Welcome To OneAmerica Funds

A Message From The Fund President

Welcome to the OneAmerica Funds website. OneAmerica Funds, Inc. has been in operation since 1989 and currently offers five portfolios: Value, Money Market, Investment Grade Bond, Asset Director and Socially Responsive. This website includes financial information, prospectuses and annual reports for each portfolio as well as insights from each portfolio's investment managers. I trust that you will find this information useful as you review your investments.

After a strong performance in 2013, the S&P 500 has again posted a solid first half performance in 2014, being up over 7 percent.  Meanwhile, equity market volatility that seemed feasible or even likely after a year in which the market was up over 30 percent has not yet materialized.  Instead market volatility is back to the low levels last seen in 2005 and in the early 1990’s.  The S&P 500 has not experienced a correction of over 10 percent since 2011.

In the bond market, yields rose in the second half of 2013 and appeared poised to gradually rise further in 2014. The Federal Reserve committed to “taper”, or reduce its quantitative easing program and has since followed through with its plan.  Instead of interest rates rising, government bond yields have actually declined back into the middle of their five-year range.  Credit spreads also narrowed over the first half of 2014, as corporations continued to maintain healthy balance sheets and demand for yield by investors seemed insatiable.  Together, lower interest rates and narrowing credit spreads helped bonds generate respectable returns as well in the first half of 2014.

As we began the year, economic growth appeared to be accelerating after a number of years of lackluster growth.  The unemployment rate was declining and continues to decline.  The housing market recovery and consumer confidence were again contributing positively to the recovery.  And budget negotiations pushed the fiscal cliff issue into 2015.  The economy appeared as if its strength might catch up with the market’s strength.  Then we all experienced one of the harshest winters on record in the U.S. and the economy actually contracted by 2.1 percent during the first quarter.  What now?

Over the balance of 2014, the Federal Reserve appears poised to complete tapering of quantitative easing in the absence of much worse economic data.  Markets will then be faced with the reality that the Fed may ultimately begin to raise interest rates – the question then becomes when and how fast.  While impossible to predict, the snap back in economic data expected following the harsh winter has been surprisingly weak thus far.  Unless this changes very soon, the slow growth, low inflation environment we have experienced over the past few years may continue. 

Thus far in 2014 financial markets have absorbed a number of headwinds remarkably well including:  the much weaker economic data, Fed tapering and a wide variety of geopolitical events.  Weak but positive growth has been supportive of low interest rates and strong returns for risk assets.  Fed communication regarding monetary policy will become increasingly important as the Fed finishes tapering.  The Fed has stated that monetary policy rates are not likely to rise until 2015.  If economic data is strong enough, then talk of rates rising earlier due to this strength may permit equities to continue their advance during the second half of the year. However, the fixed income market may not fare as well. Once monetary policy actually becomes more restrictive, we can expect interest rates to rise at least moderately and place downward pressure on bond prices.

OneAmerica Funds, Inc. is comprised of five portfolios, each with a different directive. The Value Portfolio is an equity portfolio utilizing a multicap, value approach. The investment objectives of the Money Market Portfolio are to provide current income, preserve assets and maintain liquidity. The Investment Grade Bond Portfolio focuses primarily on intermediate investment grade bonds. The Asset Director Portfolio is a managed portfolio investing in stocks, bonds and cash based on our outlook for these various asset classes. And finally, the Socially Responsive Portfolio typically invests in financially strong companies that also adhere to specific moral beliefs.

Investment performance for each portfolio in OneAmerica Funds, Inc. for the first half of 2014 has been listed below. 

Portfolio Class O Advisor Class
Value Portfolio 6.9%  6.8%
Money Market Portfolio   0.0%    0.0%
Investment Grade Bond Portfolio 4.0%  3.8%
Asset Director Portfolio   5.6%    5.5%
Socially Responsive Portfolio 5.1% 5.0%

Performance numbers for the OneAmerica portfolios are net of investment advisory fees and other expenses paid by each portfolio, but do not reflect specified contract, mortality and expense risk charges.

As always, I am grateful for the confidence you have placed in us and by continuing to invest in OneAmerica Funds, Inc.

J. Scott Davison
President
OneAmerica Funds, Inc.

August 11, 2014