Title: Northern Trust
1Fund FOCUS
Mutual Fund Update
Peter Jacobs Senior Vice President Mutual Fund
Product Management Northern Trust Global
Investments For Financial Professional Use Only
2Agenda
- Northern Funds Product Line Update
- Updates on Existing Funds
- Northern Tax-Exempt Funds
- Northern Multi-Manager Funds
- NIF Global Tactical Asset Allocation
- NIF Money Market Funds
- New Funds
- NIF Treasury Portfolio (money market fund)
- Ultra-Short Duration Funds
- Northern Ultra-Short Fixed Income Fund
- Northern Tax-Advantaged Ultra-Short Fixed Income
Fund
3Northern Funds Product Line Update
Growth of Funds and Assets YTD 2009Northern
Funds and Northern Institutional Funds
Number of Funds Mutual Fund Assets under Management
9-30-08 61 85 billion
9-30-09 67 93 billion
- 12-month AUM Growth 9 vs. negative growth for
the industry - Perspective Mutual fund AUM of 93 billion is
less than 15 of Northern Trusts total
investment AUM - Primary sources of AUM growth
- Money market funds
- Bond funds Bond Index Fund High Yield Fund
Municipal Funds
4Update Tax-Exempt Funds
Tax-exempt bond funds have been Northerns
top-selling mutual fund category YTD, with more
than 2 billion in sales YTD.
- Why?
- Bond Ladders gtgtgt Bond Funds
- Active management can capitalize on
opportunities - Higher income potential by capturing cap gains
managing maturities yield curve changes
positioning strategies (barbell, bullet, etc.)
vs. ladders static - Designed to provide steady stream of monthly
income vs. sporadic income of individual bonds - Risk management Active manager may increase
income or protect capital vs. ladders are locked
in - Low transaction costs size matters
- Easy transition from ladders to funds low
minimum of 2,500 and instant diversification - Seasoned, skilled management same lead manager
since inception
5Update Tax-Exempt Funds
More Northern Municipal Bond Funds Advantages
- Competitive Fees
- Excellent historical performance
- 3 of 6 tax-exempt funds qualifying for
Morningstar ratings have received either a
4-star or 5-star overall rating the others are
3-star - The 3 investment grade tax-exempt funds with
10-year track records are in the upper 1/3 of
their Lipper categories - 3 of 6 tax-exempt funds with 3-year records are
in the upper 10 of their Lipper categories
Past performance is no guarantee of future
results. Ratings reflect fee waivers in effect
in their absence, ratings may have been
lower. Due to ongoing market volatility, the Fund
may have experienced negative returns for the
time periods shown. Star ratings are based on a
Morningstar Risk-Adjusted Return measure that
accounts for variation in a funds monthly
performance (including the effects of sales
charges and redemption fees), placing more
emphasis on downward variations and rewarding
consistent performance. The overall rating is a
weighted average of the 3-, 5-, and 10-year (if
applicable) returns. 5 stars top 10 of funds
in an asset category 4 stars next 22.5 of
funds 3 stars next 35 2 stars next 22.5
and 1 star next 10. A fund must be in
existence three years to be rated. Ratings are
subject to change monthly.
as of August 31, 2009
6Update Multi-Manager Funds
Northerns answer to open architecture includes
seven mutual funds managed by multiple outside
managers, selected by Northern Trust Global
Advisors (NTGA), our manager-of-managers
investment group.
- NTGA, since 1979, has 102 employees in 5 offices
with 30 billion AUM (as of 6/30/09) - Manager research
- Manager selection
- Key Manager combinations
- Manager oversight
- Important today due diligence in manager
selection / oversight - Seven Multi-Manager Funds gt5 billion in AUM in
three years - Acceptance from Northern Trust and fiduciary
clients - Northern corporate support and commitment
7Update Multi-Manager Funds
- Northern Multi-Manager Funds
- Northern Multi-Manager Large Cap Fund
- Northern Multi-Manager Mid Cap Fund
- Northern Multi-Manager Small Cap
- Northern Multi-Manager International Equity Fund
- New funds since last years FOCUS conference
- Northern Multi-Manager Global Real Estate Fund
- Northern Multi-Manager Emerging Markets Equity
Fund - Northern Multi-Manager High Yield Opportunity
Fund -
8Update NIF Global Tactical Asset Allocation Fund
Simple, but sophisticated, solution to global
asset allocation
- Converted from NIF-Balanced Portfolio in April,
2008. - Represents best thinking of Northern Trust Global
Investments - Asset allocation based on Investment Policy
Committees process - 15 asset classes in a fund-of-funds structure
rebalanced daily - 15 asset classes via one NASDAQ symbol and one
CUSIP number - Competitive performance since conversion (April,
2008)
9Update NIF Money Market Portfolios
Guarantee Program and Proposed SEC Changes
- U.S. Treasury Temporary Guarantee Program expired
on September 18. Non-event in the markets. - SEC proposed amendments designed to further
stabilize money market funds and to increase
safety liquidity for shareholders - Northern Trust already adheres, in large part, to
SEC proposals dont expect changes to
significantly impact NIF money funds.
