Investment Update

Investment Update – 1st Quarter 2015

The first quarter of 2015 delivered weaker than expected economic data and downward revisions to both GDP and earnings estimates.  Bad weather and a strong U.S. dollar were contributing factors.  In terms of market performance, a more important driver was the Federal Reserve’s reiteration of its dovish stance, which is in part a reaction to concerns over the economic impact of the strong dollar and the continued weakness in energy prices.  However, as investor expectations for near term interest rates increased and the belief in an improving consumer-led economy increased, investors pushed up stocks during the quarter. The S&P 500 index rose 1.0% in the first quarter.  Small Cap Stocks, as measured by the Russell 2000 index, outperformed, rising 4.3%.  Overall, the Russell 3000 index increased 1.8%.  Longer term, one-year returns were 12.7%, 8.2% and 12.4%, respectively.  The DJIA increased 0.3% for the quarter and 10.6% for the year.  The NASDAQ rose 3.8% for the first quarter and 18.1% for the year.

The European Central Bank announced a long-awaited quantitative easing program which contributed to declining yields allowing all major sectors to finish in positive territory with the Barclays Aggregate index rising by 1.6% during the first quarter.  For the one-year period, the index rose 5.7%

The start of sovereign quantitative easing by the European Central bank helped boost Europe ex-UK equities. Equities also rose in Japan as its economy exited recessionary territory. The MSCI EAFE returned 5.0% in the first quarter and -0.5% for the one-year.

Emerging Asia outperformed.  The increase was driven by advances in Chinese and Indian equities. Emerging Latin America, on the other hand declined over corruption scandals in Brazil.  Overall, the MSCI EM index rose 2.3% during the first quarter.  For the one-year period, the index increased 0.8%.

 

ACERA is a long-term investor with a well-diversified portfolio. For the quarter ending March 31, 2015, ACERA’s Total Fund returned 2.3%, ranking in the 45th percentile and finished the first quarter at a market value of $6.9 billion.  Domestic Equities returned 1.9% (65th percentile), International Equities returned 4.0% (60th percentile), and Fixed Income returned 1.4% (62nd percentile) during the first quarter.  ACERA’s Real Estate managers composite and Private Equity and Alternatives Return Leading Strategies[1] (PEARLS) composite returned 3.3% and 3.5%, respectively, during the first quarter. The Real Return Pool composite decreased -4.9%, during the first quarter. 

 

[1] Real Estate and PEARLS composite returns are subject to a quarter lag in reporting results. 

Commands