July 2011 Investment Report


  • U.S. equities represented by the Russell 3000 Index declined 2.3% for the month. During the final week in July, equity markets erased gains recorded earlier in the month as uncertainty increased regarding Congress’ ability to reach agreement on raising the U.S. government debt ceiling. Year-to-date, the S&P 500 held on to gains of 3.9% despite challenges stemming from high unemployment, slow economic growth and sovereign debt concerns.
  • Large-company U.S. equities outperformed small-company U.S. equities. Large companies with strong earnings growth performed better than companies classified as value.
  • International developed equities as measured by the MSCI EAFE Index declined 1.6% in dollar terms. The U.S. dollar posted small losses relative to developed-market currencies, which added modestly to developed-market equity performance. Equities of developing countries also declined as the MSCI Emerging Markets IMI Index dropped 0.2% during the month.
  • As equity markets declined, investors sought the safety of U.S. Treasuries despite concerns of a potential government default. The yield on the benchmark U.S. 10-Year Treasury Note declined from 3.18% to 2.82% and the Barclays Capital U.S. Treasury Index advanced 1.8% for the month. Treasury Inflation Protected Securities (TIPS) outperformed nominal Treasury debt as the Barclays Capital U.S. Government Inflation-Linked Bond Index gained 4.1% in July.
  • Investment grade debt, as represented by the Barclays U.S. Credit Index, advanced 2.4%. Higher-rated debt securities outperformed lower-rated debt securities as the Barclays Capital Corporate High Yield Index only gained 1.1% in July. Global fixed income securities also performed well during the month as the Barclays Capital Global Aggregate Index advanced 2.1%.
  • The Swiss Franc benefited as investors sought safe-haven assets in response to fears of a default by the U.S. government due to the debt ceiling crisis and concerns of contagion in the Eurozone. The Swiss Franc strengthened against the Euro and the U.S. Dollar by 7.8% and 7.0%, respectively.
  • Commodities advanced 3.0% during the month as represented by the Dow Jones UBS Commodity Index. Gold (+8.4%) and silver (+15.2%) experienced significant gains due to their appeal as a hedge to the declining U.S. Dollar, a default by the U.S. government and falling equity prices.

Economics Highlights

  • The partisan struggle to raise the U.S. debt ceiling and the U.S. government’s ability to meet its obligations dominated July headlines. Just prior to the August 2 deadline, President Obama signed a bill to raise the U.S. debt limit by at least $2.1 trillion, averting a potential default by the government.
  • At month end, investors were uncertain whether the rating agencies would retain or downgrade the U.S. AAA credit rating. Asset managers continued to assess the implications of a potential U.S. credit downgrade.
  • First quarter Gross Domestic Product (GDP) was revised down to a 0.4% rate from the earlier estimated 1.9% gain in a sign that economic growth remains extremely challenged. The second quarter advanced estimate for GDP was 1.3% suggesting limited improvement on the horizon.
  • European officials negotiated a deal to inject more aid into the highly leveraged Greek financial system. The deal provides EUR 109 billion in new loans, as well as an additional EUR 50 billion through a bond exchange and buyback plan.
  • The European Central Bank (ECB) increased its benchmark rate by 25 basis points to 1.5%—the second increase in three months. Jean-Claude Trichet, ECB president, believes monetary policy must remain accommodative and not give rise to broad-based inflation pressures over the medium term.

Geopolitical Headlines

  • Japan raced to revive older gas- and coal-fired plants following the March earthquake and tsunami that knocked out more than half of the nuclear power plants serving the Tokyo area. The country’s efforts may have global implications as other nations review their nuclear power generation plans.
  • The White House announced that the U.S. would partner with 13 major automakers to increase fuel efficiency to 54.5 miles per gallon for cars and small trucks by 2025.
  • Legendary hedge fund manager George Soros notified investors that his firm would no longer manage outside money in order to avoid a new level of regulatory oversight brought on by the Dodd-Frank financial overhaul.

