The discussion about a potential tapering or slowing down of the Federal Reserve’s latest quantitative easing program led to a pull-back in the major indices. Concern over the Federal Reserve’sintention to reduce its quantitative easing program caused a rout in the fixed income markets. In two short months, the yield on the 10-year Treasury note jumped 80 basis points, steamrolling bond prices along the way. The Barclays Capital Aggregate returned -2.3% for the quarter and -0.7% forthe year.

U.S. equities rose during the quarter as China growth concerns and continuing Fed tapering fears gave way to improved sentiment at the end of June. The S&P 500 and DJIA index rose 2.9% for the second quarter of 2013. Smallerstocks performed the best with the Russell 2000 index, appreciating 3.1%. Overall,the Russell 3000 index returned 2.7% during the quarter;the one yearreturn was 21.5%. TheNASDAQreturned 4.2% forthe quarter.

Global growth concerns and Fed tapering also led to sharp declines in the Intl equity and emerging markets. The MSCI ACWI, ex US index declined 2.9%, while the MSCI EM index fell 8.0% in the second quarter.

ACERA is a long-term investor with a well-diversified, conservative portfolio. For the quarter ending June 30, 2013, ACERA’s Total Fund returned 0.7%, ranking in the upper 23rd percentile and finished the second quarter at a market value of about $6.0 billion. Domestic Equities returned 4.1%, International Equities returned -1.2%, and Fixed Income returned -2.7% during the second quarter. ACERA’s Real Estate managers composite and Private Equity and Alternatives Return Leading Strategies¹ (PEARLS) composite returned 2.8% and 2.3%, respectively, during the second quarter. The Real Return Pool composite returned -7.9% during the second quarter.

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