November 2013 Investment Report

Markets

  • U.S. equities as represented by the Russell 3000 Index increased 2.9% during November. The month ended on the day after Thanksgiving, often referred to as “Black Friday,” which is considered by many to be the beginning of the Christmas shopping season. According to the National Retail Federation, Americans spent about 3% less this year than they did during the previous four-day Black Friday weekend. Both the S&P 500 and the Dow Jones Industrials Average completed the month with their eighth consecutive weekly gain.
  • Investors favored small companies during the month, with the Russell 2000 Index gaining 4.0%. Regardless of size, companies with strong earnings growth performed better than those with lower prices relative to their earnings.
  • Developed country international equities as measured by the MSCI EAFE Index gained 0.8% during the month. Equities from developing countries as measured by the MSCI Emerging Markets Index declined 1.5%. Year-to-date, developed country international equities have gained 21.4% while emerging market equities have declined 0.9%.
  • The U.S. Treasury yield curve steepened during November. The 2-year U.S. Treasury Note yield decreased by 0.02% to 0.28%. The 10-year Note yield increased by 0.19% to 2.75%, and the long bond (30-year U.S. Treasury) increased 0.17% in yield to 3.81%. Investors continue to evaluate the potential timing and impact of a reduction in the Federal Reserve’s bond purchase program amid signs of continued moderate economic growth.
  • U.S. Treasury securities, as measured by the Barclays U.S. Treasury Index, decreased 0.3% in November, reflecting the moderate increase in yields along most of the Treasury yield curve. Investment-grade debt, as measured by the Barclays U.S. Credit Index, also decreased 0.3% during the month. Below-investment-grade debt, as measured by the Barclays U.S. Corporate High Yield Index, increased 0.5%, outperforming less-risky government and investment-grade debt because investors favored more risky bonds in light of the moderate improvement in the U.S. economic outlook.
  • The U.S. dollar, as measured by the U.S. Dollar Index, increased 0.6% in November. During the month, the euro increased fractionally relative to the dollar. The British pound increased 2.0% amid positive economic signs in the United Kingdom. The Japanese yen decreased 4.0%, reflecting Japan’s commitment to highly accommodative monetary policy and an increase in Japanese consumer inflation. The Brazilian real decreased 4.1% during the month, attributed to an increasing budget deficit and rising inflation in Brazil.
  • Commodities, as represented by the Dow Jones UBS Commodity Index, decreased 0.8% in November. Energy—the strongest segment of the index—increased 2.3%. Precious metals—the weakest segment–decreased 6.4%. The price of gold decreased 5.5%, which was the largest November decline in the price of gold since 1978. The decrease was attributed to expectations that the Federal Reserve will soon begin reducing monetary stimulus, thereby reducing the probability of rapidly rising inflation and a weaker dollar.

Economics Highlights

  • The Senate Banking Committee voted 14-8 to approve Janet Yellen’s nomination as the next Chair of the Federal Reserve, sending her nomination to a full Senate vote. Ms. Yellen is expected to receive full Senate confirmation in December.
  • The European Central Bank (ECB) unexpectedly lowered its benchmark interest rate to 0.25% from 0.50%. The decision to decrease the rate followed an October euro zone annualized inflation reading of 0.7%, which is well below the ECB target inflation rate of 2.0%.
  • The U.S. Commerce Department reported that the number of residential building permits issued in October increased 6.2% over the previous month to a seasonally adjusted annual rate of 1.03 million. The rate, which was driven mostly by a 15.3% increase in multifamily permits, was the highest since June 2008.
  • President Barack Obama announced an administrative change to the Affordable Care Act. The change grants state insurance regulators the discretion to allow certain individual health insurance policies that do not meet the coverage requirements of the Act but that were in effect during 2013 to be extended through 2014.

Geopolitical Headlines

  • The central Philippines were devastated by typhoon Haiyan—locally known as Yolanda—which brought destructive winds, extreme rainfall and a 15-foot storm surge. The official death toll of more than 5,200 continues to rise, and more than 3 million people were displaced from their homes.
  • The United States and several other world powers reached an accord with Iran to limit its nuclear program. The six-month accord suspends certain trade sanctions and allows Iran to repatriate approximately $4.2 billion in frozen assets. In exchange, Iran agreed to eliminate its stockpile of highly enriched uranium and to cease installation of new enrichment centrifuges.
  • Chinese President Xi Jinping and Communist Party leaders announced broad reforms to China’s human rights and economic policies. The planned reforms include the abolishment of labor camps, relaxation of China’s one-child policy and increased property rights for farmers.
  • The U.S. Senate adopted a controversial rule change designed to reduce the use of minority party filibuster tactics to block presidential nominations. The new rule allows most executive branch and judicial nominations to advance through the Senate if 51 senators vote to block a filibuster instead of the previous Senate rules that required 60 votes.

