October 2011 Investment Report


  • U.S. equities represented by the Russell 3000 Index increased 11.5% in October, ending five consecutive months of declines. Markets advanced throughout the month on optimism that the European credit crisis would be resolved soon. For the month, the S&P 500 Index recorded its largest gain since 2009 and its best October performance since 1991.
  • Small-company U.S. equities outperformed large-company U.S. equities during the month as investors favored the increased risk-return profile of small-company equities. Among small-company equities, those with strong earnings growth performed better than equities classified as “value.”
  • International developed equities, as measured by the bellwether MSCI EAFE Index, increased 9.6% in U.S. dollar terms. Investors attributed the increase to reports of a new agreement among European leaders to address the Greek financial crisis. Private investors agreed to forgive 50% of the value of outstanding Greek government debt. The European Financial Stability Facility was increased to more than $1 trillion (in U.S. dollars) to assist troubled banks and sovereign states. The U.S. dollar decreased 5.1% versus the euro during the month. Equities of developing countries also increased as the MSCI Emerging Markets IMI Index gained 12.8% during the month.
  • As investors developed an appetite for risk, the yield curve for U.S. Treasury securities steepened. The yield for the 10-year U.S. Treasury note increased almost 20 basis points to 2.11%, and the 30-year U.S. Treasury bond increased almost 22 basis points to 3.13%.
  • The “risk on” atmosphere in October helped the credit market. Investment-grade debt represented by the Barclays U.S. Credit Index returned 1.5% for the month. The even riskier below-investment-grade debt market returned a dramatic 6.0% for the month as represented by the Barclays U.S. High Yield Index.
  • Bonds from developing countries also benefited from the market’s renewed appetite for risk, with most of their currencies rebounding after the previous month’s decline. The Brazilian real appreciated by 8.7%, the Mexican peso increased by 3.9%, and the Russian ruble climbed by 6.0%—all relative to the U.S. dollar.
  • Commodities broadly gained, with the Dow Jones UBS Commodity Index gaining 6.6% for the month. Within the index, energy gained 8.7%, precious metals gained 8.0%, and grains and agriculture gained approximately 4%.

Economics Highlights

  • The U.S. Treasury Department announced that it would study the possibility of issuing floating rate debt in an effort to diversify the government’s debt sources. Floating rate debt would allow investors to hold longer-term U.S. Treasury bills and notes without locking in a constant interest rate. Interest paid would automatically “float,” with prevailing interest rates linked to an accepted market benchmark rate. This would be a significant change for the Treasury market.
  • Financial firm MF Global filed for bankruptcy as one of the first major casualties of the European debt crisis. The company had allocated a significant amount of its capital to debt of the distressed European countries, and subsequent losses caused a credit rating downgrade that prompted many investors to withdraw their money from the firm.
  • Swiss Bank UBS announced co-heads of global equities would resign following last month’s $2.3 billion loss from a rogue trader.

Geopolitical Headlines

  • Occupy Wall Street, an ongoing series of demonstrations protesting perceived inequality, greed and corruption in corporate America, continued to expand to cities around the world. While the movement has been criticized for lacking leadership and coherent demands, protests have captured significant media attention as the U.S. heads into a presidential election year.
  • Rebels killed Libyan dictator Muammar Gaddafi after capturing him near his hometown of Sirte. Libyan citizens appeared to welcome the unpopular leader’s death as an end to tyranny and an opportunity for a better future.
  • After reaching an agreement with European leaders, Greek Prime Minister George Papandreou announced he would conduct a referendum regarding his country’s participation in a European bailout deal. The announcement temporarily jolted the financial markets, and the prime minister rescinded his decision days later.
  • U.S. President Barack Obama announced that the U.S. will withdraw its troops from Iraq by the end of the year and America’s war in Iraq will be over.

