March 2011 Investment Report


  • U.S. equities represented by the Russell 3000 Index advanced 0.5% for the month. March completed the best first-quarter increase for the S&P 500 Index since 1998 (+5.9%). The market rally occurred despite growing concerns about inflation, repercussions from the economic uncertainties resulting from Japan’s earthquake disaster, and the impact of Middle East/North Africa (MENA) unrest on oil prices.
  • Small-company U.S. equities outperformed large-company U.S. equities for the month of March. Among large-company U.S. equities, those classified as “value” performed better than stocks with strong earnings growth.
  • International equities declined during March. The bellwether MSCI EAFE Index, which measures performance of developed-country equities in U.S. dollar terms, decreased 2.2%, in part due to the index’s 20% exposure to Japan. Developed market currencies strengthened versus the U.S. dollar, as measured by the U.S. Dollar Index. Equities of developing countries, as measured by the MSCI Emerging Markets IMI Index, increased 5.7% in March, extending a 34-month run for the global economic recovery.
  • Investors sought the safety of U.S. Treasury securities in the aftermath of turmoil in the MENA region and Japan. The interest rate yield of the 10-year U.S. Treasury note was mostly unchanged, though inflationary concerns attributed to a slight 0.05% increase to 3.47%. Corporate credit, as represented by the Barclays U.S. Credit Index, was virtually unchanged.
  • Commodities, as represented by the Dow Jones UBS Commodity Index, gained 2.1% in March. Oil and gold advanced on MENA concerns, 5.1% and 1.5% respectively, while agriculture commodities such as corn and wheat declined on speculation that higher oil prices would slow global economic growth.

Economics Highlights

  • The U.S. unemployment rate dropped to 8.8%, as new jobs in the private sector increased by 216,000. The private sector has added nearly 1.8 million jobs since the recovery began in 2009, and March marked the 12th straight month of private-sector job growth.
  • In the U.S., headline inflation has increased, driven by rising prices for gasoline and food. However, wage inflation remains muted, due to high labor availability. One indicator of increasing confidence in the economic recovery is merger and acquisition (M&A) activity. Several significant M&A announcements in the month included a proposed consolidation between two of the largest U.S. cell phone service providers, AT&T and T-Mobile (owned by the German company Deutsche Telekom), and a bid by Deutsche Boerse and NASDAQ for the New York Stock Exchange.
  • U.S. regulators are examining whether Bank of America, Union Bank of Switzerland (UBS) and Citibank manipulated the London Inter-Bank Offer Rate (LIBOR) to keep their funding costs low during the height of the financial crisis. LIBOR is a key base rate for impacting interest rates across the globe.
  • Rating agency Standard & Poor’s again downgraded the sovereign debt of Portugal, Greece and Ireland. Portugal’s prime minister resigned after Portugal’s parliament was unwilling to approve a new set of austerity measures designed to address that country’s pending debt maturities.

Geopolitical Headlines

  • Japan suffered a 9.0 magnitude earthquake and continues to experience aftershocks. The ensuing catastrophic tsunami resulted in the deaths of an estimated 25,000 people and significantly damaged the country’s power generation infrastructure, including several nuclear plants. In addition to the physical impact of lost productivity in the Japanese economy, supply chains around the world have been affected by critical parts shortages, particularly in the global auto industry. The media also continues to monitor the consequences of the nuclear damage.
  • Organized protest movements accelerated across the Middle East/North Africa region after the fall of Egypt’s government. With the establishment of a U.N.-enforced “no-fly” zone over Libya, Moammar Gadhafi’s pro-regime military forces were prevented from destroying the poorly-armed opposition forces.

