This summer's wild price swings in the markets hasn't fazed investment managers, according to a recent survey by Russell Investment Group. If anything, they are even more positive about U.S. equity markets subsequent to the credit concerns that rattled Wall Street-the percentage of managers who say the market is undervalued climbed to 28% from 21% in the second quarter.

   The Investment Manager Outlook is Russell's quarterly survey of investment managers' attitudes about U.S. equity markets. More than 340 large- and small-cap equity managers, as well as fixed-income managers, participated in the third-quarter survey.

   While the outlook for the equities market remained steady and positive, sentiment toward some individual sectors swung wildly. Manager bullishness for the technology sector reached an all-time high of 73% while manager bullishness toward financial services fell for the fourth straight quarter to an all-time low of 30%. Manager bullishness for consumer discretionary and services tumbled from 40% to 25% and positive sentiment for materials and processing slipped from 44% to 33%.

   "Managers are looking at sectors that withstand times of uncertainty and slower growth and at companies that have a global footprint with exposure to economies outside the United States," said Randy Lert, chief portfolio strategist at Russell Investment Group. "Managers in the Russell survey were bearish on the financial services well before this summer, but the subprime crisis has accelerated and reinforced concerns over this sector."

   Large-cap stocks are a favorite among surveyed managers with 69% bullish on this asset class, the widest measure of support since the survey began more than three years ago. In addition, 57% of managers favor non-U.S. developed market equities and 53% like U.S. midcap growth stocks. Manager bullishness for U.S. small cap value fell to 13% from 27% last quarter, and U.S. midcap value fell to 25% from 34%. Real estate was the most bearish sector, with 79% giving it the thumbs down.

   Manager bullishness for corporate bonds more than doubled from 15% to 31%, while support for high yield bonds rose from 12 % to 21%. U.S. Treasuries recorded one of their highest bullish scores of the past 14 quarters, at 33% versus 19% last quarter.

   "We believe the surge in manager bullishness for fixed income represents a flight to safety and that managers fundamentally believe that the bigger opportunity still lies in the equity markets," said Lert.

   Russell conducted the current Investment Manager Outlook between August 27 and September 4, 2007.