March 2012 Investment Report


  • U.S. equities represented by the Russell 3000 Index increased 3.1% during March. Investor sentiment continued to improve as corporate profit margins remained high, consumer confidence increased and market volatility declined. It was the third consecutive monthly gain for stocks and the best first quarter in 14 years as the S&P 500 Index increased 12.6%.
  • International developed equities, as measured by the bellwether MSCI EAFE Index, decreased 0.5% in U.S. dollar terms over fears of an economic slowdown in China and the euro zone. Equities of developing countries also decreased as the MSCI Emerging Markets IMI Index declined 3.3% during the month.
  • The interest rate yield curve steepened in March. Short rates (less than three years) changed fractionally. The yield on the 10-year U.S. Treasury Note increased by 0.24% (24 basis points) to end the month at 2.21%. The long bond (30-year U.S. Treasury) rose 25 basis points in yield to 3.34%. Investor sentiment regarding improving economic growth contributed to higher long-term interest rates, whereas short-term rates continued to remain at low levels due to the Federal Reserve policy of maintaining low interest rates to help sustain the economic recovery.
  • Rising yields across most of the yield curve had a negative impact on fixed-income returns. Investment-grade debt, as represented by the Barclays U.S. Credit Index, declined 0.8%. Below-investment-grade debt, as measured by the Barclays U.S. High Yield Index, declined 0.1% in March but outperformed the investment grade index by 0.7%.
  • The U.S. dollar climbed modestly in March. The Dollar Index, which compares the U.S. dollar to six other major currencies, advanced 0.3%. Within that index, the euro recorded a slight gain of 0.1% versus the dollar, and the Japanese yen declined 2.1% for the month. In emerging market currencies, the Brazilian real declined 6.0% against the U.S. dollar, resulting from official Brazilian currency intervention.
  • Commodities as represented by the Dow Jones UBS Commodity Index declined 4.1% for the month. Energy and livestock prices were down 7.2% and 8.1%, respectively. Grain was the strongest performing commodity and added 1.5% for the month.

Economics Highlights

  • The U.S. economy has seen improvement across several sectors. Despite the recent rise in gasoline prices, auto sales accelerated in February to their fastest rate since 2008. Consumers usually purchase autos on credit, so this suggests a positive indicator for a rebound in consumer credit markets.
  • Sales of existing homes have shown some strength during the past several months without governmental stimulus, though observers are anxiously awaiting to see consecutive months of positive data.
  • Retail sales showed the biggest increase in five months.
  • While the U.S. economy has strengthened in recent months, international markets reacted negatively to a weak March manufacturing report from China, raising concerns that country’s growth may be slowing.
  • Concerns over the debt crisis in the euro zone eased somewhat during the month. The biggest news was Greece’s successful effort to restructure about €200 billion in debt. This helped facilitate the country’s access to new capital through an International Monetary Fund (IMF) bailout plan. For investors that purchased insurance against a Greek default, the restructuring was considered an official default event.
  • Apple Inc. addressed investor questions over its growing cash reserves by declaring a dividend and a stock buyback program. The stock reached an all-time high in the month, surpassing $600 per share.

Geopolitical Headlines

  • The Supreme Court conducted a three-day review of the Patient Protection and Affordable Care Act (PPACA, i.e., the health care reform law) passed earlier in President Obama’s presidency. The debate centers on the question of whether it is constitutional to require citizens to buy health insurance.
  • Mitt Romney continued to build a lead in the Republican presidential primary campaign with strategic wins in Massachusetts, Virginia, Ohio and Illinois.

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 March Year-to-Date
Inflation Protection Fund -1.2% +1.8%
Barclays Capital U.S. Government Inflation-Linked Bond Index -1.1% +0.8%
Difference -0.1% +1.0%
  • The Inflation Protection Fund declined 1.2% and slightly underperformed its performance benchmark, primarily due to the 3.1% decline in the value of the fund’s commodities investments. The fund’s other two diversifying strategies of inflation-linked bonds from international companies positively contributed and partially offset the negative contribution from the fund’s commodity investments.
  • For the first quarter and year-to-date, the fund has gained 1.8% and outperformed its benchmark by 1.0% due to the outperformance of the fund’s three diversifying strategies. The fund’s holdings of inflation-linked bonds from developing countries have gained 7.8%, and the fund’s commodities portfolio has gained 3.7%.

