Global Tactical Asset Allocation
as of June 30, 2014
Fund Commentary
A downbeat macroeconomic backdrop didn’t prevent financial markets from rallying broadly in the second quarter. Instead, a combination of continued easy money, solid corporate profits and still-low bond yields stoked investor optimism in the face of mixed economic data and deepening frictions in the Middle East and Ukraine. Investors appear convinced the economy is on ever-firmer footing yet expect the U.S. Federal Reserve and other central banks to show restraint in scaling back the stimulus programs that have helped bolster risk asset prices.

The Global Tactical Asset Allocation Fund posted a total return of 3.60% for the quarter, compared with 3.84% for the Fund’s blended static benchmark. We did not make any changes to the Fund’s asset allocation during the quarter. The Fund maintained an overweight position in risk assets, especially U.S. and other developed equities and high yield bonds, a neutral weighting in real assets and underweight positions in investment-grade fixed income and cash. Real assets were the quarter’s best performers, led by global listed infrastructure and global real estate investment trusts (REITs). Among equities, emerging markets posted the strongest gains, followed by developed region and U.S. shares. Fixed income returns were muted, topped by Treasury inflation protected securities (TIPS) and high-yield bonds. Meanwhile, gold increased sharply amid the spike in geopolitical tensions.

The Fund’s current asset composition anticipates an enduring economic expansion that successfully transitions from a reliance on generous monetary stimulus to one supported by steady — if unspectacular — low inflationary growth.
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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