Shifting outlooks surrounding the Federal Reserves plan to taper its monthly bond purchases animated financial markets during the third quarter. Statements from the central bank had convinced investors that a modest reduction in the pace of bond buying would start in September, which helped to stabilize an earlier bond sell-off and drive a rebound in equities. The Feds subsequent decision not to taper sparked a rally in bonds and a jump in equity volatility and remodeled consensus narratives surrounding monetary normalization and economic recovery. Despite the drama, asset class returns for the quarter were universally positive. The best performers were non-U.S. developed market equities, as growth returned to Japan and Europe. Other strong results came from U.S. and emerging market equities and natural resources. Global real estate investment trusts (REITs) and high yield securities were modest performers, while investment-grade fixed income increased fractionally.
The Global Tactical Asset Allocation Fund posted a total return of 5.07% for the quarter, compared with 4.97% for the Funds blended static benchmark. The allocation changes we made during the period moderately increased the Funds overall risk profile, which aided performance. The major adjustment was to build an overweight position in non-U.S. developed market equities in two separate steps first by neutralizing constructive bets on emerging equities and natural resources, and second by paring back overweight positions in global REITs and Treasury inflation-protected securities (TIPs).
The Funds asset composition anticipates an improving but modest global recovery that remains underpinned by generous central bank support and buffeted by persistent fiscal and political headwinds.
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.