Fixed Income Fund

Fund March Year-to-Date
Fixed Income Fund -0.6% +2.4%
Barclays Capital U.S. Universal (ex MBS) Index -0.7% +1.0%
Difference +0.1% +1.4%
  • The Fixed Income Fund declined 0.6% in March and slightly outperformed the fund’s benchmark. The fund’s better-than-benchmark performance is primarily attributable to the fund’s greater-than-benchmark exposure to credit; however, this was partially offset by of the 1.2% decline of the fund’s positive social purpose (PSP) loans. The value of the PSP loans was adversely affected by the rise in long-term interest rates, as these loans have an average term longer than the average maturity for the fund benchmark.
  • For the first quarter and year-to-date, the fund has gained 2.4% and has meaningfully exceeded the benchmark return. The fund’s allocation to bonds from developing countries has gained 6%, its credit-sensitive strategies have gained between 4% and 5%, and its global bond allocation has gained 3% because of general U.S. dollar weakness. In addition, the fund’s largest manager, PIMCO, has rebounded nicely from a disappointing 2011 and is significantly outperforming its benchmark.

U.S. Equity Fund

Fund March Year-to-Date
U.S. Equity Fund +2.6% +12.0%
Russell 3000 +3.1% +12.9%
Difference -0.5% -0.9%
  • The U.S. Equity Fund gained 2.6% in March, but again underperformed the fund’s benchmark by 0.5%. The primary contributor to the fund’s below-benchmark performance is the fund’s greater-than-benchmark allocation to stocks of small and medium-sized companies, as large-company stocks outperformed small and mid-sized company stocks during the month. In addition, the fund’s allocation to private real estate and private equity adversely contributed to the fund’s performance because the value of these investments tends to lag in periods of strong equity returns, as experienced during the first quarter. The fund’s allocation of publicly traded real estate investment trusts (REITs) gained 5.2% and positively contributed to the fund’s benchmark-relative performance.
  • For the first quarter and year-to-date, the U.S. Equity Fund gained 12.0%, but underperformed the fund benchmark by 0.9%. Although the fund’s investment managers have collectively outperformed their respective benchmarks, the primary contributor to the U.S. Equity Fund’s underperformance is the fund’s 10% allocation to the alternative investments of private equity and private real estate. These strategies recorded fractional gains during the quarter compared with the nearly 13% return of the fund benchmark. We expect that the fund will recognize some gains for these strategies in the second quarter.

International Equity Fund

Fund March Year-to-Date
International Equity Fund -1.1% +12.8%
MSCI ACWI ex US -1.4% +11.6%
Difference +0.3% +1.2%
  • The International Equity Fund declined 1.1% in March, but outperformed its benchmark by 0.3%. As in February, the fund’s diversifying strategies of international REITs and stocks of small international companies were the primary drivers of the fund’s positive benchmark-relative results.
  • For the first quarter and year-to-date, the International Equity Fund has produced a 12.8% return—exceeding its performance benchmark by 1.2%. The fund’s diversifying strategies of stocks from developing countries, small-company stocks and international REITs have all positively contributed to performance, with the fund’s portfolio of international small companies advancing 17.1%.

Multiple Asset Fund

Fund March Year-to-Date
Multiple Asset Fund +0.7% +8.7%
Composite Benchmark +0.8% +8.4%
Difference -0.1% +0.3%
  • For March, the Multiple Asset Fund gained 0.7%, but slightly underperformed its fund benchmark. Two of the fund’s underlying investment strategies outperformed their respective benchmarks, and two underperformed their benchmarks.
  • For the first quarter and year-to-date, the fund gained 8.7% and outperformed the 8.4% return of its benchmark. The excellent benchmark-relative performance of the Fixed Income Fund, Inflation Protection Fund and International Equity Fund all contributed positively to the excess benchmark-relative performance; however, this was partially offset by underperformance of the U.S. Equity Fund.

Balanced Social Values Plus Fund

Fund March Year-to-Date
Balanced Social Values Plus Fund +1.7% +7.0%
Composite Benchmark +1.9% +7.1%
Difference -0.2% -0.1%


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