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 November Year-to-Date
Inflation Protection Fund -1.08% -5.81%
Barclays Capital U.S. Government Inflation-Linked Bond Index -1.22% -7.86%
Difference +0.14% +2.05%
  • The Inflation Protection Fund declined 1.08% in November but outperformed the fund’s benchmark return by 0.14%. The value of very safe U.S. Treasury Inflation Protected Securities, which comprise the fund’s benchmark, declined as real interest rates increased as investors anticipated changes in Federal Reserve interest rate policies resulting from steady economic growth. The fund’s allocation to floating rate senior secured loans gained fractionally and was the primary contributor to the fund’s positive benchmark-relative performance. The fund’s allocation to bonds from developing countries declined more than 3% and detracted from benchmark-relative performance.
  • For the year-to-date, the fund has declined 5.81% but has outperformed its benchmark by 2.05%. 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 4.7% in 2013 through November. The fund’s allocation to inflation-linked bonds of developed countries has also added value relative to the benchmark, declining 2.5% year-to-date. The fund’s allocation to bonds from developing countries detracted from performance, declining 13.1% for the year-to-date.

Fixed Income Fund

Fund November Year-to-Date
Fixed Income Fund -0.28% -0.45%
Barclays Capital U.S. Universal (ex MBS) Index -0.23% -0.90%
Difference -0.05% +0.45%
  • The Fixed Income Fund declined 0.28% in November and slightly underperformed its benchmark return by 0.05%. The fund’s exposure to higher risk high yield bonds contributed positively to benchmark-relative performance, gaining 0.4%. The fund’s 9% allocation to positive social purpose loans also positively contributed to benchmark-relative performance, gaining 0.4%. As with the Inflation Protection Fund, the Fixed Income fund’s allocation to debt from developing countries detracted from performance and declined 2.7%.
  • For the year-to-date, the Fixed Income Fund has declined 0.45%. The fund exceeds the performance of the fund benchmark by 0.45%. The fund’s two allocations to below investment grade debt have gained approximately 7% and positively contributed to benchmark-relative performance. In addition, the fund’s allocation to positive social purpose loans gained 5.2% and contributed positively to benchmark-relative performance. The fund’s allocation to debt from developing countries detracted from performance, declining 7.0%.

U.S. Equity Fund

Fund November Year-to-Date
U.S. Equity Fund +2.36% +30.55%
Russell 3000 +2.90% +30.12%
Difference -0.54% +0.43%
  • The U.S. Equity Fund (USEF) gained 2.36% in November, but underperformed the fund’s Russell 3000 Index benchmark by 0.54%. The fund’s greater than benchmark allocation to the stocks of small and mid-sized companies had a positive impact on benchmark-relative performance as the Russell 2000 Index of small companies gained 4.0% compared to the large-cap S&P 500 Index return of 3.1%. But the fund’s 6% allocation to the alternative investment strategies of private equity and private real estate recognized virtually no gain compared to the strong performance of the fund benchmark. In addition, the fund’s nearly 3% allocation to publicly traded real estate investment trusts declined 5.2% and detracted from benchmark-relative performance. Finally, several of the fund’s managers that had strong benchmark-relative performance in 2013 had relatively poor benchmark-relative performance until October.
  • For the year-to-date, the fund has gained 30.55% and, with only a fractional gain in December, could record the best yearly performance since the inception of the fund in 1998. The fund has outperformed its benchmark return by 0.43% in 2013 through November. The fund’s active managers have collectively outperformed their respective benchmarks, benefiting from their higher than benchmark allocations to small and mid-sized companies. The small-cap Russell 2000 Index has gained 36.1% through November. The fund’s allocation to the diversifying strategy of publicly traded real estate investment trusts has gained less than 1% for the year and has detracted from performance. In addition, the fund’s allocation to the alternative investment strategies of private equity and private real estate have gained 5.8% and 11.8% respectively compared to the strong returns from the public equity markets, offsetting the positive contributions from the fund’s active managers.

International Equity Fund

Fund November Year-to-Date
International Equity Fund +0.17% +15.12%
MSCI ACWI ex US +0.12% +14.68%
Difference +0.05% +0.44%
  • The International Equity Fund (IEF) had a fractional gain of 0.17% in November and outperformed its benchmark by 0.05%. The fund benefited from its below benchmark allocation to stocks from developing markets, as the MSCI Emerging Markets Index declined 1.5% for the month.
  • For the year-to-date, the International Equity Fund has gained 15.12% and has outperformed its benchmark return by 0.44%. The fund’s allocation to small international companies has gained 22.4% 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 lost 0.9% in 2013 through November. The fund’s allocation to international real estate investment trusts has gained 7.0% and has detracted from benchmark-relative performance.

Multiple Asset Fund

Fund November Year-to-Date
Multiple Asset Fund +0.94% +15.48%
Composite Benchmark +1.15% +14.70%
Difference -0.21% +0.78%
  • For November, the Multiple Asset Fund (MAF) gained 0.94% and underperformed its fund benchmark by 0.21%. The Inflation Protection Fund and International Equity Fund contributed positively to benchmark- relative performance, while the U.S. Equity Fund and the Fixed Income Fund detracted from benchmark- relative performance.
  • For the year-to-date, the Multiple Asset Fund has gained 15.48%, and has outperformed its benchmark return by 0.78%. All four of the fund’s strategies have outperformed their respective benchmarks and contributed to the fund’s positive benchmark-relative performance.

Balanced Social Values Plus Fund

Fund November Year-to-Date
Balanced Social Values Plus Fund +1.41% +18.25%
Composite Benchmark +1.29% +18.21%
Difference +0.12% +0.04%

 

 
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