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: briefing.com–economic statistics; Econoday–description of the economic indicators

Investment Fund Review (Net of Fees Performance)

Inflation Protection Fund

Fund July Year-to-Date
Inflation Protection Fund +2.9% +7.6%
Barclays Capital U.S. Government Inflation-Linked Bond Index +4.0% +10.1%
Difference -1.1% -2.5%
  • The Inflation Protection Fund was the best performing fund in July, though it trailed its benchmark by 1.1%. Investor concern about the sustainability of economic growth resulted in higher demand for high-quality, low-risk investments such as U.S. Treasury Inflation Protected Securities (TIPS). Hence, while all three of the fund’s diversifying strategies produced gains for the month, all three underperformed the fund benchmark, which is comprised exclusively of TIPS.
  • For the year, the fund is the best performing fund with a gain of 7.6%, though the fund lags its performance benchmark by a meaningful 2.5%. As for the month, investor risk aversion has resulted in increased demand, and higher prices, for TIPS despite no evidence of accelerating inflation. The fund’s diversifying strategies of global inflation-linked bonds, developing market inflation-linked bonds, and commodities have returned a respectable 6.1%, 5.1%, and 4.5% respectively, but all contributed to the fund’s benchmark-relative underperformance.

Fixed Income Fund

Fund July Year-to-Date
Fixed Income Fund +1.8% +5.5%
Barclays Capital U.S. Universal (ex MBS) Index +1.8% +4.8%
Difference +0.0% +0.7%
  • The Fixed Income Fund gained 1.8% for the month and matched the performance of the fund benchmark. The fund’s allocations to investment grade corporate bonds and positive social purpose loans gained approximately 2.5% and contributed positively to benchmark-relative performance. The fund’s allocation to lower quality bonds, however, detracted from performance.
  • For the year, the fund continues to outperform its benchmark. The fund’s two portfolios with meaningful exposure to international bonds each gained between 7-8% because of weakness in the U.S. dollar compared to most other currencies.

U.S. Equity Fund

Fund July Year-to-Date
U.S. Equity Fund -2.6% +3.1%
Russell 3000 -2.3% +3.9%
Difference -0.3% -0.8%
  • The U.S. Equity Fund declined 2.6% in July and slightly underperformed the fund’s benchmark. The fund’s higher than benchmark allocation to stocks of small and mid-sized companies detracted from performance as the Russell 2000 Index of small companies declined 3.9% compared to the 2.0% drop of the large company S&P 500 Index.
  • For the year, the 3.1% return attained by the U.S. Equity Fund trails the benchmark return of 3.9%. Although the fund’s allocation to stocks of U.S. real estate investment trusts (REITs) has attained the best performance of any strategy for all funds with a 14% return through the end of July, the fund’s higher than benchmark allocation to small and mid-sized companies and poor benchmark-relative performance of three of the fund’s managers have detracted from returns.

International Equity Fund

Fund July Year-to-Date
International Equity Fund -1.2% +1.4%
MSCI ACWI x US -1.2% +2.3%
Difference +0.0% -0.9%
  • The International Equity Fund declined 1.2%, matching the performance of the fund’s benchmark in July. While the fund’s allocation to international REITs recorded slight gains in July and positively contributed to benchmark-relative performance, three of the fund’s managers underperformed their respective benchmarks by 1% or more, which offset the positive contribution from the REIT allocation.
  • For the year, the International Equity Fund trails its benchmark by 0.9%. The fund’s underperformance is primarily attributable to the fund’s less than benchmark exposure to stocks from the European Union, which has performed well despite ongoing concerns surrounding the Greek debt crisis.

Multiple Asset Fund

Fund July Year-to-Date
Multiple Asset Fund -0.7% +3.9%
Composite Benchmark -0.4% +4.5%
Difference -0.3% -0.6%
  • For the month of July, MAF declined 0.7% and trailed the performance of the fund’s benchmark by 0.3%. Though the returns for two of the funds matched the performance of their respective benchmarks, the underperformance of the Inflation Protection Fund and U.S. Equity Fund detracted from MAF’s performance compared to its benchmark.
  • For the year, the fund has underperformed its benchmark by 0.6%. The Fixed Income Fund has positively contributed to the fund’s benchmark relative returns, though more than offset by the negative contribution from the other three funds.

Balanced Social Values Plus Fund

Fund July Year-to-Date
Balanced Social Values Plus Fund -0.8% +3.1%
Composite Benchmark -1.1% +2.9%
Difference +0.3% +0.2%


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