Global asset manager Russell Investments is implementing a series of strategic asset allocation changes to several retail product offerings in the U.S. market, including the Russell LifePoints® Funds, Target Portfolio Series and Russell Core Model Strategies. The primary changes include shifts in the fixed income, U.S. equity, international equity and alternatives asset class allocations, and for most portfolios the reallocations take effect in January 2014.

These reallocations reflect Russell's commitment to a globally diversified investment approach and are grounded in the firm's ongoing process of reviewing its multi-asset portfolios in relation to market conditions and its capital markets forecasts, and making strategic changes where and when it may be beneficial to help meet investors' desired outcomes.

"Our investment strategists are forecasting an environment of modest returns through 2014, which can be challenging for some investors in achieving a desired rate of return at a level of risk they are comfortable with," said Jeff Hussey, global chief investment officer at Russell. "Despite a lower-return environment, our outlook is not pessimistic and we see promising opportunities for many investors maintaining diversified, multi-asset portfolios with global exposure."

The perspective of Russell's team of global strategists is outlined in its recently released 2014 Annual Global Outlook, which highlights the firm's expectations of modest global growth in 2014 with equities outperforming cash and fixed income, despite some expected market volatility.

"Many investors and financial advisors are struggling with the best way to approach U.S. core fixed income in an environment in which we expect interest rate increases," said Phill Rogerson, managing director of consulting and product services for Russell's U.S. advisor-sold business. "While we believe fixed income remains an important element of a diversified portfolio, we feel the time is right to implement a modest decrease in core fixed income exposures and an offsetting increase to equity and high-yield bond exposures that may benefit investors' long-term investing goals with a commensurate increase in risk."

The specific portfolio reallocations include the following changes:

  • Fixed income: Reallocate assets from core bond exposures (Russell Strategic Bond Fund and Russell Investment Grade Bond Fund) to equities and global high yield bonds that represent a higher return potential with corresponding increase in risk.
  • U.S. equity: Increase overall exposure to U.S. equity, with a majority of this increase going to the small capitalization equity allocation, in an effort to compensate for the lower return expectations of fixed income markets.
  • International equity: Take a more targeted approach to our non-U.S. equity exposure with an emphasis on emerging markets and adjustments within global equity allocations.
  • Alternatives: Change the real asset composition by decreasing commodities and increasing infrastructure allocations in an effort to maintain non-U.S. exposure levels while also offering higher return potential.

"We are committed to investing in where we believe the world is going - not where it has been. We also believe that strategic asset allocation is one of the primary determinants of investors' progress toward their desired outcomes," said Rogerson. "The changes we are making to our products reflect Russell's best thinking and our commitment to providing investment solutions that are broadly diversified, implemented utilizing some of the world's leading money managers and strategies, and dynamically managed to reflect the realities of changing global market conditions."

The Russell LifePoints® Funds are fund-of-funds mutual fund portfolios of equity and fixed income funds designed to simplify the investment process for investors. The Russell Model Strategies are a series of portfolio allocation recommendations designed to meet a range of client needs and investment risk tolerances through strategic portfolios.

For more information about these changes, watch this short video featuring Phill Rogerson or visit www.russell.com.

About Russell Investments

Russell Investments (Russell) is a global asset manager and one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. Russell stands with institutional investors, financial advisors and individuals working with their advisors -- using the firm's core capabilities that extend across capital market insights, manager research, portfolio construction, portfolio implementation and indexes to help each achieve their desired outcomes.

Russell has more than $246 billion* in assets under management (as of 9/30/2013) and works with over 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell has $2.4 trillion in assets under advisement (as of 6/30/2013). It has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell traded more than $1.4 trillion in 2012 through its implementation services business. Russell also calculates approximately 700,000 benchmarks daily covering 98% of the investable market globally, which includes more than 80 countries and more than 10,000 securities. Approximately $4.1 trillion in assets are benchmarked to the Russell Indexes.

