June 2012 Investment Report


  • U.S. equities represented by the Russell 3000 Index increased 3.9% during June. For the three months ending June 30, the Russell 3000 Index has declined 3.1%; however, the index has gained 9.3% year-to-date through June. Developed-country international equities as measured by the bellwether MSCI EAFE Index increased 7.0% in U.S. dollar terms. Equities of developing countries also increased, as the MSCI Emerging Markets IMI Index gained 3.8% during the month.
  • The interest rate yield curve steepened marginally in June. The two-year U.S. Treasury Note yield increased by 0.04% (4 basis points) to 0.30%. The 10-year U.S. Treasury Note yield increased by 0.09% (9 basis points) to 1.65%. The long bond (30-year U.S. Treasury) increased 11 basis points in yield to 2.75%.
  • Investment grade debt as represented by the Barclays U.S. Credit Index increased 0.4%. Below-investment-grade debt as measured by the Barclays U.S. High Yield Index increased 2.1%, outperforming the investment grade index by 1.7%. Treasury securities as measured by the Barclays U.S. Treasury Index decreased 0.4% in June, reflecting the willingness of investors to assume more risk in their fixed income investments.
  • The U.S. dollar declined during June, reflecting investors’ perception of reduced risk in non-dollar financial assets and moderation in the growth of U.S. economic indicators. The Dollar Index, which compares the U.S. dollar to six other major currencies, decreased 1.7%. Within that index, the euro increased 2.4% versus the dollar while the Japanese yen decreased 1.9% for the month.
  • Commodities, as represented by the Dow Jones UBS Commodity Index, increased 5.5% in June. Grains were the strongest contributor to the index, rising 17.6% as hot and dry weather conditions across much of the U.S. adversely affected crop growth.

Economics Highlights

  • The Federal Reserve (“the Fed”) extended its “Operation Twist” until January 2013. The program is designed to lower long-term yields and borrowing costs as the Fed sells short-term U.S. Treasury bills and notes and purchases longer term bonds.
  • According to the S&P/Case-Shiller Index, average home prices in major cities increased by 1.4%. This is the first increase in seven months. The Commerce Department also reported that new home sales rose by 7.6%.
  • The Chinese Central Bank (PBOC) cut its one-year bank lending rate by 25 basis points. It also loosened regulations on interest rates that banks can offer depositors. The moves are attempts by the PBOC to stimulate growth amid concerns of an economic slowdown.
  • There was mixed news regarding manufacturing. A somewhat alarming Fed report from Philadelphia showed the manufacturing sector contracting. This was countered by a strong upbeat durable goods report showing manufacturing orders rebounding 1.1%, which exceeded expectations by 0.5%.
  • Europe reached a surprise agreement to unify its banking system. The agreement called for a single regulator to oversee banks in 17 nations. Details are expected to be finalized by year-end. Almost every financial market advanced on this news, except U.S. Treasuries. Oil prices advanced the most, gaining more than 9% on the first trading day after the agreement was announced.

Geopolitical Headlines

  • Several important global elections took place. In its first free democratic election, Egypt elected Mohamed Morsi, a member of the Muslim Brotherhood. In Greece, Antonis Samaras, the candidate who advocated renegotiating Greece’s bailout, was sworn in as Prime Minister in an election that seemed to signal that the Greek majority wants to remain in the European Union. In France, the Socialist Party headed by Prime Minister Francois Hollande captured an absolute majority in parliamentary elections, giving Socialists almost full control of France’s political institutions.
  • Spain requested a bailout of $125 billion to help recapitalize its banks. Cyprus followed with a request for its banks and became the fifth European country to request a bailout. In the U.S., Governor Scott Walker of Wisconsin survived a recall vote, which was seen as a defeat for organized labor.
  • The U.S. Supreme Court ruled that the Patient Protection and Affordable Care Act is constitutional in a 5/4 split vote. Chief Justice John Roberts provided the surprise swing vote stating that the law imposed a tax, which is valid under Congress’ constitutional authority to levy taxes. The Court also ruled that the U.S. government could not expel states from Medicaid if they did not agree to expanded eligibility for the health program.

Sources: Bloomberg News, the Economist, the Wall Street Journal, CNBC, CNN, Associated Press and Bridgewater

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)

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 June Q2 2012 Year-to-Date
Inflation Protection Fund +0.0% +1.2% +3.0%
Barclays Capital U.S. Government Inflation-Linked Bond Index -0.6% +3.4% +4.2%
Difference +0.6% -2.2% -1.2%
  • The Inflation Protection Fund was flat for the month of June, but outperformed its benchmark as investor pessimism about the state of the U.S. and world economy dissipated. The fund’s 10% allocations to its diversifying strategies that invest in commodities and inflation-linked debt of developing countries gained 3.9% and 2.6% respectively.
  • For the three months ending June 30, the fund gained 1.2% but meaningfully underperformed its benchmark, as all three of the fund’s diversifying strategies underperformed the fund’s U.S. Treasury Inflation Protected Securities (TIPS) benchmark. Investor sentiment turned decidedly negative in May over concerns regarding the European debt crisis and its impact on U.S. and world growth. Funds flowed into low risk investments such as U.S. TIPS, which gained 3.3% for the quarter. The fund’s commodities investments declined 6.5% for the quarter and contributed the most to the fund’s poor benchmark-relative performance.
  • For the year, the fund has gained 3.0% but is underperforming its benchmark. Two of the fund’s diversifying strategies—commodities and inflation-linked bonds from developed countries—have contributed to the below-benchmark performance, with the fund’s commodities investments having declined 2.9% for the year. The fund’s 10% allocation to bonds from developing countries, however, has gained 6.3% and partially offset the negative contributions from the other two diversifying strategies.