Sources: Bloomberg News, Wall Street Journal, CNBC and CNN

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 October Year-to-Date
Inflation Protection Fund +2.3% +8.0%
Barclays Capital U.S. Inflation-Linked Bond Index +1.9% +13.0%
Difference +0.4% -5.0%
  • The Inflation Protection Fund gained 2.3% and exceeded its benchmark return by 0.4%, which was attributable to 7% gains in two of the fund’s diversifying strategies. The value of most commodities rebounded as concerns of a global economic slowdown abated. In addition, the value of debt from developing nations increased, largely due to strengthening of their currencies in response to a more optimistic outlook for the global economy.
  • For the year, however, the fund is significantly underperforming its benchmark Barclays Capital U.S. Inflation-Linked Bond Index. U.S. Treasury Inflation Protected Securities (TIPS) is the best performing asset class in the world, as risk-averse investors have sought the safety of the asset class. Hence, all three of the fund’s diversifying strategies have detracted from the fund’s benchmark-relative performance. Yields for U.S. TIPS are presently at historically low levels, with shorter-maturity TIPS carrying negative yields. In the absence of accelerating inflation, U.S. TIPS are unlikely to continue providing meaningful returns for investors.

Fixed Income Fund

Fund October Year-to-Date
Fixed Income Fund +1.8% +5.8%
Barclays Capital U.S. Universal (Ex MBS) Index +0.8% +6.9%
Difference +1.0% -1.1%
  • The Fixed Income Fund advanced 1.8% in October and meaningfully outperformed the fund’s benchmark return, recapturing half of September’s underperformance. The fund’s exposure to higher-risk bonds contributed positively to performance, on diminished concerns of a global economic downturn. Nearly every strategy in the fund positively contributed to the positive benchmark-relative performance.
  • For the year, the fund has gained 5.8% but trails its benchmark by 1.1%. The fund’s allocation to bonds from developing countries and below-investment-grade bonds have primarily contributed to the fund’s below-benchmark performance. In addition, the fund holds fewer U.S. Treasury securities than the fund benchmark, which has also detracted from performance. Investor preference for investments with lower risk has resulted in better returns for U.S. Treasury debt and lower returns for higher-risk bonds.

U.S. Equity Fund

Fund October Year-to-Date
U.S. Equity Fund +11.3% -0.6%
Russell 3000 +11.5% +0.5%
Difference -0.2% -1.1%
  • The U.S. Equity Fund gained 11.3% in October and slightly underperformed the fund’s benchmark. The fund benefited from its higher-than-benchmark allocation to stocks of small and mid-sized companies, which advanced 16.7% and 14.3% respectively. The positive contribution from small and mid-sized company stocks, however, was more than offset by the fund’s allocation to private real estate and private equity. Valuations for these two strategies will lag valuation changes in the public markets.
  • For the year, the U.S. Equity Fund trails its benchmark by 1.1% largely due to its greater-than-benchmark allocations to small and mid-sized company stocks. Despite meaningful gains for stocks of small and mid-sized companies in October, the Russell 2000 Index of small companies has declined 4.6%, whereas the S&P 500 Index has gained 1.3%.

International Equity Fund

Fund October Year-to-Date
International Equity Fund +10.4% -9.3%
MSCI ACWI x US +10.3% -8.5%
Difference +0.1% -0.8%
  • The International Equity Fund advanced 10.4% in October and slightly outperformed its benchmark. None of the fund’s diversifying strategies meaningfully contributed or detracted from the fund’s benchmark-relative performance.
  • For the year, the International Equity Fund trails its benchmark by 0.8%. The fund’s greater-than-benchmark exposure to small, internationally based companies has declined 13.3% and has detracted from the benchmark-relative performance. However, the negative contribution from small companies was partially offset by the fund’s allocation to international private real estate, which has gained 6.0%.

Multiple Asset Fund

Fund October Year-to-Date
Multiple Asset Fund +7.8% +0.4%
Composite Benchmark +7.6% +1.7%
Difference +0.2% -1.3%
  • For October, the Multiple Asset Fund gained 7.8%, slightly outperforming its benchmark return by 0.2%. Three of the fund’s strategies outperformed their respective benchmarks, whereas the underperformance of the U.S. Equity Fund detracted from the Multiple Asset Fund’s overall performance.
  • For the year, the fund is underperforming its benchmark by 1.3%. All four funds that comprise the Multiple Asset Fund are underperforming their respective benchmarks.

Balanced Social Values Plus Fund

Fund October Year-to-Date
Balanced Social Values Plus Fund +5.6% +2.7%
Composite Benchmark +6.1% +2.2%
Difference -0.5% +0.5%


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