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International Equity

as of 12/31/17

Fund Commentary

Global equity markets showed strength throughout 2017, the Developed ex-US markets rose for the fourth consecutive quarter led by the strength in the Asian equity markets. Global interest rates remain historically low and are supportive of strong economic growth. Global markets were also supported by low inflation and stable labor markets. Manufacturing and industrial production in Japan and the eurozone continue to indicate economic improvements. The geopolitical events, including an unpredictable North Korea has not deterred investors nor significantly changed the risk profile of the equity markets. Oil prices continued to rise as the global economy strengthens.

The International Equity Fund posted a total return of 2.41% for the quarter, compared with 4.23% for the Fund's benchmark, the MSCI EAFE® Index. During the fourth quarter, value securities trailed growth-oriented securities across the global markets creating a headwind for the Fund. The Fund's overweight to inexpensive securities detracted from performance as did our overweight to high quality securities. From a sector perspective, value securities underperformed in the healthcare and energy sectors, and low quality securities outperformed in the consumer discretionary and health care sectors explaining a significant portion of the Fund's underperformance. Regionally, most of the underperformance was driven within the European region where expensive growth-oriented securities led the market.

By focusing on inexpensive, high-quality securities and prudent risk management, we believe the Fund can deliver attractive long-term performance. We believe this strategy is favorably positioned as geopolitical concerns have subsided and investors are refocusing on company fundamentals and valuations.

Not FDIC insured | May lose value | No bank guarantee

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.

©2018 Northern Funds | Northern Funds are distributed by Northern Funds Distributors, LLC, not affiliated with Northern Trust.