August 2013 Investment Report


  • U.S. equities represented by the Russell 3000 Index decreased 2.8% during August. The market reflected uncertainty as investors reacted to possible U.S. military action in Syria and concerns that the U.S. Federal Reserve (the Fed) will soon reduce its quantitative easing program. It was the worst month for the Dow Jones Industrial Average (-4.5%) since May 2012.
  • Investors favored the perceived lower risk of large companies—especially those with strong earnings growth as measured by the Russell 1000 Growth Index (-1.7%)—over small companies classified as value based on the Russell 2000 Value Index (-4.4%).
  • Developed country international equities as measured by the MSCI EAFE Index declined 1.3% during the month. Developing nation equities as measured by the MSCI Emerging Markets Index continued to lag developed markets and declined 1.9%. Year-to-date, developing nation equities have declined 9.8% while developed markets have gained 8.5%.
  • The U.S. Treasury yield curve rose in August as investors contemplated potential reductions to the Fed’s bond purchase program. The 2-year U.S. Treasury Note yield increased by 0.09% to 0.40%. The 10-year U.S. Treasury Note yield increased by 0.21% to 2.79% during the month, and the long bond (30-year U.S. Treasury) yield increased 0.06% to 3.70%.
  • U.S. Treasury securities as measured by the Barclays U.S. Treasury Index decreased 0.5% in August, reflecting the rise in the U.S. Treasury yield curve. Investment-grade debt as represented by the Barclays U.S. Credit Index decreased 0.8% for the month and underperformed treasuries, as credit spreads widened modestly. Below-investment-grade debt as measured by the Barclays U.S. Corporate High-Yield Index decreased 0.6%, outperforming investment-grade credit due to relatively shorter duration and higher yield. Developing nation local currency debt as measured by the JPMorgan Government Bond Index-Emerging Markets decreased 3.5% in August on an un-hedged U.S. dollar basis. The decrease was attributed to expected reductions in U.S. monetary stimulus and possible U.S. military action in Syria.
  • The U.S. dollar as measured by the U.S. Dollar Index increased 0.8% in August. During the month, the euro decreased 0.6% relative to the dollar and the Japanese yen decreased 0.3% relative to the dollar. The British pound increased 2.0% in August relative to the U.S. dollar amid improving economic data in Britain. Currencies of developing countries were generally weak relative to the dollar; the Mexican peso decreased 4.8%, and the Brazilian real decreased 4.6%. The Indian rupee decreased 8.1% relative to the dollar during the month amid India’s slowing growth and rising trade deficit.
  • Commodities as represented by the Dow Jones UBS Commodity Index increased 3.4% in August, partially reversing commodity weakness earlier in the year. The precious metals sector was the strongest during August and increased 9.3%. Most commodity sectors rose during the month, but the soft commodities sector comprised of sugar, coffee and cotton decreased 3.3%.

Economics Highlights

  • Minutes from the Fed’s late July meeting suggest that the central bank remains on track to taper its bond-buying activities, but uncertainty prevails as to the timing and pace of the reduction. Fed Vice Chairman Janet Yellen and former Treasury Secretary Larry Summers are current favorites to replace Ben Bernanke when President Obama appoints a new Fed chairman in January.
  • Second-quarter GDP in the eurozone grew at a 1.1% rate, signifying an end to the region’s 18-month recession. Europe still faces daunting problems, particularly in the peripheral countries of the Mediterranean area. Economic recoveries in parts of Europe as well as Japan and the U.S. correspond with a deceleration of growth in developing countries. Factors such as rising U.S. interest rates and a slowdown in demand for commodities in China have affected nations as diverse as Brazil, South Africa, India, Turkey and Russia.
  • The NASDAQ stock market shut down for three hours on August 23 due to software problems in its order-handling programs. This technical glitch raised further questions for investors about the reliability of trading on NASDAQ, particularly in the wake of last year’s mishandled Facebook initial public offering (IPO).
  • Citing potential harm to consumers, the U.S. Justice Department vetoed the pending merger between American Airlines and U.S. Airways. The combination would have created the largest domestic airline carrier, as the combined entity would potentially control 25% of the U.S. airline industry. The action raises uncertainty for American Airlines’ ultimate emergence from bankruptcy.

Geopolitical Headlines

  • The Egyptian military continued to assert its authority following the removal of President Mohammed Morsi. Army troops forcefully removed Muslim Brotherhood protesters and demolished their encampments in the symbolic Tahrir Square area, resulting in more than 600 deaths.
  • The global community condemned the Syrian government for using poison gas in its ongoing conflict with insurgents. The Obama administration is seeking Congressional approval for limited military intervention in Syria.
  • India’s currency has fallen precipitously in recent months and is now down more than 30% against the U.S. dollar since reaching a high in 2011. The decline in the rupee originates from concern about the country’s heavy reliance on foreign direct investment and the extent to which foreign investment has been withdrawn from India following speculation about the pace of investment tapering by the U.S. Fed. Economic estimates for India’s decelerating GDP growth are now below 5%, while the country owns the distinction of having the widest current account deficit of all emerging nations—at 5% of GDP.

