Despite Geopolitical Uncertainty, Financial Advisors Intend to Shift More Client Assets to International Markets in 2018

Geopolitical uncertainty is the top concern of financial advisors when investing overseas, but not enough to hold them back from adding to their international exposure in the coming year, according to a survey conducted by Northern Trust’s FlexShares Exchange Traded Funds (ETFs).

The survey of more than 250 advisors conducted at the IMPACT 2017 conference hosted by Charles Schwab in November found that half of advisors intend to increase their allocation to international markets in 2018. Only 4 percent expect to decrease their international holdings, while 44 percent will not make any change.

Despite increasing appetite, advisors still approach investments abroad with unease. Nearly two-thirds (64 percent) of respondents cited geopolitics as their top concern when investing internationally. Other top concerns about international investments include costs (39 percent), liquidity (25 percent), and regulations (21 percent).

“Concerns about investing internationally do not appear to limit advisor interest in capitalizing on opportunities abroad,” said Darek Wojnar, Head of Funds and Managed Accounts Group. “With international growth expected by many to continue, advisors are adjusting their asset allocation models to account for this. In particular, they’re primarily turning towards international-focused funds to gain this exposure.”

Financial advisors favor using mutual funds for their international exposure, with 70 percent using mutual funds, 58 percent using ETFs, and 38 percent using both to invest abroad. This compares to only 20 percent of respondents who get international exposure through individual securities. "U.S. investors have been underweight international equities in recent years, as compared to the historical mean, particularly immediately following the U.S. presidential election" said Chris Huemmer, senior investment strategist at FlexShares. "However, we’re seeing a transition in investor expectations, as they realize the U.S. is not the sole engine of global growth. A combination of factors – including strong performance of emerging markets, positive global growth predictions, compelling valuations of international equities, and more accommodative monetary policy overseas – make international exposure an attractive allocation heading into 2018."

For advisors looking for international exposure, FlexShares offers a number of international-focused funds among their 25-fund lineup including a suite of international dividend funds, emerging markets tilted funds, a global ESG fund, and a global natural resources fund. To learn more, visit www.flexshares.com.

About FlexShares

FlexShares Exchange Traded Funds are designed to pursue specific investment goals across both passive and active strategies. FlexShares offers differentiated ETF strategies that improve and simplify the investment decision process for the long-term investor.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has offices in the United States in 19 states and Washington, D.C., and 23 international locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2017, Northern Trust had assets under custody/administration of US$9.7 trillion, and assets under management of US$1.1 trillion. For more than 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit northerntrust.com or follow us on Twitter @NorthernTrust.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/disclosures.

Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. The Funds are subject to the following principal risks: asset class; commodity; concentration; counterparty; currency; derivatives; dividend; emerging markets; equity securities; fluctuation of yield; foreign securities; geographic; income; industry concentration; inflation-protected securities; infrastructure-related companies; interest rate / maturity risk; issuer; large cap; management; market; market trading; mid cap stock; MLP; momentum; natural resources; new funds; non-diversification; passive investment; privatization; small cap stock; tracking error; value investing; and volatility risk. A full description of risks is in the prospectus.

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