We hope you all had a wonderful Christmas and Happy New Year. It is truly an honor to serve you and your Moravian Ministries Foundation in America. 2017 is in the books and it was a great year for the markets. We encourage you to review your fourth quarter statements and certainly let us know if there are any questions. We have also developed a one page performance summary for each investment model. These summaries include an easy reference to the asset allocation of each model, as well as, the performance of the model for the quarter. You will be able to access these, every calendar quarter, from our website www.mmfa.info. Please like us on Facebook and subscribe to our weekly newsletter so you can track our progress and our many activities through 2018. We are truly hoping to work with each of you to move ministries forward, together.
Moravian Ministries Foundation now has over $161 million in assets under management and we continue to strive hard to provide a high-quality investment product at a low cost. In 2017 all of our allocations generated positive returns and outperformed their multi-asset benchmarks. The Growth allocation returned 16% for the year, net of fees, and ahead of the growth, multi-asset benchmark that was up 14.7%. The primary contributors to relative performance were our fixed income managers, the domestic REIT manager, and tactical adjustments made by our investment partner, TIAA Kaspick through the year.
The year had a backdrop of solid corporate earnings and synchronized global economic growth. The S&P 500 returned 21.8% in 2017 which was the index’s ninth consecutive year of positive returns. Market volatility, despite political volatility, remained exceptionally low. Helped by a weaker US dollar, international and developed markets returned 25% outperforming the S&P 500 for the first time since 2012. Emerging market stocks were the superstar for the year, up 37.3%. This again, provides backing for a well-diversified portfolio. For the first time since 2012, globally diversified portfolios beat US-centric portfolios. Value stocks lagged growth stocks during the year primarily because growth managers were helped by outstanding performance in the technology sector. Technology stocks now make up 24% of the S&P 500. Again, diversification helps even out returns over time and capture some upswing when certain sectors do better than others.
The Fed raised rates three times in 2017, but the yield curve on the 10-year US Treasury closed at just 2.4% essentially unchanged from where it began the year (2.45%). As short-term rates rose, the yield curve flattened. At the end of the year, the difference between the yields on two-year and 10-year notes was just .51%, its lowest level since late 2007. With yields largely unchanged, intermediate-term bonds returned a modest 2.1% in 2017, while high yield bonds benefited from tighter credit spreads and rose 7.5%.
We maintain a perpetual view on investment management. Focus on the long-term approach. Our investment pools are designed with high-quality managers and a strategic allocation where incremental changes can be made as conditions warrant. No changes were made to portfolio weights or to the manager line-up in 2017. As we look forward to another year the prospects are bright for the market. If January is any indication, corporate America has loved the tax cuts passed in late 2017 and the market has hit even more record highs. Many economists are revising GDP estimates upward for the year and most commentators think the bull market still has running room. As always, we encourage diversification and decisions made on the needs of your church, your ministry and those you serve. May the Lord continue to bless you and, if we can help in any way, do not hesitate to call at 888-722-7923 or email us at email@example.com.