October 2013 Investment Report


  • U.S. equities as represented by the Russell 3000 Index increased 4.2% during October. Markets continued to advance as lawmakers reached a last-minute bipartisan deal to end a partial government shutdown and avoid a possible default of U.S. treasury debt. The S&P 500 reached a new all-time high during the month and has gained 25.3% year-to-date.
  • Investors favored large companies during the month, gaining 4.4% as measured by the Russell 1000 Index versus small companies’ gains of 2.5% as measured by the Russell 2000 Index. Financial Services was the worst-performing Russell 3000 sector during the month (+3.7%), while Consumer Staples was the best (+6.5%).
  • Developed country international equities as measured by the MSCI EAFE Index gained 3.4% during the month. Developing nation equities as measured by the MSCI Emerging Markets Index gained 4.7%. Year-to-date, developed country international equities have gained 20.5% while emerging market equities have gained only 0.6%.
  • The U.S. Treasury yield curve declined modestly in October. The 2-year U.S. Treasury Note yield decreased by 0.01% to 0.31%. The 10-year Note yield decreased by 0.06% to 2.56%, and the long bond (30-year U.S. Treasury) decreased 0.05% in yield to 3.64%. Yields generally fluctuated within a quarter-point range during the month as investors assessed the impact of the temporary U.S. government shutdown and the political process of extending the debt ceiling.
  • U.S. Treasury securities as measured by the Barclays U.S. Treasury Index increased 0.5% in October, reflecting the modest decline in the U.S. Treasury yield curve. Investment-grade debt as represented by the Barclays U.S. Credit Index increased 1.4% for the month. Below-investment-grade debt as measured by the Barclays U.S. Corporate High-Yield Index increased 2.5%, outperforming less-risky government and investment-grade corporate debt. Developing country local currency debt as measured by the JP Morgan Government Bond Index-Emerging Markets increased 2.3% in October on an unhedged U.S. dollar basis. The performance of riskier assets generally increased as the U.S. Congress came to an agreement to extend the country’s borrowing authority to avert default.
  • The U.S. dollar as measured by the U.S. Dollar Index declined only fractionally in October. During the month, the euro increased 0.4% relative to the dollar, and the British pound decreased 0.9%. The Japanese yen decreased by a modest 0.1%. The Brazilian real decreased 1.0%, and Mexican peso increased 0.5% relative to the U.S. dollar. Currencies of developing countries were generally more stable relative to the dollar than they have been in recent months, reflecting the market’s reaction to efforts by the Federal Reserve to assure investors that the monetary policy will remain highly accommodative.
  • Commodities as represented by the Dow Jones UBS Commodity Index decreased 1.5% in October. Precious metals were nearly unchanged during the month after exhibiting much higher volatility in recent months. The Livestock portion of the index was the strongest and increased 1.5% during the month. Soft commodities such as sugar, coffee and cotton were the weakest, declining 4.4%.

Economics Highlights

  • The U.S. federal government shut down from October 1 to October 16 after Congress failed to pass legislation to temporarily fund the government. Approximately 800,000 federal employees were furloughed during this period, and most routine operations were halted. On October 16, Congress passed a bill, which was subsequently signed by President Obama, to fund the government through January 15, 2014 and raise the debt ceiling limit through February 7, 2014. A bipartisan committee will be formed to address the underlying budget issues and submit a recommendation to Congress on December 13, 2013. U.S. stocks rose on news of the agreement, with the Dow Jones Industrial Average rising over 200 points.
  • President Obama appointed Janet Yellen to succeed Ben Bernanke in January as Chair of the Federal Reserve Board. If confirmed, she will be the first female chair in the Federal Reserve’s 100-year history.
  • The 2010 Affordable Care Act’s website, www.healthcare.gov, opened on October 1 and has been plagued with issues concerning security and traffic bottlenecks. Kathleen Sebelius, the Health and Human Services secretary, testified before a House committee about the website’s problems. Contractors believe they can have the website up and working by the end of November. Healthcare.gov serves people in 36 states that declined to build their own health insurance exchanges.
  • JP Morgan has tentatively agreed to a settlement with the Justice Department to pay $13 billion in fines and restitutions to settle civil charges that it knowingly sold faulty mortgage securities that contributed to the housing crisis. This amount represents about half of JP Morgan’s profits from last year. The bank will not be offered immunity on possible criminal charges resulting from the LIBOR scandal, the derivative scams of the “London Whale,” and allegations of bribing Chinese officials, among others. If finalized, this will be the largest settlement paid to the federal government by a single company. The company’s stock, which has increased by 23% since January, has not been damaged by this latest news.

Geopolitical Headlines

  • The U.S. conducted two weekend raids aimed at capturing terror suspects in Africa. A successful raid in Libya captured Nazih Abdul-Hamed al-Ruqai, who was wanted in connection with bombings of U.S. embassies. Hours earlier, a group of Navy SEALs struck a Somalia base used by the al-Shabaab militant group. This group claimed responsibility for the deadly mall attack in Kenya in September. After a gun battle, the SEALs pulled back to avoid civilian casualties.
  • Syria has completed the destruction of critical equipment for all its declared chemical weapons production and mixing facilities, rendering them inoperable. This was the first major deadline in an ambitious disarmament program.
  • The head of the National Security Agency (NSA), General Keith Alexander, defended his organization over reports of spying on citizens and leaders of major U.S. allies. He referenced some of the data leaked by Edward Snowden, former NSA contractor, as incorrect. In his testimony, Alexander noted that much of the data was shared by European intelligence services with the NSA.