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:–economic statistics; Econoday–description of the economic indicators

Investment Fund Review

Inflation Protection Fund

Fund March Q1 2011 Year-to-Date
Inflation Protection Fund +1.2% +2.3% +2.3%
Barclays Capital U.S. Government Inflation-Linked Bond Index +1.0% +2.1% +2.1%
Difference +0.2% +0.2% +0.2%
  • For March, the Inflation Protection Fund again gained 1.2% as inflation-linked assets outperformed traditional fixed-income investments on heightened concerns about inflation. The fund outperformed its benchmark by 0.2%, primarily due to the fund’s diversifying exposure to commodities and inflation-linked bonds of developing countries.
  • For the quarter and year, the fund’s 0.2% excess performance is attributable primarily to the fund’s holdings of commodities, which have gained 8.2% so far in 2011. However, the fund’s exposure to inflation-linked bonds of developed countries has slightly detracted from returns.

Fixed Income Fund

Fund March Q1 2011 Year-to-Date
Fixed Income Fund +0.4% +1.5% +1.5%
Barclays Capital U.S. Universal (ex MBS) Index +0.1% +0.7% +0.7%
Difference +0.3% +0.8% +0.8%
  • The Fixed Income Fund outperformed its benchmark in March, largely because of the fund’s exposure to bonds denominated in currencies other than the U.S. dollar. More specifically, the fund’s holdings of debt from developing countries gained 2.7% during the month.
  • For the year, the fund has meaningfully outperformed its benchmark, largely due to gains in the higher-risk credit portfolios that benefit from improving economic conditions. In addition, U.S. dollar weakness has benefitted the fund’s holdings in non-dollar denominated bonds from developed countries.

U.S. Equity Fund

Fund March Q1 2011 Year-to-Date
U.S. Equity Fund +0.8% +6.2% +6.2%
Russell 3000 +0.5% +6.4% +6.4%
Difference +0.3% -0.2% -0.2%
  • The U.S. Equity Fund advanced 0.8% in March and outperformed its benchmark by 0.3%. As in February, the fund benefitted from its greater-than-benchmark exposure to the stocks of small and mid-sized companies. For the month, the Russell 2000 Index of small companies gained 5.5% (the same as February) compared to the 0% return of the S&P 500. The fund’s exposure to both publicly traded real estate securities as well as its private real estate holdings detracted from performance.
  • For the year, U.S. stocks were the best-performing asset class. The fund has underperformed its benchmark by 0.2%. Although the fund’s larger-than-benchmark exposure to small and mid-sized companies positively contributed to benchmark-relative performance, the fund’s exposure to private real estate and private equity detracted from performance.

International Equity Fund

Fund March Q1 2011 Year-to-Date
International Equity Fund +0.5% +1.9% +1.9%
MSCI ACWI x US -0.1% +3.2% +3.2%
Difference +0.6% -1.3% -1.3%
  • Although the fund benchmark declined in March, the fund produced a slight positive return and outperformed its benchmark by 0.6%. The excess performance is primarily attributable to higher-than-benchmark allocations to stocks from developing countries, as well as the fund’s small allocation to private real estate, which gained 7.6% during the month.
  • For the year, however, the International Equity Fund meaningfully trails its benchmark by 1.3%. The underperformance is primarily attributable to the fund’s less-than-benchmark exposure to stocks from the European Union. In the first three months, the MSCI European Union Index has gained 12.2%, compared to the 3.2% performance for the fund benchmark.

Multiple Asset Fund

Fund March Q1 2011 Year-to-Date
Multiple Asset Fund +0.7% +3.8% +3.8%
Composite Benchmark +0.3% +3.9% +3.9%
Difference +0.4% -0.1% -0.1%
  • For the month of March, the Multiple Asset Fund outperformed its benchmark, as all four of the underlying funds outperformed their respective benchmarks.
  • For the quarter and year, the fund is slightly underperforming its benchmark. While the two bond funds have added value relative to their respective benchmarks, the two stock funds have underperformed their respective benchmarks.

Balanced Social Values Plus Fund

Fund March Q1 2011 Year-to-Date
Balanced Social Values Plus Fund -0.3% +2.4% +2.4%
Composite Benchmark -0.2% +2.4% +2.4%
Difference -0.1% +0.0% +0.0%


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