10Update NIF Money Market Portfolios
Current Product Positioning
- Remain conservatively positioned
- High credit quality
- Strong liquidity
- Secondary emphasis on yield
- Rate Forecast Expect Fed Funds to remain near
0 into 2010, then rise based on performance of
the economy - Recent Northern Credit Policy Enhancements
- Enhanced credit review process
- Master Eligible List to ensure names satisfy
higher standards - Revised limits to reduce amount and maturity to
all but strongest names - Result Raise average credit quality and improve
diversification
11New Funds
NIF Treasury Portfolio (money market fund)
Why Developed? - To provide a US Treasury
alternative - To meet client demand Investment
Objective Seeks to preserve capital, maintain
liquidity and generate income, by investing
exclusively in money market instruments issued
by, or guaranteed by, the U.S. government
Investment Strategy To invest in securities
issued by the U.S. Treasury or guaranteed as to
principal and interest by the U.S.
government Benchmark Index iMoneyNet Treasury
and Repo Institutional includes only
institutional government funds that hold U.S.
Treasuries and repurchase agreements backed by
the U.S. Treasury Average Maturity Under normal
market conditions, 20-60 days Dividend
Distribution Monthly Net Expenses 0.20 on
Shares Class (currently waived down to
0.15) Current Assets (9-30-09) 2.2 billion
Includes voluntary fee waivers and expense
reimbursements that may change or end at any
time, along with contractual expense
reimbursements that, if not extended, will end on
December 31, 2009. It does not include additional
expenses related to the Treasury Guarantee
Program. Unaudited as of August 31, 2009. An
investment in the Money Market Funds is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency. Although the Money Market Funds seek to
preserve the value of your investment at 1.00
per share, it is possible to lose money by
investing in the Money Market Funds.
12New Funds
Northern Ultra-Short Fixed Income Fund
- Why Developed? - In response to client
frustration with low yields on money funds - - To seek higher yield than money fund, but with
NAV fluctuation - Investment Objective Seeks to maximize total
return to the extent consistent with preservation
of capital - Investment Strategy Invests in investment grade
domestic debt securities, all US denominated,
using yield curve, sector and security selection - Average Maturity 6-18 months
- Dividend Distribution Monthly
- Net Expenses 0.25
- Current Assets (9-30-09) 68 million
The Fund is not a money market fund, which
maintains a 1.00 NAV, and the Funds share price
will fluctuate with its returns. Bond Risk
Bond funds will tend to experience smaller
fluctuations in value than stock funds. However,
investors in any bond fund should anticipate
fluctuations in price, especially for longer-term
issues and in environments of rising interest
rates. Net expenses include voluntary expense
reimbursements by Northern Funds investment
advisers that may change or end at any time
13New Funds
New Funds
Northern Tax-Advantaged Ultra-Short Fixed Income
Fund
- Why Developed? - In response to client
frustration with low yields on money funds - - To seek higher yield than money fund, but with
NAV fluctuation - - To maximize after-tax return
- Investment Objective Seeks to maximize total
return, adjusted for the maximum federal tax
rate, to the extent consistent with preservation
of capital - Investment Strategy Invests in investment grade
domestic debt securities, taxable and tax-exempt,
all US denominated using yield curve, sector
selection and security selection - Average Maturity 6-18 months
- Dividend Distribution Monthly
- Net Expenses 0.25
- Current Assets (9-30-09) 110 million
The Fund is not a money market fund, which
maintains a 1.00 NAV, and the Funds share price
will fluctuate with its returns. Bond Risk
Bond funds will tend to experience smaller
fluctuations in value than stock funds. However,
investors in any bond fund should anticipate
fluctuations in price, especially for longer-term
issues and in environments of rising interest
rates. Net expenses include voluntary expense
reimbursements by Northern Funds investment
advisers that may change or end at any time
14Important Disclosure Information
Information has been obtained from sources
believed to be reliable, but its accuracy and
interpretation are not guaranteed. Information is
subject to change without notice. No information
provided herein shall constitute, or be construed
as, an offer to sell or a solicitation of an
offer to acquire any security, investment product
or service, nor shall any such security, product
or service be offered or sold in any jurisdiction
where such offer or solicitation is prohibited by
law or regulation. This material is provided for
informational purposes only and does not
constitute a recommendation of any investment
strategy or product described herein. Northern
Trust typically offers its investment products
and services through its various affiliates
including Northern Trust Investments, N.A.,
Northern Trust Global Investments Ltd., Northern
Trust Global Advisors, Inc., Northern Trust Bank,
FSB, and Northern Trust Securities, Inc. Not all
products may be suitable for or available to all
investors. Investing involves risk, including
the possible loss of principal. Investment
products and services are offered through
Northern Trust Securities, Inc., member FINRA and
SIPC and a wholly owned subsidiary of Northern
Trust Corporation. Please carefully read the
prospectus and consider the investment
objectives, risks, charges and expenses of
Northern Funds and Northern Institutional Funds
before investing. Call 800-595-9111 to obtain a
prospectus, which contains this and other
information about the funds. Northern Funds and
Northern Institutional Funds are distributed by
Northern Funds Distributors, LLC, Boston, MA, not
affiliated with Northern Trust.
Not FDIC-Insured No bank guarantee
May lose value
15Thank you.
Peter Jacobs Mutual Fund Product
Management Northern Trust Global Investments