December 2011 Investment Report


  • U.S. equities represented by the Russell 3000 Index increased 0.8% during the month of December. Market prices fluctuated less than in the previous two months as trading volume decreased toward the end of the year. Despite wide fluctuations throughout the year, the Russell 3000 Index finished 2011 with a modest 1.0% gain.
  • Large-company U.S. equities outperformed small-company U.S. equities during December, as investors favored the lower risk-return profile of large-company equities. Among large-company stocks, those classified as “value" performed better than those with strong earnings growth.
  • International developed countries equities, as measured by the bellwether MSCI EAFE Index, declined 1.0% in U.S. dollar terms. Equities of developing countries also decreased as the MSCI Emerging Markets IMI Index declined 1.2% during the month. For the full year 2011, international developed countries equities decreased 11.8% as measured by the MSCI EAFE Index. These declines were due in large part to economic challenges created by growing sovereign debt concerns in Europe.
  • The interest rate yield curve continued to flatten in December. Short rates (less than three years) were mostly unchanged. The yield on the 10-year U.S. Treasury bond declined 0.19% (19 basis points) to end the month at 1.88%. The long bond (30-year U.S. Treasury) dropped 16 basis points to yield 2.90%. This is the lowest rate for the long bond over the past 50 years.
  • The U.S. credit sector performed well in December. Investment-grade debt as represented by the Barclays U.S. Credit Index increased by 1.9%. The Barclays U.S. High Yield Index performed even better, returning 2.7% in December.
  • After a strong November, the U.S. dollar continued to advance against other currencies through year-end. December produced a 2.3% return for the Dollar Index, which compares the U.S. dollar to six other major currencies. Within that index, the euro weakened significantly, losing 3.6% of its value. Emerging market currencies also continued to weaken.
  • Commodities did not benefit from the gain in the U.S. dollar, as reflected in the Dow Jones UBS Commodity Index, which declined 3.8% for the month. Precious metals were the biggest detractor, dropping 11.5%, primarily attributable to the decline in the value of gold. A basket of energy commodities also fell 5.6%. The best-performing commodities sector was grains, which gained 6.1%.

Economics Highlights

  • Events related to the euro zone continued to drive global market activity. Key highlights included the implementation of an austerity plan in Italy, bank borrowing of 490 billion euros ($640 billion) from a European Central Bank facility and further regional economic concerns. Against this backdrop of turmoil, the euro fell against the U.S. dollar, reaching the lowest level since January 2011.
  • U.S. housing had some modest good news in the quarter that positively influenced the broad markets. New housing starts were up 9% over the previous month and 24% ahead of the previous year. A subsequent Case-Shiller report mitigated that optimism with the news that housing prices declined 3.4% in October.
  • Zynga, an online gaming company, went public and raised about $1 billion, the largest proceeds raised for an Internet firm since Google’s public offering in 2004.
  • In a sign of concern about monopoly pricing power in the mobile telecommunications markets, the U.S. Justice Department rejected AT&T’s bid for cellular carrier T-Mobile, which is owned by Deutsche Bank.

Geopolitical Headlines

  • The U.S. ended its formal military involvement in Iraq with the recall of the remaining troops following an almost nine-year engagement. Iraq’s political stability remains in question, as coordinated bomb attacks killed more than 60 people the day after U.S. soldiers departed.
  • Long-time North Korean dictator Kim Jong Il died in December, with the line of succession falling to his youngest son. Kim’s reign was most notable for North Korea’s evolution to nuclear power status.
  • Government financing efforts moved forward as Congress finally extended the expiring payroll-tax break for two months until a more permanent bipartisan solution can be achieved. The legislative compromise included an extension of federal benefits for the long-term unemployed and a continuation of Medicare rates for doctors.

Sources: Bloomberg News, the Economist, the 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:–economic statistics; Econoday–description of the economic indicators

Investment Fund Review (Net of Fees Performance)

For returns of one year, three years, five years, 10 years and Since Inception periods, please visit our Historical Funds Performance page.

Inflation Protection Fund

Fund December Q4 2011 Year-to-Date
Inflation Protection Fund +0.3% +2.8% +8.6%
Barclays Capital U.S. Government Inflation-Linked Bond Index +0.1% +2.8% +14.0%
Difference +0.2% 0.0% -5.4%
  • The Inflation Protection Fund recorded a slight gain (0.3%) and exceeded the benchmark return by about 0.2%. The fund’s exposure to hedged international inflation-linked bonds contributed positively to benchmark-relative performance, as interest rates for longer-term bonds significantly declined during the month. However, the fund’s other two diversifying strategies detracted from its performance, with the fund’s 10% allocation to commodities declining 2.8% for the month.
  • For the fourth quarter 2011, the Inflation Protection Fund gained 2.8% and matched the performance of its benchmark. All four of the fund’s strategies produced comparable returns for the period, with no single strategy adding to or detracting from benchmark-relative performance.
  • For the year, U.S. Treasury Inflation Protected Securities (TIPS) represented the best-performing major asset class in the world, gaining 14.0%. Fear about prolonged economic contraction resulting from the European monetary crisis led risk-averse investors to seek the safety of this asset class, which many consider as the safest investment in the world. Accordingly, all three of the fund’s diversifying strategies detracted from the fund’s benchmark-relative performance. The fund’s 10% allocation to commodities declined 7.4% and its 10% allocation to bonds from developing countries declined 4.5%.

