October 2010 Investment Report


  • U.S. equity markets, represented by the Russell 3000, advanced 3.9% for the month of October. The gains are primarily attributable to positive corporate earnings announcements and reports that Federal Reserve (Fed) Chairman Ben Bernanke was considering additional changes in monetary policy that would increase the availability of credit and promote growth in the economy.
  • Small-company U.S. equities outperformed large-company U.S. equities. For both groups, companies with strong earnings growth performed better than equities classified as “value.”
  • International equities advanced during October, albeit at a slightly slower pace than U.S. equities. The bellwether MSCI EAFE Index, which measures performance of developed-country equities in U.S. dollar terms, increased 3.6%. Equities of developing countries, as measured by the MSCI Emerging Markets Index, increased 3.1% during the month.
  • U.S. Treasury Inflation Protected Securities (TIPS) as measured by the Barclays Capital U.S. Government Inflation-Linked Bond Index posted a 2.7% return for the month. The 10-year U.S. Treasury Note yield increased 0.10% for the month, ending at 2.63% as investors’ inflationary fears grew. The Barclays Capital U.S. Credit Index advanced 0.1% for the month.

Economics Highlights

  • In early November, the Fed announced plans to purchase an additional $600 billion of Treasury securities through June 2011. The Fed’s objective is to increase the money supply so that banks are more willing to extend credit to businesses, with the goal of boosting economic growth and reducing joblessness.
  • Companies continued to spend the cash that they have accumulated on their balance sheets. Specifically, share repurchases along with mergers and acquisitions have rebounded from the depressed levels of 2009.
  • New and existing home sales increased from the previous month; however, transactions remain well below peak levels.
  • Several large banks, including Bank of America and JP Morgan Chase, halted home foreclosures during the month, pending review of potentially fraudulent foreclosure practices. These actions also follow record-high home seizures in September.
  • Commodities markets, as measured by the Dow Jones UBS Total Return Commodity Index, advanced 5.0% in October. The advance in commodities is attributed to weakness in the U.S. dollar and potential inflationary pressure from changes in the Fed’s monetary policy.
  • Quarterly corporate earnings announcements generally exceeded expectations, as did future earnings guidance. Many corporations continue to see improving profit margins on cost controls as well as revenue growth.
  • For the first time ever, the U.S. government was able to issue TIPS with a negative yield in late October. The Treasury sold $10 billion of 5-year TIPS with a yield of -0.55%, due to increased investor demand resulting from fears of rising prices. This means that investors purchasing these securities were essentially guaranteeing that they would receive a return of principal with lower purchasing power than at the time they made their investment.

Geopolitical Headlines

  • Pending Congressional mid-term elections filled most of the headlines in October. As expected after the November 2 election, Republican candidates fared very well across the country and gained enough seats from Democrats to control the House of Representatives and increase their influence in the Senate. Key economic issues in the election included tax-cut extensions, job creation and reduced government regulation.
  • China unexpectedly raised interest rates for the first time since 2007. In an effort to combat inflation, the central bank lifted the benchmark one-year lending rate to 5.56% from 5.31%.
  • Thirty-three Chilean miners were rescued after they were trapped underground for more than two months. The miners received worldwide attention and were greeted with a heroes’ welcome upon their safe return.

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

Source: Bloomberg, briefing.com

Investment Fund Review

Inflation Protection Fund

Fund October Year-to-Date
Inflation Protection Fund +2.3% +9.8%
Barclays Capital U.S. Government Inflation-Linked Bond Index +2.7% +9.9%
Difference -0.4% -0.1%
  • The fund benchmark relative underperformance in October is primarily attributable to its allocation to inflation-linked securities from developed countries. U.S. inflation-linked securities gained 2.7% as investor appetite increased for securities and investment strategies that shielded them from the adverse effects of potential inflation resulting from Fed monetary policy. However, the fund’s 10% allocations to both commodities and developing country debt partially offset the adverse impact from the fund’s investments in developed country debt.
  • For the year, the fund has slightly underperformed its benchmark. As in October, developed country inflation-linked debt has detracted from performance, although this underperformance was nearly entirely offset by better-than-benchmark gains resulting from the fund’s investments in commodities and developing country inflation-linked securities.

Fixed Income Fund

Fund October Year-to-Date
Fixed Income Fund +0.6% +10.7%
Barclays Capital U.S. Universal (ex MBS) Index +0.3% +10.0%
Difference +0.3% +0.7%
  • The Fixed Income Fund outperformed its benchmark by 0.3% primarily due to improved credit conditions resulting in gains in the fund’s credit holdings. These gains were partially offset by a decline in the value of the fund’s Positive Social Purpose loans.
  • For the year, the fund is outperforming its benchmark due to the excellent benchmark-relative performance by the fund’s core bond manager PIMCO, the fund’s exposure to bonds from developing countries, and excellent returns from the fund’s credit strategies. The fund’s exposure to bonds from developed countries has slightly detracted from performance, as interest rate declines in the U.S. have exceeded interest rate declines abroad.

U.S. Equity Fund

Fund October Year-to-Date
U.S. Equity Fund +3.6% +9.6%
Russell 3000 +3.9% +8.9%
Difference -0.3% +0.7%
  • The U.S. Equity Fund underperformed its benchmark in October primarily due to its holdings of private equity and private real estate. Valuations for private investments lag significant gains in public securities. In addition, the fund’s dedicated financial services portfolio return was 0.7%, which was meaningfully below the return of the fund benchmark.
  • For the year, the fund’s excess performance is again attributable to its exposure in small and mid-sized companies. The Russell 2000 Index of small companies has gained 15.0% for the year through October, whereas the large-company dominated S&P 500 has gained 9.4%. In addition, the fund’s exposure to public real estate securities and private equity positively contributed to performance. Generally, the benchmark-relative performance of the fund’s active managers has slightly detracted from performance.

International Equity Fund

Fund October Year-to-Date
International Equity Fund +3.2% +10.2%
MSCI ACWI x US +3.5% +8.3%
Difference -0.3% +1.9%
  • The International Equity Fund underperformed its benchmark in October primarily because of the below-benchmark performance of the fund’s investment managers. All but one of the fund’s managers underperformed their respective benchmarks during the month.
  • For the year, the fund remains meaningfully ahead of its benchmark because of its allocation to stocks from developing countries and its holdings of international public real estate securities. In addition, despite October’s below-benchmark performance by the fund’s managers, they have collectively produced excellent benchmark-relative performance for the 10 months of 2010.

Multiple Asset Fund

Fund October Year-to-Date
Multiple Asset Fund +2.6% +10.0%
Composite Benchmark +2.8% +9.6%
Difference -0.2% +0.4%
  • The Multiple Asset Fund underperformed its performance benchmark in September primarily because of the negative benchmark-relative performance of the Inflation Protection Fund, International Equity Fund and U.S. Equity Fund.
  • For the year, the Multiple Asset Fund has outperformed its benchmark because of the better-than-benchmark performance of the Fixed Income Fund, International Equity Fund and U.S. Equity Fund.

Balanced Social Values Plus Fund

Fund October Year-to-Date
Balanced Social Values Plus Fund +2.2% +5.7%
Composite Benchmark +2.7% +5.8%
Difference -0.5% -0.1%


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