Multi-Manager High Yield Opportunity
as of December 31, 2013
Fund Commentary
High-yield issues outperformed investment-grade bonds during the fourth quarter, as lower-quality credits registered the highest returns. Supported by improving U.S. economic data and a rising stock market, high yield produced positive performance for the quarter led by CCC bonds, which outperformed the B and BB-rated sectors. Credit risk remained low compared to historical levels and ratings agencies continued to forecast a default environment below the long-term average of 4.8%. Issuers took advantage of this environment and extended maturity through reissuance.

For the quarter, the BofA Merrill Lynch High Yield Master II Constrained Index gained 3.49%. The Multi-Manager High Yield Opportunity Fund finished the quarter behind the benchmark with a return of 3.16%.

Fund underperformance was driven by sub-adviser Loomis Sayles, due to their yield curve positioning. The portfolio’s exposure to non-U.S. dollar assets also represented a drag on relative results. For calendar year 2013, the Fund returned 6.67% compared with the benchmark return of 7.41%.
Investor Profile

If you're looking for a total-return-oriented high yield fund that's designed to provide competitive performance in a broad range of market environments, you may want to consider the Multi-Manager High Yield Opportunity Fund. The highly diversified, multi-style Fund can invest in high yield corporate securities as well as foreign bonds, emerging markets, bank loans, convertibles, preferreds, mortgages, REITs, equities, munis and closed-end high yield funds. Despite the Fund's opportunistic investment strategy, it can be used as the primary high yield allocation in portfolios.

  • Strive to maintain a highly diversified, opportunistic investment strategy that can invest in high yield corporate securities as well as foreign bonds, emerging markets, bank loans, convertibles, preferreds, mortgages, REITs, equities, municipals and closed-end high yield funds.
  • Select complementary manager from a broad universe of investment managers.
  • Blend managers into a single fund in an effort to provide an attractive combination of risk and return.
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Not FDIC insured | May lose value | No bank guarantee

†Northern tax-exempt fixed income funds' and Northern High Yield Fixed Income Fund's Average Duration is calculated using the modified duration formula. Other Northern fixed income funds show the option-adjusted duration. Duration is a measure of a bond fund's sensitivity to changes in interest rates.

*Distribution rate and tax-equivalent distribution rate represent the annualization of the Fund's distributions for the prior month ending on the date shown, including capital gain distributions. The 30-day SEC yield and tax-equivalent 30-day SEC yield represent the annualization of the Fund's net investment income, excluding capital gain income. The tax-equivalent distribution rate and tax-equivalent 30-day SEC yield are based on an assumed tax rate of 47.9% for Arizona, 55.7% for California and 43.4% for national municipal funds.

**Per share paid out February 24 with a record date of February 21. The amount shown represents dividends paid for net investment income and excludes distributions from capital gain income.

*View investment term definitions

Please carefully read the prospectus and summary prospectus and consider the investment objectives, risks, charges and expenses of Northern Funds before investing. Call 800-595-9111 to obtain a prospectus and summary prospectus, which contains this and other information about the funds.

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