2023-10-31ABFYE_10_31_PRO
PROSPECTUS
March
1, 2024
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Share
Class |
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A |
C |
Y |
R6 |
Advisor |
R5 |
Investor |
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American
Beacon Balanced Fund |
ABFAX |
ABCCX |
ACBYX |
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ABLSX |
AADBX |
AABPX |
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American
Beacon Garcia Hamilton Quality
Bond Fund |
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GHQYX |
GHQRX |
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GHQIX |
GHQPX |
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American
Beacon International Equity Fund |
AIEAX |
AILCX |
ABEYX |
AAERX |
AAISX |
AAIEX |
AAIPX |
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American
Beacon Large Cap Value Fund |
ALVAX |
ALVCX |
ABLYX |
AALRX |
AVASX |
AADEX |
AAGPX |
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American
Beacon Small Cap Value Fund |
ABSAX |
ASVCX |
ABSYX |
AASRX |
AASSX |
AVFIX |
AVPAX |
This
Prospectus contains important information you should know about investing,
including information about risks. Please read it before you invest
and keep it for future reference.
As
with all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or determined if this Prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
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American
Beacon
Balanced
FundSM
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Investment
Objective
The
Fund’s investment objective is income and capital
appreciation.
Fees
and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You
may qualify for sales discounts
if you and your eligible family members invest, or agree to invest in the
future, at least $50,000
in all classes of the American Beacon Funds on an aggregated
basis.
More information about these and other discounts is available from your
financial professional and in “Choosing Your Share Class” on page 67
of the Prospectus and “Additional Purchase and Sale Information for A Class
Shares” on page 74 of the Statement of Additional Information
(“SAI”). With
respect to purchases of shares through specific intermediaries, you may find
additional information regarding sales charge discounts and waivers in
Appendix
A to the Fund’s Prospectus entitled “Intermediary Sales Charge Discounts,
Waivers and Other Information.”
Shareholder
Fees
(fees paid directly from your investment)
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Share
Class |
A |
C |
Y |
Advisor |
R5 |
Investor |
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Maximum
sales charge imposed on purchases (as a percentage of offering
price) |
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Maximum
deferred sales charge (as a percentage of the lower of original
offering
price or redemption proceeds) |
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Annual
Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your
investment) |
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Share
Class |
A |
C |
Y |
Advisor |
R5 |
Investor |
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Management
Fees |
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Distribution
and/or Service (12b-1) Fees |
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Other
Expenses |
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Acquired
Fund Fees and Expenses |
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Total
Annual Fund Operating Expenses2
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A
contingent deferred sales charge (‘‘CDSC’’) of 0.50% will be charged on
certain purchases of $1,000,000 or more of A Class shares that are
redeemed in whole or part within 18
months of purchase.
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The
Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to average net assets provided in the Fund’s Financial Highlights
table, which reflects the operating
expenses of the Fund and does not include Acquired Fund Fees and
Expenses. |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that
you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that
your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. C Class shares automatically convert to A Class shares 8
years
after purchase, if the conversion is available through your financial
intermediary. This Example reflects your costs as though C Class shares were
held for the
full 10-year period. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
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A |
$680 |
$903 |
$1,144 |
$1,833 |
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C |
$286 |
$577 |
$993 |
$2,154 |
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Y |
$86 |
$270 |
$469 |
$1,043 |
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Advisor |
$127 |
$395 |
$684 |
$1,506 |
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R5 |
$80 |
$251 |
$436 |
$972 |
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Investor |
$107 |
$333 |
$577 |
$1,277 |
Assuming
no redemption of shares:
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
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C |
$186 |
$577 |
$993 |
$2,154 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual
Fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 48%
of the
average value of its portfolio.
Principal
Investment Strategies
Under
normal circumstances, between 50% and 70% of the Fund’s total assets are
invested in equity securities and between 30% and 50% of the Fund’s total
assets are invested in debt securities.
The
Manager allocates the assets of the Fund among different sub-advisors. The
Manager believes that this strategy may help the Fund outperform other
investment
styles over the longer term while reducing volatility and downside
risk.
Prospectus
– Fund Summaries1
The
Fund’s equity investments may include common stocks, preferred stocks,
convertible securities, including convertible preferred securities, master
limited partnerships
(“MLPs”), real estate investment trusts (“REITs”), depositary receipts, which
may include American depositary receipts (“ADRs”) and global depositary
receipts (“GDRs”), and U.S. dollar-denominated foreign stocks traded on U.S.
exchanges (collectively referred to as “stocks”). The Fund’s investments
in stocks include dividend-paying stocks. The Fund principally invests in
large-capitalization and mid-capitalization
companies.
