Financial markets, especially within most equity area, continue to perform nicely. November results evidenced a continuing rebound to the economy with housing and manufacturing activity indicating important new found strength and unemployment and domestic output continuing to show gains. Hopes for Congress finally demonstrating some leadership on the budget front and reduced anxiety over the economic impact of the Federal Reserve’s possible backing off its “easy” monetary policy have helped to reassure markets.
Domestic stocks, especially small and midcap securities posted strong gains last month, the small cap index, the Russell 2000, was up another 4%, while the major broader domestic indices climbed just over 3%. Non US markets were fractionally higher.

For the third month in a row, global equities far outdistanced bonds and commodities such as precious metals, agriculture and real estate. Interest rates spiked higher in November anticipating an improving economic picture with the 10-Year Treasury bond brushing 2.75%. Higher yields translate into low bond prices with bond markets lower. An exception were high-yield (non-investment grade)debt securities that bumped up 0.5%.

For the fiscal year, the portfolio is ahead by over 10%, with seven months remaining. Obviously anything can happen, but this is well ahead of last year at this point. Assets stand at approximately $990 million and have improved by approximately $60 million since June 30. One of the portfolio’s consistently strong performers, small cap value manager, Dimensional Advisors was up 5% in November and calendar year to date has added nearly 40%.

First Quarter FY 2014, September 24 –
St. Paul Teachers’ Retirement Fund Association

Uncertainty, in August, both about when the Federal Reserve will begin its curtailment of bond buying and continuing Congressional haggles over the funding of the Government, caused securities markets to pause from their earlier “bullish” mood. As a result, a strong July trend was nearly erased by the August swoon. Since July and the start of a new fiscal year, the Fund’s portfolio is up about 1.4% (net of fees) but slightly trails its benchmark return of 1.9%. In August, the portfolio fell 2.3%, following July’s strong 3.7% advance. The portfolio’s annual target return stands at 8%. The Fiscal Year’s first quarter, through September 30, often sets the tone for the ensuing twelve month period.

A look at the portfolio indicates that domestic and non-US equities generally added value. However, emerging markets and real estate stocks were lower. On the fixed income front, the Plan’s high yield portfolio rose 1%, while investment grade global (US and non-US) bonds were down slightly over 1% for the two month period. Alternative holdings were mixed. Over the longer term, the three year return has generated a 12% return and the 10 year number stands at 9.1%. Total portfolio assets at the end of August were approximately $930 million.

The Board is continuing to make selective adjustments to the portfolio to bring the asset mix in line with its established longer term asset targets. The Policy calls for 55% equity, 20% fixed income, 11% real assets, 9% private equity/alternatives and 5% hedge funds.