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 August Year-to-Date
Inflation Protection Fund -0.88% -6.34%
Barclays Capital U.S. Government Inflation-Linked Bond Index -1.49% -8.60%
Difference +0.61% +2.26%
  • After a modest gain in July, the Inflation Protection Fund resumed its recent downward trend as investors continued to speculate about the timing of the Fed’s tapering of its bond purchase program and the return of interest rates to their historical normal levels. The fund declined 0.88% but easily surpassed its benchmark by 0.61%. Three of the fund’s four diversifying strategies delivered better-than-benchmark performance, with the fund’s 10% allocation to commodity futures contracts actually gaining 4.0%. Investor concerns about the impact of Fed policy changes on the outlook for developing countries continued to adversely impact the price of developing market bonds, as the fund’s allocation to inflation-linked debt from developing countries once again declined. The August decline of 4.6% represents a fourth-consecutive monthly decline for inflation-linked debt from developing countries.
  • For the year to date, the Inflation Protection Fund has declined 6.34% but has outperformed its benchmark by 2.26%. 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 3.2% so far in 2013. The fund’s allocation to inflation-linked bonds of developed countries contributed to positive benchmark-relative performance, declining only 3.5% year-to-date. However, the fund’s allocation to inflation-linked debt from developing countries has declined 15.4%, partially detracting from the fund’s positive benchmark-relative performance.

Fixed Income Fund

Fund August Year-to-Date
Fixed Income Fund -0.98% -2.99%
Barclays Capital U.S. Universal (ex MBS) Index -0.66% -2.59%
Difference -0.32% -0.40%
  • After positive performance in July, the Fixed Income Fund also resumed its decline due to investor concerns about the Fed’s change in its bond purchase policy. The fund fell 0.98% in August and underperformed its benchmark return by 0.32%. The fund’s allocation to debt from developing countries contributed the most to the fund’s negative benchmark-relative performance, declining 3.3%. The best-performing strategy was the fund’s allocation to positive social purpose loans, which was flat for the month.
  • For the year to date, the Fixed Income Fund has declined 2.99% and has underperformed the fund benchmark by 0.40%. Three of the fund’s diversifying strategies have produced positive results for the year. The fund’s credit opportunities, high yield and positive social purpose lending strategy have gained 4.3%, 2.3% and 2.2% respectively. However, the positive contribution from these strategies have been offset by the fund’s 10% allocation to bonds from developing countries, which has declined 10.2% for the year to date. In addition, the fund’s largest manager, PIMCO, has underperformed its benchmark by 0.6%, which has also detracted from benchmark-relative performance.

U.S. Equity Fund

Fund August Year-to-Date
U.S. Equity Fund -1.74% +18.22%
Russell 3000 -2.79% +16.95%
Difference +1.05% +1.27%
  • The U.S. Equity Fund declined 1.74% in August, but significantly outperformed its benchmark’s return. August represented the best month of benchmark-relative performance for the fund in nearly 4½ years. The fund’s 7% allocation to alternative investments gained more than 2.5%, contributing to the positive benchmark-relative performance. In addition, one of the fund’s active growth managers, Zevenbergen, outperformed its benchmark index by a full 7 percentage points. Furthermore, most of the fund’s active managers meaningfully outperformed their respective benchmarks. However, the fund’s 3% allocation to real estate investment trusts (REITs) continued to detract from benchmark-relative performance and declined 6.8% in August.
  • For the year to date, the U.S. Equity Fund has gained 18.22%, which is 1.27% better than the fund’s benchmark return. The fund’s active managers have collectively outperformed their respective benchmarks by benefiting from their collective higher-than-benchmark allocations to small and mid-sized companies. The Russell 2000 Index has gained 20.0% through August. The fund’s best-performing manager, Zevenbergen, has produced a 43.0% return and exceeds its performance benchmark by more than 26 percentage points year-to-date; whereas, the fund’s worst performing manager has only underperformed by about 5 percentage points. The fund’s allocation to the diversifying strategy of public real estate investment trusts has declined 1.5% for the year and detracted from performance. In addition, the fund’s allocations to the alternative investment strategies of private equity and private real estate have gained 4.7% and 11.3% respectively compared to the strong returns from the public equity markets. This has offset the positive contributions from the fund’s active managers.

International Equity Fund

Fund August Year-to-Date
International Equity Fund -1.27% +4.19%
MSCI ACWI ex US -1.32% +3.26%
Difference +0.05% +0.93%
  • The International Equity Fund declined 1.27% in August and slightly outperformed its benchmark return by 0.05%. The fund again benefited from its less-than-benchmark allocation to stocks from developing countries as the MSCI Emerging Markets Index lost 1.9% compared to the 1.3% decline of the MSCI EAFE Index of stocks from developed countries. The fund’s international growth manager once again outperformed its benchmark, which also added to the fund’s better-than-benchmark performance. The fund’s 6% allocation to international REITs lost 1.5% and detracted from the fund’s performance compared to the benchmark.
  • For the year to date, the International Equity Fund has gained 4.19% and has outperformed its benchmark return by 0.93%. The fund’s allocation to small international companies has gained 9.1% and 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 9.8% so far this year. The fund’s allocation to international real estate investment trusts has lost 0.5% and modestly detracted from benchmark-relative performance.

Multiple Asset Fund

Fund August Year-to-Date
Multiple Asset Fund -1.35% +7.42%
Composite Benchmark -1.83% +6.46%
Difference +0.48% +0.96%
  • For August, the Multiple Asset Fund (MAF) declined 1.35%, but outperformed its fund benchmark by a meaningful 0.48%. Three of the fund’s four strategies contributed positively to benchmark-relative performance, with the U.S. Equity Fund contributing the most because of its significant benchmark-relative outperformance. The Fixed Income Fund’s less-than-benchmark performance detracted from performance.
  • For the year to date, the Multiple Asset Fund has gained 7.42% and outperformed its benchmark return by 0.96%. The Inflation Protection Fund, the International Equity Fund, and the U.S. Equity Fund have all positively contributed to benchmark-relative results, and the Fixed Income Fund has detracted from relative performance.

Balanced Social Values Plus Fund

Fund August Year-to-Date
Balanced Social Values Plus Fund -1.87% +10.67%
Composite Benchmark -1.84% +10.52%
Difference -0.03% +0.15%


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