The
Fund’s sub-advisors select stocks that, in their opinion, have most or all of
the following characteristics (relative to the S&P 500®
Index):
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above-average
earnings growth
potential, |
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below-average
price to earnings
ratio, |
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below-average
price to book value ratio,
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above-average
dividend yields. |
Each
of the Fund’s sub-advisors determines the earnings growth prospects of companies
based upon a combination of internal and external research using fundamental
analysis and considering changing economic trends. The sub-advisors typically
seek to invest in companies that they believe to be undervalued at the
time of purchase. The decision to sell a stock is typically based on the belief
that the company is no longer considered undervalued or shows deteriorating
fundamentals,
or that better investment opportunities exist in other
stocks.
The
Fund’s debt securities may include: debentures; obligations of the U.S.
Government, its agencies and instrumentalities, including U.S. Government-sponsored
enterprises (some of which are not backed by the full faith and credit of the
U.S. Government); corporate debt securities, such as notes
and bonds; mortgage-backed and mortgage-related securities, including
collateralized mortgage obligations (“CMOs”)
and
commercial mortgage-backed
securities
(“CMBSs”);
asset-backed securities; and variable and floating rate securities, which pay
interest at variable rates, certain of which are
based on a lending rate.
The
Fund will only buy debt securities that are deemed by the Manager or
sub-advisors, as applicable, to be investment grade at the time of the purchase.
If an
investment held by the Fund is downgraded below investment grade, the Manager or
sub-advisors, as applicable,
will take action that they believe to be advantageous
to the Fund. The Fund has no limitations regarding the duration of the debt
securities it can buy.
The
Fund may have significant exposure to the Financials sector. However, as the
sector composition of the Fund’s portfolio changes over time, the Fund’s
exposure
to the Financials sector may be lower at a future date, and the Fund’s exposure
to other market sectors may be higher.
In
determining which debt securities to buy and sell, the Manager and the
sub-advisors generally use either
a
“top-down” or “bottom-up” investment strategy,
or a combination of both strategies. The top-down fixed income investment
strategy is implemented as follows:
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Develop
an overall investment strategy, including a portfolio duration target, by
examining the current trends in the U.S.
economy. |
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Set
desired portfolio duration structure by comparing the differences between
corporate and U.S. Government securities of similar duration to judge
their potential
for optimal return in accordance with the target duration
benchmark. |
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Determine
the weightings of each security type by analyzing the difference in yield
spreads between corporate and U.S. Government
securities. |
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Select
specific debt securities within each security
type. |
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Review
and monitor portfolio composition for changes in credit, risk-return
profile and comparisons with
benchmarks. |
The
bottom-up fixed income investment strategy is implemented as
follows:
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Search
for eligible securities with a yield to maturity advantage versus a U.S.
Government security with a similar
duration. |
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Evaluate
credit quality of the
securities. |
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Perform
an analysis of the expected price volatility of the securities to changes
in interest rates by examining actual price volatility between U.S.
Government
and non-U.S. Government
securities. |
Each
sub-advisor’s investment processes incorporate the sub-advisor’s environmental,
social and/or governance (“ESG”) analysis as a consideration in the assessment
of potential equity investments, and of potential debt security investments to
which such analysis is deemed applicable by the sub-advisor. However,
as ESG information is just one investment consideration, ESG considerations are
not solely determinative in any investment decision made by a sub-advisor.
In addition, the sub-advisors do not use ESG considerations to limit, restrict
or otherwise exclude companies or sectors from the Fund’s investment
universe.
A sub-advisor may use ESG research and/or ratings information provided by one or
more third parties in performing this analysis and considering ESG
risks.
The
Fund may invest cash balances in a government money market fund advised by the
Manager, with respect to which the Manager receives a management fee.
The Fund may also purchase and sell equity index futures contracts to gain
market exposure on cash balances or reduce market exposure in anticipation
of
liquidity needs. The Fund may seek to earn additional income by lending its
securities to certain qualified broker-dealers and
institutions.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective and you
could lose part or all of your investment in the Fund.
The
Fund is not designed
for investors who need an assured level of current income and is intended to be
a long-term investment. The Fund is not a complete investment
program and may not be appropriate for all investors. Investors should carefully
consider their own investment goals and risk tolerance
before investing in the Fund.
The principal
risks of investing in the Fund listed below are presented in alphabetical order
and not in order of importance
or potential exposure. Among other matters, this presentation is intended to
facilitate your ability to find particular risks and compare them with
the
risks of other funds. Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Allocation
Risk
The
allocations among strategies, asset classes and market exposures may be less
than optimal and may adversely affect the Fund’s performance. There can be
no
assurance, particularly during periods of market disruption and stress, that
judgments about allocations will be correct. The Fund’s allocations may be
invested
in strategies, asset classes and market exposures during a period when such
strategies, asset classes and market exposures
underperform.