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: briefing.com–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 October Year-to-Date
Inflation Protection Fund +0.67% -4.78%
Barclays Capital U.S. Government Inflation-Linked Bond Index +0.58% -6.71%
Difference +0.09% +1.93%
  • The Inflation Protection Fund (IPF) gained 0.67% in October and outperformed the fund’s benchmark return by 0.09%. Three of the fund’s four diversifying strategies positively contributed to benchmark-relative performance. The fund’s allocation to inflation-linked bonds from developed and developing countries both gained more than 1%. The fund’s 10% allocation to commodities futures contracts declined 0.6% and detracted from performance.
  • For the year to date, the Inflation Protection Fund has declined 4.78% but has outperformed its benchmark by 1.93%. 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 4.1% so far in 2013. The fund’s allocation to inflation-linked bonds of developed countries has also added value relative to the benchmark, declining 1.7% year-to-date compared to the benchmark’s year-to-date decline of 6.7%. The fund’s allocation to bonds from developing countries detracted from performance, declining 10.3% for the year-to-date.

Fixed Income Fund

Fund October Year-to-Date
Fixed Income Fund +1.41% -0.17%
Barclays Capital U.S. Universal (ex MBS) Index +1.09% -0.67%
Difference +0.32% +0.50%
  • The Fixed Income Fund (FIF) advanced 1.41% in October and outperformed its benchmark return by 0.32%. The fund’s exposure to higher-risk strategies such as high-yield bonds and emerging market debt contributed positively to benchmark-relative performance, gaining 2.7%. The only strategy detracting from relative performance was the fund’s 9% allocation to positive social purpose loans, which gained 0.8% in October.
  • For the year to date, the Fixed Income Fund has nearly erased its prior losses and has declined 0.17%. The fund exceeds the performance of its benchmark by 0.50%. The fund’s two allocations to below-investment-grade debt have gained more than 6% and positively contributed to benchmark-relative performance. In addition, the fund’s allocation to positive social purpose loans gained 4.8% and contributed positively to benchmark-relative performance. However, the fund’s allocation to the debt of developing countries detracted from performance, declining 4.4%.

U.S. Equity Fund

Fund October Year-to-Date
U.S. Equity Fund +3.49% +27.54%
Russell 3000 +4.25% +26.45%
Difference -0.76% +1.09%
  • The U.S. Equity Fund (USEF) gained 3.49% in October, but underperformed the fund’s Russell 3000 Index benchmark by a meaningful 0.76%. The fund’s greater-than-benchmark allocation to the stocks of small and mid-sized companies contributed to negative benchmark-relative performance, as the Russell 2000 Index of small companies gained only 2.5% compared to the large-cap S&P 500 Index return of 4.6%. In addition, the fund’s 6% allocation to the alternative investment strategies of private equity and private real estate recognized very modest gains compared to the strong performance of the fund benchmark. Finally, during October several of the fund’s managers that had strong benchmark-relative performance previously in 2013 experienced some reversal of their prior excess benchmark-relative performance.
  • For the year to date, the fund has gained 27.54% and is outperforming its benchmark return by 1.09%. The fund’s active managers have collectively outperformed their respective benchmarks, benefiting from their collective higher-than-benchmark allocations to small and mid-sized companies. The Russell 2000 Index has gained 30.9% through October. The fund’s allocation to the diversifying strategy of public real estate investment trusts has gained only 5.9% for the year and has detracted from performance. In addition, the fund’s alternative investment strategies of private equity and private real estate have gained 6.0% and 11.4% respectively compared to the strong returns from the public equity markets; this offset positive contributions from the fund’s active managers.

International Equity Fund

Fund October Year-to-Date
International Equity Fund +3.14% +14.92%
MSCI ACWI ex US +3.60% +14.55%
Difference -0.46% +0.37%
  • The International Equity Fund (IEF) advanced 3.14% in October and underperformed its benchmark return of 3.60%. The fund’s below-benchmark allocation to stocks from developing markets detracted from benchmark-relative performance as the MSCI Emerging Markets IMI Index advanced 4.7% for the month. In addition, the fund’s new valuation policy had a slight negative impact on benchmark-relative performance, offsetting the slight gain from the valuation policy realized in September. This new daily valuation policy is described here.
  • For the year to date, the International Equity Fund has gained 14.92% and has outperformed its benchmark return by 0.37%. The fund’s allocation to small international companies has gained 22.1% and has positively contributed to the fund’s benchmark-relative performance. The fund also has benefited from its below-benchmark allocation to the stocks of developing countries, as the MSCI Emerging Markets IMI Index has gained only 0.6% year-to-date. The fund’s allocation to international real estate investment trusts has gained 8.8% and has detracted from benchmark-relative performance.

Multiple Asset Fund

Fund October Year-to-Date
Multiple Asset Fund +2.64% +14.40%
Composite Benchmark +2.96% +13.40%
Difference -0.32% +1.00%
  • For October, the Multiple Asset Fund (MAF) gained 2.64% and underperformed its fund benchmark by 0.32%. The Inflation Protection Fund and Fixed Income Fund contributed positively to benchmark-relative performance, while the U.S. Equity Fund and the International Equity Fund detracted from benchmark-relative performance.
  • For the year-to-date, the Multiple Asset Fund has gained 14.40% and has outperformed its benchmark return by 1.00%. All four of the fund’s strategies outperformed their respective benchmarks, with the U.S. Equity Fund’s excess performance contributing about half to MAF’s excess performance.

Balanced Social Values Plus Fund

Fund October Year-to-Date
Balanced Social Values Plus Fund +2.88% +16.61%
Composite Benchmark +2.95% +16.71%
Difference -0.07% -0.10%


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