Headquartered in Seattle, Washington, Russell operates globally, including through its offices in Seattle, New York, London, Paris, Amsterdam, Sydney, Melbourne, Auckland, Singapore, Seoul, Tokyo, Toronto, Chicago, San Diego, Milwaukee and Edinburgh. For more information about how Russell helps to improve financial security for people, visit www.russell.com or follow@Russell_News.

*includes more than $70 billion of derivative overlay assets under management not included prior to June 30, 2013

Fund objectives, risks, charges and expenses should be carefully considered before investing. A summary prospectus, if available, or a prospectus containing this and other important information can be obtained by calling 800-787-7354. Please read a prospectus carefully before investing.

Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

Mutual fund investing involves risk. Principal loss is possible.

The LifePoints® Funds are a series of fund of funds which expose an investor to the risks of the underlying funds proportionate to their allocation. Investments in LifePoints Funds involves direct expenses of each fund and indirect expenses of the underlying funds, which together can be higher than those incurred when investing directly in an underlying fund.

Each of the LifePoints® Funds, Target Portfolio Series, invests its assets in shares of a number of underlying Russell Funds. From time to time, the Fund's adviser may modify the target strategic asset allocation for any fund and/or the underlying funds in which a fund invests including the addition of new underlying funds. A Fund's actual allocation may vary from the target strategic asset allocation at any point in time. In addition, the Fund's adviser may also manage assets of the underlying funds directly for a variety of purposes.

Model Strategies represent target allocations of Russell funds; these models are not managed and cannot be invested in directly. You and your financial advisor may work to combine selected funds that differ from the illustrated combinations depending upon individual investment objectives.

Model Strategies are exposed to the specific risks of the funds directly proportionate to their fund allocation. The funds comprising the strategies and the allocations to those funds have changed over time and may change in the future.

Global equity involves risk associated with investments primarily in equity securities of companies located around the world, including the United States. International securities can involve risks relating to political and economic instability or regulatory conditions. Investments in emerging markets or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which have less stability than those of more developed countries.

Small cap investments are subject to considerable price fluctuations and are more volatile than large cap stocks. Investors should consider the additional risks involved in small cap investments.

Bond investors should carefully consider risks such as interest rate, credit, repurchase and reverse repurchase transaction risks. Greater risk, such as increased volatility, limited liquidity, prepayment, non-payment and increased default risk, is inherent in portfolios that invest in high yield ("junk") bonds or mortgage backed securities, especially mortgage backed securities with exposure to subprime mortgages. Investment in non-U.S. and emerging market securities is subject to the risk of currency fluctuations and to economic and political risks associated with such foreign countries.

Investments in infrastructure-related companies have greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. Investment in infrastructure related companies are subject to various risks including governmental regulations, high interest costs associated with capital construction programs, costs associated with compliance and changes in environmental regulation, economic slowdown and surplus capacity, competition from other providers of services and other factors. Investment in non-U.S. and emerging market securities is subject to the risk of currency fluctuations and to economic and political risks associated with such foreign countries.

Exposure to the commodities markets may subject the Fund to greater volatility than investments in traditional securities, particularly if the investments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or sectors affecting a particular industry or commodity and international economic, political and regulatory developments. The use of leveraged commodity-linked derivatives creates an opportunity for increased return, but also creates the possibility for a greater loss.

Investments that are allocated across multiple types of securities may be exposed to a variety of risks based on the asset classes, investment styles, market sectors, and size of companies preferred by the investment managers. Investors should consider how the combined risks impact their total investment portfolio and understand that different risks can lead to varying financial consequences, including loss of principal.

Strategic asset allocation and diversification do not assure profit or protect against loss in declining markets.

Russell Investment Group, a Washington, USA corporation, operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

Copyright © Russell Investments 2013. All rights reserved.

This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investment Group. It is delivered on an "as is" basis without warranty.

Russell Investment Group, a Washington, USA corporation, operates through subsidiaries worldwide including Russell Investments. Russell Investment Group is a subsidiary of The Northwestern Mutual Life Insurance Company.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its indexes.

Securities products and services offered through Russell Financial Services, Inc., member FINRA, part of Russell Investments.

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Russell Investments
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kstouffer@russell.com
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