Asset-Backed
Securities Risk
Investments
in asset-backed securities are influenced by factors affecting the assets
underlying the securities, including the broader market sector and individual
markets, such as the auto markets. These securities may be more sensitive to
changes in interest rates than other types of debt securities. Investments
in asset-backed securities also are subject to risks of fixed-income securities,
which include, but are not limited to, credit risk, interest rate risk,
prepayment
and extension risk, callable securities risk, valuation risk, liquidity risk,
and restricted securities risk. A decline in the credit quality of the issuers
of asset-backed
securities or instability in the markets for such securities may affect the
value and liquidity of such securities, which could result in losses to the
Fund.
These securities are also subject to the risk of default on the underlying
assets, particularly during periods of market downturn, and an unexpectedly
high
rate of defaults on the underlying assets will adversely affect the security’s
value.
2Prospectus
– Fund Summaries
Asset
Selection Risk
Assets
selected for the Fund may not perform to expectations. This could result in the
Fund’s underperformance compared to other funds with similar investment
objectives.
Convertible
Securities RiskThe
value of a convertible security,
including a convertible preferred security,
typically increases or decreases with the price of the underlying common stock.
In
general, a convertible security is subject to the market risks of stocks when
the underlying stock’s price is high relative to the conversion price and is
subject to
the market risks of debt securities when the underlying stock’s price is low
relative to the conversion price. The general market risks of debt securities
that are
common to convertible securities include, but are not limited to, interest rate
risk and credit risk. Many convertible securities have credit ratings that are
below
investment grade and are subject to the same risks as an investment in below
investment grade debt securities (commonly known as “junk bonds”). Lower-rated
debt securities may fluctuate more widely in price and yield than investment
grade debt securities and may fall in price during times when the economy
is weak or is expected to become weak. Convertible securities are subject to the
risk that the credit standing of the issuer may have an effect on the
convertible
security‘s investment value.
In
addition, to the extent the Fund invests in convertible securities issued by
mid-capitalization companies, it will be subject
to the market risks of investing in such companies. The stocks of
mid-capitalization companies may fluctuate more widely in price than the market
as a
whole and there may also be less trading in mid-capitalization
stocks.
Convertible
securities are sensitive to movement in interest
rates.
Counterparty
Risk
The
Fund is subject to the risk that a party or participant to a transaction, such
as a broker or a derivative counterparty, will be unwilling or unable to satisfy
its obligation
to make timely principal, interest or settlement payments or to otherwise honor
its obligations to the Fund.
Credit
Risk
The
Fund is subject to the risk that the issuer, guarantor or insurer of an
obligation, or the counterparty to a transaction,
may fail, or become less able or unwilling,
to make timely payment of interest or principal or otherwise honor its
obligations or default completely. Changes in the actual or perceived
creditworthiness
of an issuer, or a downgrade or default affecting any of the Fund’s securities,
could affect the Fund’s performance. Generally, the longer the maturity
and the lower the credit quality of a security, the more sensitive it is to
credit risk.
Cybersecurity
and Operational Risk
Operational
risks arising from, among other problems, human errors, systems and technology
disruptions or failures, or cybersecurity incidents may negatively impact
the Fund and its service providers as well as the ability of shareholders to
transact in
the Fund’s shares,
and result in financial losses. Cybersecurity incidents
may allow an unauthorized party to gain access to Fund assets, shareholder data,
or proprietary information, or cause the Fund or its service providers,
as well as securities trading venues and their service providers, to suffer data
corruption or lose operational functionality. Cybersecurity incidents
can
result from deliberate attacks or unintentional events. It is not possible for
the Fund or its service providers to identify all of the operational risks that
may affect
the Fund or to develop processes and controls to completely eliminate or
mitigate their occurrence or effects. The Fund cannot control the cybersecurity
plans
and systems of its service providers, its counterparties or the issuers of
securities in which the Fund invests. The
issuers of the Fund’s investments are likely
to be
dependent on computers for their
operations
and require ready access to their
data and the
internet to conduct their business. Thus, cybersecurity incidents
could also affect issuers of the
Fund’s investments,
leading to significant loss of value.
Debentures
Risk
Debentures
are unsecured debt securities. The holder of a debenture is protected only by
the general creditworthiness of the issuer. The
Fund may invest in both
corporate and government debentures.
Dividend
Risk
An
issuer of stock held by the Fund may choose not to declare a dividend or the
dividend rate might not remain at current levels or increase over time.
Dividend
paying stocks might not experience the same level of earnings growth or capital
appreciation as non-dividend paying stocks. Securities that pay dividends
may be sensitive to changes in interest rates and, as interest rates rise or
fall, the prices of such securities may fall.
