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Northern Trust Survey: Institutional Investment Managers See Growth and Inflation on the Horizon

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CHICAGO--(EON: Enhanced Online News)--Institutional investment managers expect global inflation to increase and interest rates to rise in the coming months as economic growth accelerates and corporate earnings continue to grow, according to a quarterly survey by Northern Trust. The survey for the fourth quarter of 2010 showed that 62 percent of managers believe global inflation will rise over the next six months. This measure is up approximately 40 percentage points from the third quarter survey a style='fon

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									Northern Trust Survey: Institutional Investment
Managers See Growth and Inflation on the
Horizon
January 14, 2011 11:54 AM Eastern Time  

CHICAGO--(EON: Enhanced Online News)--Institutional investment managers expect global inflation to increase
and interest rates to rise in the coming months as economic growth accelerates and corporate earnings continue to
grow, according to a quarterly survey by Northern Trust.

The survey for the fourth quarter of 2010 showed that 62 percent of managers believe global inflation will rise over
the next six months. This measure is up approximately 40 percentage points from the third quarter survey and is the
highest level recorded since Northern Trust began its survey in the fourth quarter of 2008. More than half (53
percent) of managers believe that interest rates will rise over the next three months, up from 20 percent in the third
quarter of 2010, and also the highest level recorded since the survey’s inception.

Inflation concerns are likely related to increased optimism regarding the economy and financial markets: 55 percent
of investment managers surveyed by Northern Trust expect global growth to accelerate over the next six months, up
from 33 percent who held this view in the third quarter. And 80 percent expect corporate earnings to rise in the next
three months.

“In the fourth quarter our managers expressed optimism that global markets are on solid footing and will perhaps
continue their upward trajectory,” said Chris Vella, Global Director of Research for Northern Trust Global Advisors
(NTGA), the multi-manager arm of Northern Trust Corp. “As we might expect, however, with growth comes the
risk of increased inflationary pressure and the potential for rising interest rates. It appears that our managers have
also sounded a note of caution around these two important measures.” 

The survey of approximately 97 institutional managers was conducted by NTGA in mid-December. All respondents
participate in NTGA's external manager platform and are utilized in investment products including mutual funds,
separate accounts, emerging manager programs and other investment solutions.

Managers remained positive regarding market valuations. The majority of managers (58 percent) stated that the U.S.
equity market, as measured by the S&P 500 Index, is undervalued. Select areas of international markets are also
seen to be attractive, with 55 percent of managers stating that Japanese equities are undervalued. The biggest shift in
valuation sentiment was in emerging market equities, where 39 percent of managers believe that the segment is
undervalued, a significant decrease from the 59 percent who held this view in the third quarter.

“Our managers are continuing to find investment opportunities throughout the U.S. and International markets,” said
Harry Phinney, NTGA Investment Analyst. “However, with regard to emerging market equities, it appears that the
recent strong relative performance in the segment may be boosting valuations to levels that our managers feel are
somewhat less compelling when compared to other markets.” 

Other major findings from the survey include:

    l   In the fourth quarter’s topical question, managers were asked for their views on the impact of the U.S.
        Federal Reserve’s second round of quantitative easing. Just over half (52 percent) of managers expect the
        Fed’s program to have a positive impact on the U.S. economy.
    l   Investment managers cited technology, energy, consumer discretionary, emerging markets and healthcare as
       the top five most attractive market segments.
   l   Cash levels were stable for most managers during the fourth quarter. The majority of managers, 75 percent,
       continue to be working within their normal cash range, down from 86 percent in the third quarter. There were
       slight increases in the percentage of managers working with cash levels both above (11 percent versus 5
       percent last quarter) and below their historical norm (15 percent versus 10 percent last quarter).

Respondents to Northern Trust’s survey included fixed income and equity managers across value and growth styles,
with a bias toward fundamental, bottom-up stock picking strategies. The survey is conducted quarterly so that
NTGA and participating managers can examine trends in attitudes and allocations.

NTGA is a leading provider of multi-manager investment solutions, with $31.5 billion under management as of
September 30, 2010 for institutional and personal clients. Having investments with more than 200 external managers
worldwide, NTGA solutions range from retail mutual funds and alternative asset classes to Emerging Manager
programs and total investment program management for institutions and affluent individuals and families.

Northern Trust Global Investments comprises Northern Trust Investments, Inc., Northern Trust Global
Investments Limited, Northern Trust Global Investments Japan, K.K., the investment adviser division of The
Northern Trust Company and Northern Trust Global Advisers, Inc. and its subsidiaries to offer investment products
and services to personal and institutional markets.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund
administration, banking solutions and fiduciary services for corporations, institutions and affluent individuals
worldwide. Northern Trust, a financial holding company based in Chicago, has offices in 18 U.S. states and 16
international locations in North America, Europe, the Middle East and the Asia-Pacific region. As of September 30,
2010, Northern Trust had assets under custody of US$3.9 trillion, and assets under investment management of
US$657.2 billion. For more than 120 years, Northern Trust has earned distinction as an industry leader in combining
exceptional service and expertise with innovative products and technology. For more information, visit
www.northerntrust.com.

Contacts
Media Contacts:
Northern Trust Corporation
John O’Connell, +1 312-444-2388
John_O'Connell@ntrs.com
or
Newton Sears, 312-444-3094
Newton_Sears@ntrs.com
http://www.northerntrust.com

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