Russell Investment Manager Outlook December 2007 (Russell.com)

Russell Investments Survey:
Manager Optimism Undimmed for 2008

Tacoma, WA — December 19, 2007 — Money managers are bullish for the year ahead and have not let the credit concerns or a slowing U.S. economy shake their outlook, according to the latest Investment Manager Outlook, Russell Investments' quarterly survey of investment managers.

Thirty percent of money managers responding to the survey anticipate U.S. equity markets will notch returns greater than 10 percent in 2008, and another 54 percent believe the markets will gain less than 10 percent or run flat. In total, 76 percent of managers responding to this quarter's survey expect the markets to rise while only 15 percent foresee declines. Last year, 86 percent of managers thought the markets would rise, and 12 percent thought the markets would decline.

"Attractive valuation levels and the potential of the global economy are pointing managers towards stocks in 2008," said Randy Lert, chief portfolio strategist, Russell Investments. "The credit crunch and slowing U.S. economy do raise concerns, but manager optimism for U.S. stocks appears undimmed from that of one year ago."

Managers still prefer large-cap growth over every other asset class and now see opportunity in mid-cap and small-cap growth as well. Seventy-five percent of investment managers responding to the survey are bullish on large-cap growth, and that large number well exceeds the 61 percent of managers who were bullish for the next most popular asset class, non-U.S. (developed market) equities. Mid-cap growth and small-cap growth bullishness both rose from the previous quarter. Bullishness for mid-cap growth rose seven points from last quarter to 60 percent, and small-cap growth rose nine points to 47 percent.

"The managers are favoring growth over value, whether it's large-cap, mid-cap or small-cap. Generally speaking, value stocks are more economically sensitive to the economy, and the managers appear to be positioning themselves so they are not overexposed to value should the economy drag," said Lert. "Value stocks had such a long and strong run. Many managers expect the growth run of 2007 is likely to continue into 2008."

Russell's Investment Manager Outlook is intended to generate a meaningful snapshot of investment manager sentiment for each quarter. For the current installment of the survey, Russell collected the opinions of senior-level investment decision-makers at U.S. large- and small-cap equity investment managers, as well as U.S. fixed-income investment managers. More than 290 managers participated in the survey.

Additional findings from the Investment Manager Outlook include:

Technology Reaches New High While Financial Services Remains In Its Rut
For the second quarter in a row, manager bullishness for the technology sector reached an all-new high — this quarter that measure of optimism ran at 78 percent. Health care was a close second at 73 percent. Other energy, consumer staples and integrated oils fill out the top five sector choices with 50, 44 and 43 percent respectively.

"For 2008, managers are forecasting stocks to rise and believe technology and health care are the best sectors to capture that growth," said Lert. "At the same time, the sectors they favor are mostly defensive plays, consistent with those one would buy during an economic slowdown. Managers are optimistic but certainly will be keeping their eyes on economic indicators to make sure there are no big surprises."

Financial services remained in its rut, posting survey numbers nearly identical to last quarter's pessimistic conclusions. Fifty percent of all managers surveyed were bearish on financial services, second only to the autos and transportation sector. Manager bullishness on financial services rose slightly from 30 percent to 32 percent but still represents a dramatic fall from 46 percent bullishness one year ago.

"Whether it's that the subprime situation will take many more months to fully unwind or whether it's that there is another, wholly unexpected shoe to drop, the managers we surveyed are not optimistic about the financial services sector over the next 12 months," said Lert. "Still, manager bullishness for financial services did not decline for the first time this year, and perhaps some managers are beginning to spot buying opportunities."

About Russell
Russell Investments provides strategic advice, world-class implementation, state-of-the-art performance benchmarks and a range of institutional-quality investment products. With nearly $231 billion in assets under management (as of 9/30/07), Russell serves individual, institutional and advisor clients in more than 40 countries. Russell provides access to some of the world's best money managers. It helps investors put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors. Founded in 1936, Russell is a subsidiary of Northwestern Mutual Life Insurance Company and headquartered in Tacoma, Wash. Russell has principal offices in Amsterdam, Auckland, Hong Kong, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Singapore, Sydney, Tokyo and Toronto.

Contacts:
Matt Burkhard, 718-875-2122
Jennifer Tice, 253-439-1858

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

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.

This is not an offer, solicitation, or recommendation to purchase any security or the services of any organization.

Large capitalization (large cap) investments involve stocks of companies generally having a market capitalization between $10 billion and $200 billion. The value of securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions.

Middle capitalization (middle cap) investments involve stocks of companies generally having a market capitalization between $2 billion and $10 billion and considered more volatile than large cap companies. Mid cap investments are often considered to offer more growth potential than larger caps (but less than small caps) and less risk than small caps (but more than large caps).

Small capitalization (small cap) investments involve stocks of companies with smaller levels of market capitalization (generally less than $2 billion) than larger company stocks (large cap). Small cap investments are subject to considerable price fluctuations and are more volatile than large company stocks. Investors should consider the additional risks involved in small cap investments.

Value investments focus on stocks of income-producing companies whose price is low relative to one or more valuation factors, such as earnings or book value. Such investments are subject to risks that their intrinsic values may never be realized by the market, or, such stock may turn out not to have been undervalued. Investors should carefully consider the additional risks involved in value investments.

Growth investments focus on stocks of companies whose earnings/profitability are accelerating in the short term or have grown consistently over the long term. Such investments may provide minimal dividends which could otherwise cushion stock prices in a market decline. Stock value may rise and fall significantly based, in part, on investors' perceptions of the company, rather than on fundamental analysis of the stocks. Investors should carefully consider the additional risks involved in growth investments.

Technology sector primarily consists of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.

Health care sector consists of companies involved in medical services or health care including biotechnology research and production, drugs and pharmaceuticals, and health care facilities and services.

Financial services sector consists of companies that provide financial services including banking, finance, life insurance, and securities brokerage, and services companies.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and 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.

RFD—07-7315 First used: December 2007

Securities distributed through Russell Fund Distributors, Inc., member FINRA, part of Russell Investments.
For information on the Financial Industry Regulatory Authority, go to www.finra.org.