February 2010 Investment Report


  • U.S. equity markets, represented by the Russell 3000 Index, advanced 3.4% in February, nearly reversing their January decline. The rebound was partially due to continued faith in the economic recovery, as evidenced by the Federal Reserve Bank’s (Fed’s) plans to wind down its programs to support lending.
  • Small-company U.S. stocks gained 4.5% and outperformed large-company U.S. stocks, which gained 3.3%. Stocks with strong earnings growth outperformed stocks classified as “value” stocks.
  • U.S. stocks outperformed international developed-market stocks due to debt concerns with certain Eurozone countries. The MSCI EAFE Index declined 0.7% for the month. Stocks of developing countries, as measured by the MSCI Emerging Markets Index, gained 0.3%. This gain was primarily due to strong performance of the Latin American stock markets, but it was partially offset by weak performance of Eastern European markets that were affected by concerns over Greece’s economic problems.
  • U.S. credit markets advanced slightly during February. High-quality, investment-grade bonds, as measured by the Barclays U.S. Credit Index, returned 0.4% for the month, roughly equal to interest paid on debt. Overall, interest rates and credit spreads were largely unchanged during the month.
  • The Fed announced a widely anticipated increase in the discount rate, which is the rate it charges member banks for emergency loans. Treasury bond yields increased on this news, but later declined as turmoil caused by Greece’s financial crisis initiated a “flight to safety.” The yield on the 10-year Treasury note ended the month at 3.6%, generally unchanged from the beginning of the month.

Economics Highlights

  • The U.S. Commerce Department revised fourth quarter 2009 Gross Domestic Product (GDP) growth upward to 5.9% from 5.7% as businesses spent more to rebuild inventories than originally estimated. Consumer spending was revised lower, however, tempering the positive news.
  • The Consumer Price Index (CPI), a measure of inflation, increased 0.2% in January due to higher gasoline prices. However, core CPI, which excludes food and energy prices, declined 0.1%, signaling that inflation may not be a near-term concern.
  • Housing market data disappointed during the month. Due to severe winter weather, sales of both new and existing homes declined more than expected, calling into question whether the housing sector is poised for recovery.

Geopolitical Headlines

  • President Obama’s health care summit with members of Congress yielded no new agreements after hours of debate. Democrats appear willing to move forward with their plan without Republican support.
  • Despite the massive amounts of liquidity injected into the banking system over the past year, the Federal Deposit Insurance Corporation (FDIC) reported that U.S. banks posted their sharpest decline in lending since 1942. Banking groups counter that they are under pressure from regulators to improve their capital position and that demand for loans has decreased.
  • Greece is under intense pressure from the European Union to implement budget deficit-lowering measures. Financial assistance from Germany and France is looking more likely. The euro has suffered because of Greece’s financial crisis, falling 5% against the dollar since the start of the year.
  • Akio Toyoda, the president and CEO of Toyota Motor Corporation, was questioned by a congressional panel following the recall of 8 million vehicles due to safety concerns. Analysts project the crisis could lead to increased government regulation of the auto industry.
  • The death toll climbed to more than 700 as Chile continued to dig out from under a massive 8.8 magnitude earthquake.
  • In defiance of U.N. demands, Iran announced plans to construct two new uranium-enrichment facilities deep inside mountains that offer protection from attack.

Investment Fund Review

Inflation Protection Fund

Fund February Year-to-Date
Inflation Protection Fund -0.3% +0.0%
Barclays Capital Inflation Linked Index -1.2% +0.4%
Difference +0.9% -0.4%
  • The Inflation Protection Fund declined 0.3% for the month. The fund outperformed its benchmark in February by a margin of 0.9%. The fund’s investments in commodities generated strong absolute returns and ended the month as the best-performing strategy for the fund. Although the fund’s two other diversifying strategies had negative absolute returns, each delivered better-than-benchmark performance.
  • For the year, the fund is underperforming its benchmark due to negative returns for the emerging-market, inflation-linked and commodities strategies.

Domestic Bond Fund

Fund February Year-to-Date
Domestic Bond Fund +0.6% +2.1%
Barclays Capital U.S. Universal (ex MBS) Index +0.5% +2.1%
Difference +0.1% +0.0%
  • The Domestic Bond Fund returned 0.6% for the month of February and slightly outperformed its benchmark. The fund’s investment-grade credit strategies generated the highest absolute returns. Its non-investment-grade and global bond strategies detracted from performance.
  • The fund has matched the performance of its benchmark for the year-to-date period. The fund’s positive social purpose loans have positively contributed to performance, while its international bond exposure has detracted from performance due to the strength of the dollar.

Domestic Stock Fund

Fund February Year-to-Date
Domestic Stock Fund +3.5% -0.5%
Russell 3000 +3.4% -0.3%
Difference +0.1% -0.2%
  • The Domestic Stock Fund returned 3.5% for the month of February. In sharp contrast to last month, all strategies delivered positive returns. Small- and mid-company strategies contributed principally to the fund outperforming its benchmark by a margin of 0.1%. Public real estate securities performed best in the month, advancing 5.4%.
  • For the year, returns for the Domestic Stock Fund continue to modestly underperform the fund’s benchmark primarily due to the below-benchmark performance by the fund’s large growth company managers.

International Stock Fund

Fund February Year-to-Date
International Stock Fund -0.6% -4.2%
MSCI ACWI x US +0.0% -4.6%
Difference -0.6% +0.4%
  • The International Stock Fund declined 0.6% for the month of February. This underperformance is attributable to the below-benchmark performance of seven of the eight actively managed portfolios in the fund.
  • For the year, the International Stock Fund has slightly outperformed its benchmark principally due to the fund’s exposure to small-company stocks and strong benchmark-relative performance by the largest manager portfolio of developed-country equities.

Multiple Asset Fund

Fund February Year-to-Date
Multiple Asset Fund +1.5% -0.6%
Composite Benchmark +1.5% -0.5%
Difference +0.0% -0.1%
  • For the month, the Multiple Asset Fund matched the performance of its composite benchmark. The relative underperformance of the International Stock Fund was offset by the better-than-benchmark performance of the Inflation Protection Fund, Domestic Bond Fund and Domestic Stock Fund.
  • For the year, the fund has performed very slightly below its benchmark due principally to the underperformance of the Inflation Protection Fund and Domestic Stock Fund, but this underperformance was partially offset by better-than-benchmark performance of the International Stock Fund.

Balanced Social Values Plus Fund

Fund February Year-to-Date
Balanced Social Values Plus Fund +2.0% +0.4%
Composite Benchmark +1.7% +0.0%
Difference +0.3% +0.4%


close (X)