values Plus Fund

Fund May Year-to-Date
Balanced Social Values Plus Fund +1.34% +11.14%
Composite Benchmark +1.39% +10.75%
Difference -0.05% +0.39%


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