Fixed Income Fund

Fund June Q2 2012 Year-to-Date
Fixed Income Fund +1.0% +2.1% +4.6%
Barclays Capital U.S. Universal (ex MBS) Index +0.3% +2.3% +3.3%
Difference +0.7% -0.2% +1.3%
  • The Fixed Income Fund gained 1.0% in June and outperformed its benchmark by 0.7%. The fund’s benchmark-relative performance benefitted from its significant underweighting of U.S. Treasury securities, which underperformed all other fixed income sectors because of a reversal of investor pessimism regarding the state of the U.S. and world economy. The fund’s allocation to bonds from developing countries and below-investment grade bonds advanced 4.5% and 2.3% respectively. The fund’s allocation to positive social purpose loans declined 0.5%, as the value of these loans is largely linked to the price of U.S. Treasury securities.
  • For the three months ended June 30, the fund gained 2.1% and slightly underperformed the fund’s benchmark return of 2.3%. The fund’s allocation to positive social purpose loans produced the best performance, gaining 4.7% for the quarter as it benefitted from a decline in long-term U.S. Treasury interest rates, which significantly impact the value of these loans. In addition, the fund’s largest manager, PIMCO, produced a 3.2% return, which exceeded its performance benchmark by nearly 1%. The positive contributions from these strategies, however, were more than offset by the fund’s allocations to international bonds and below-investment-grade bonds. The U.S. dollar significantly appreciated against foreign currencies in the second quarter due to investor risk aversion attributable to the European debt crisis. Reduced investor appetite for risk also adversely affected the value of higher risk fixed income securities.
  • For the year, the Fixed Income Fund has gained 4.6% and has outperformed its benchmark by 1.3%. All of the fund’s strategies have added value relative to the fund benchmark. As the fund’s largest manager, PIMCO is exceeding its performance benchmark for the year to date by 2.6% and represents the most significant contributor to the fund’s excess performance.

U.S. Equity Fund

Fund June Q2 2012 Year-to-Date
U.S. Equity Fund +3.5% -3.5% +8.1%
Russell 3000 +3.9% -3.1% +9.3%
Difference -0.4% -0.4% -1.2%
  • The U.S. Equity Fund advanced 3.5% in June, but underperformed the fund’s Russell 3000 Index benchmark. The fund’s allocations to alternative investments primarily contributed to the fund’s below-benchmark performance.
  • For the three months ending June 30, the fund declined 3.5%, which was 0.4% below the fund benchmark. The fund’s greater-than-benchmark allocation to small and mid-sized companies detracted from the fund’s performance for the quarter.
  • For the year to date, the fund has gained 8.1% but trails its benchmark return by 1.2%. The fund’s allocation to alternative investments and its higher-than-benchmark allocation to small and mid-sized companies have both detracted from the fund’s benchmark-relative performance. The fund’s allocation to publicly traded real estate investment trusts (REITs) has gained 14.7% for the year and has positively contributed to benchmark-relative performance.

International Equity Fund

Fund June Q2 2012 Year-to-Date
International Equity Fund +4.8% -7.3% +4.6%
MSCI ACWI ex US +5.6% -7.8% +2.9%
Difference -0.8% +0.5% +1.7%
  • The International Equity Fund advanced 4.8% in June and underperformed its benchmark return by 0.8%. The fund’s managers have collectively underweighted stocks from the euro countries, and euro stocks rebounded in June due to investor optimism surrounding an agreement to strengthen the European banking system. An index of stocks from the European Monetary Union (EMU) advanced 8.4%.
  • For the three months ending June 30, the fund declined 7.3% and outperformed its benchmark index by 0.5%. The fund benefitted from its underweight of stocks from the EMU and its diversifying investments of international real estate investment trusts (REITs) and private real estate.
  • For the year to date, the International Equity Fund has gained 4.6% and outperformed its benchmark by 1.7%. The primary contributors to the positive relative performance include the fund’s 7% allocation to international REITs, which have gained about 17% so far in 2012. In addition, most of the fund’s managers are outperforming their respective benchmarks largely due to their less-than-benchmark allocations to stocks from the EMU, which have declined more than other international stocks.

Multiple Asset Fund

Fund June Q2 2012 Year-to-Date
Multiple Asset Fund +2.8% -2.6% +5.9%
Composite Benchmark +2.9% -2.0% +6.2%
Difference -0.1% -0.6% -0.3%
  • For June, the Multiple Asset Fund gained 2.8% and slightly underperformed its benchmark. The Multiple Asset Fund’s two bond funds positively contributed to benchmark-relative performance, although their contribution was more than offset by the below-benchmark performance of the two equity funds.
  • For the three months ending June 30, the fund declined 2.6% and underperformed its benchmark by 0.6%, as only the International Equity Fund outperformed its benchmark for the quarter.
  • For the year to date, the Multiple Asset Fund has gained 5.9% and has slightly underperformed the benchmark’s 6.2% return. The Fixed Income Fund and International Equity Fund have positively contributed to the Multiple Asset Fund’s benchmark-relative performance, whereas the Inflation Protection Fund and U.S. Equity Fund have negatively contributed to the Multiple Asset Fund’s benchmark-relative performance.

Balanced Social Values Plus Fund

Fund June Q2 2012 Year-to-Date
Balanced Social Values Plus Fund +1.7% -1.7% +5.1%
Composite Benchmark +1.8% -2.2% +4.8%
Difference -0.1% +0.5% +0.3%


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