Fixed Income Fund

Fund December Q4 2011 Year-to-Date
Fixed Income Fund +1.5% +2.1% +6.1%
Barclays Capital U.S. Universal (ex MBS) Index +1.3% +1.7% +7.9%
Difference +0.2% +0.4% -1.8%
  • The Fixed Income Fund advanced 1.5% in December and modestly outperformed the fund’s benchmark return. The fund’s higher-than-benchmark exposure to corporate bonds and other credit instruments contributed positively to performance, as U.S. economic conditions improved and investors were willing to accept more risk. The fund’s exposure to non-dollar international bonds partially offset the positive contribution from credit securities, as foreign currencies weakened relative to the U.S. dollar.
  • The fund gained 2.1% during the fourth quarter, exceeding the fund benchmark by 0.4%. The Fixed Income Fund’s benchmark-relative performance benefitted from improving economic conditions, as investors were more willing to hold higher-risk instruments such as corporate bonds and emerging market debt. The fund’s high-yield portfolio, comprised primarily of below-investment-grade corporate bonds, advanced 7.3% during the fourth quarter. The fund’s global bond portfolio, which includes bonds denominated in currencies other than the U.S. dollar, gained only 0.5% during the fourth quarter and negatively affected the fund’s benchmark-relative return.
  • For the year, the Fixed Income Fund gained 6.1% and underperformed its benchmark by 1.8%. The fund’s allocation to bonds from developing countries gained only 0.4% for the year and contributed to about half of the benchmark-relative underperformance. The below-benchmark performance of the fund’s largest manager and a -1% return from the fund’s credit opportunities strategy also detracted from the fund’s performance. The fund’s positive social purpose lending portfolio gained 10.4% during the year and was the fund’s best-performing strategy.

U.S. Equity Fund

Fund December Q4 2011 Year-to-Date
U.S. Equity Fund +0.4% +11.1% -0.7%
Russell 3000 +0.8% +12.1% +1.0%
Difference -0.4% -1.0% -1.7%
  • The U.S. Equity Fund gained 0.4% in December and underperformed the fund’s benchmark by 0.4%. Investors clearly preferred the stocks of large companies during the month, as an index comprised of the 50 largest companies gained 2.2% while the Russell 2000 Index of small companies gained only 0.7%. The U.S. Equity Fund and its managers have a noticeable preference for the stocks of small companies, which contributed to the benchmark underperformance. Positive contributors were the fund’s allocation to publicly traded real estate investment trusts (REITs), which gained 4.9% for the month. In addition, the fund’s allocation to alternative investments also gained approximately 3%.
  • For the quarter, the U.S. Equity Fund gained 11.1% as investors’ sentiment regarding future economic prospects improved. While the fund’s overweighting of stocks of small companies contributed positively to benchmark-relative performance, the portfolios of several of the fund’s investment managers meaningfully underperformed their respective benchmarks. In addition, the fund’s allocation to alternative investments produced returns of approximately 5% for the quarter and contributed negatively to benchmark-relative performance.
  • For the year, the U.S. Equity Fund produced a slight negative return and trailed its benchmark by 1.7%, largely due to its greater-than-benchmark allocations to stocks of small and mid-sized companies. The Russell 2000 Index of small companies declined 4.2% compared with the S&P 500 Index of large companies, which gained 2.1% for the year. The Russell Index of the 50 largest companies performed even better, gaining 4.4%. Positive contributors to performance were the fund’s allocation to public REITs and alternative investments, which both gained slightly more than 10% for the year.

International Equity Fund

Fund December Q4 2011 Year-to-Date
International Equity Fund -1.9% +2.4% -15.8%
MSCI ACWI ex US -1.2% +3.3% -14.3%
Difference -0.7% -0.9% -1.5%
  • The International Equity Fund declined 1.9% in December and underperformed its benchmark by 0.7%, driven largely by the fund’s allocation to small international companies and real estate. The fund’s small-company portfolio declined 3.1%, and its allocations to public real estate securities declined approximately 3.5%.
  • For the quarter, the International Equity Fund’s 2.4% return trailed the fund’s benchmark by 0.9%. For the month of December, the fund’s below-benchmark-relative performance was driven primarily by its allocation to small-company international stocks and real estate securities.
  • For the year, international stocks significantly trailed the performance of U.S. stocks. This was primarily attributable to investor concerns regarding the impact of the European debt crisis and expectations for declining growth rates in the developing world. In addition, U.S. dollar strength impaired performance of the international equity markets. All of the International Equity Fund’s diversifying strategies impaired the fund’s benchmark-relative performance. The fund’s international small company portfolio fell 20.5%, and the fund’s allocation to international real estate securities declined approximately 18.5%. In addition, the fund’s exposure to stocks from developing countries adversely affected performance, as an index of emerging market stocks declined 19.5%.

Multiple Asset Fund

Fund December Q4 2011 Year-to-Date
Multiple Asset Fund +0.2% +6.3% -1.0%
Composite Benchmark +0.5% +6.8% +1.0%
Difference -0.3% -0.5% -2.0%
  • For the month of December, the Multiple Asset Fund (MAF) gained 0.2% and underperformed its benchmark return by 0.3%. MAF’s two bond funds contributed positively to benchmark-relative performance, whereas its two equity funds contributed negatively to performance.
  • During the fourth quarter, the fund underperformed its benchmark by 0.5%, which is attributable to the below-benchmark performance of the two equity funds.
  • For the year, the fund declined 1.0% and meaningfully underperformed the fund benchmark return, which was a gain of 1.0%. All four funds that comprise MAF underperformed their respective benchmarks. Yet despite poor benchmark-relative performance in 2011, we are confident that the Multiple Asset Fund is positioned to outperform its benchmark in 2012.

Balanced Social Values Plus Fund

Fund December Q4 2011 Year-to-Date
Balanced Social Values Plus Fund +0.6% +6.9% +3.9%
Composite Benchmark +0.5% +7.0% +3.1%
Difference +0.1% -0.1% +0.8%


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