Global Tactical Asset Allocation
as of March 31, 2014
Fund Commentary
2014’s first quarter didn’t adhere to the bullish narrative scripted last year — the one in which supportive monetary policy, low inflation and good corporate earnings smoothly transition to improving U.S. Gross Domestic Product (GDP) and payroll gains, rising capital expenditures, a more confident consumer and, of course, rallying risk assets. Instead, a combination of overly optimistic expectations, harsh winter weather, muddled communications by the U.S. Federal Reserve (Fed) and nervy geo-political events caught market participants by surprise, forcing an early rethink of consensus outlooks and portfolio bets.

The Global Tactical Asset Allocation Fund posted a total return of 1.33% for the quarter, compared with 1.45% for the Fund’s blended static benchmark. We modestly reduced the Fund’s risk exposure during the quarter by trimming our emerging markets exposure to an underweight position and using the proceeds to move our global infrastructure position to a neutral weighting.

The most noteworthy financial market development during the quarter was the strong relative performance in the U.S. fixed income market. Defying expectations for higher rates stemming from the Fed’s tapered bond buying, yields on government bonds fell during the quarter, leading to strong returns for long-maturity Treasuries. Meanwhile, high-yield bonds outperformed the investment-grade bond market average but lagged long-maturity Treasuries. Among equities, the U.S. market outstripped non-U.S. developed and emerging markets. Falling interest rates aided global real estate investment trusts (REITs) which posted decent gains. Global infrastructure and natural resources each posted modest gains. The quarter’s string of unanticipated developments stoked investor interest in gold, which advanced strongly.

The Fund’s current asset composition anticipates a gradually improving global economy underpinned by low inflation, generous but less-predictable monetary support.
Investor Profile

For those long-term investors looking to diversify your investment among various asset classes (stocks, bonds, commodities, and other) both domestic and foreign, then this Fund may be right for you.

  • Diversify among various asset classes (stocks, bonds, commodities, and other) both domestic and foreign. The allocation will be based on an asset allocation framework developed by the Investment Policy Committee of The Northern Trust Company (TNTC) and Northern Trust Investments, Inc (NTI).
  • Invest significantly in funds that invest in companies that are located outside of the U.S. as represented in either the MSCI EAFE® Index, MSCI Emerging Markets Index or other diversified foreign indices.
  • Monitor the current asset allocation framework regularly to ensure the allocation is aligned with evolving investment views amid changing market and economic conditions.
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