Environmental,
Social, and/or Governance Investing Risk
The
use of environmental, social, and/or governance (“ESG”) considerations
by a sub-advisor may cause the Fund to make different investments than
funds that
have a similar investment style but do not incorporate such considerations in
their strategy. As with the use of any investment considerations involved in
investment
decisions, there is no guarantee that the use of any ESG investment
considerations will result in the selection of issuers that will outperform
other issuers
or help reduce risk in the Fund. The Fund may underperform funds that do not
incorporate these considerations or incorporate different ESG considerations.
Although a sub-advisor has established its own process to oversee ESG
integration in accordance with the Fund’s strategies, successful integration
of ESG factors will depend on a sub-advisor’s skill in researching,
identifying, and applying these factors, as well as on the availability of
relevant data.
A
sub-advisor may use ESG research and/or ratings information provided by one or
more third parties in performing this analysis and considering ESG risks.
The regulatory landscape with respect to ESG investing in the United States is
evolving and any future rules or regulations may require the Fund to
change
its investment process with respect to the integration of ESG
factors.
Equity
Investments Risk
Equity
securities are subject to investment risk, issuer risk and market risk. In
general, the values of stocks and other equity securities fluctuate, and
sometimes widely
fluctuate, in response to changes in a company’s financial condition as well as
general market, economic and political conditions and other factors. The
Fund
may experience a significant or complete loss on its investment in an equity
security. In addition, stock prices may be particularly sensitive to rising
interest
rates, which increase borrowing costs and the costs of capital. The Fund may
invest in the following equity securities, which may expose the Fund to
the
following additional risks:
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Common
Stock Risk.
The value of a company’s common stock may fall as a result of factors
affecting the company, companies in the same industry or sector,
or the financial markets overall. Common stock generally is subordinate to
preferred stock upon the liquidation or bankruptcy of the issuing
company. |
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Depositary
Receipts and/or U.S. Dollar-Denominated Foreign Stocks Traded on U.S.
Exchanges Risk.
Depositary receipts and U.S. dollar-denominated foreign stocks
traded on U.S. exchanges are subject to certain of the risks associated
with investing directly in foreign securities, including, but not limited
to, currency
exchange rate fluctuations, political and financial instability in the
home country of a particular depositary receipt or foreign stock, less
liquidity, more
volatility, less government regulation and supervision and delays in
transaction
settlement. |
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Master
Limited Partnerships (“MLPs”) Risk.
Investing in MLPs involves certain risks related to investing in the
underlying assets of the MLPs and risks associated
with pooled investment vehicles. Investments held by MLPs may be
relatively illiquid, limiting the MLPs’ ability to change their portfolios
promptly in
response to changes in economic or other conditions. MLPs may have limited
financial resources, their securities may trade infrequently and in
limited volume,
they may be difficult to value, and they may be subject to more abrupt or
erratic price movements than securities of larger or more broadly based
companies.
Holders of units in MLPs have more limited rights to vote on matters
affecting the partnership and may be required to sell their common units
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Prospectus
– Fund Summaries3
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at
an undesirable time or price. The Fund’s investments in MLPs will be
limited to no more than 25% of its assets in order for the Fund to meet
the requirements
necessary to qualify as a “regulated investment company” under the
Internal Revenue Code of 1986, as amended (“Internal Revenue
Code”). |
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Real
Estate Investment Trusts (“REITs”) Risk.
Investments in REITs are subject to the risks associated with investing in
the real estate industry, including, among
other risks: adverse developments affecting the real estate industry;
declines in real property values; changes in interest rates; defaults by
mortgagors
or other borrowers and tenants; lack of availability of mortgage funds or
financing; extended vacancies of properties, especially during
economic
downturns; casualty or condemnation losses; regulatory
limitations on rents and operating expenses; and other
governmental actions, such as changes
to tax laws, zoning regulations or environmental regulations. REITs also
are dependent upon the skills of their managers and are subject to heavy
cash
flow dependency or self-liquidation. Regardless of where a REIT is
organized or traded, its performance may be affected significantly by
events in the region
where its properties are located. REITs
may not be diversified geographically or by property or tenant type.
Domestic
REITs could be adversely affected by
failure to qualify for tax-free “pass-through” of distributed net income
and net realized gains under the Internal Revenue Code of 1986, as amended
(“Internal
Revenue Code”), or to maintain their exemption from registration under the
Investment Company Act of 1940, as amended (“Investment Company
Act”).
REITs typically incur fees that are separate from those incurred by the
Fund. Accordingly, the Fund’s investment in REITs will result in the
layering
of expenses such that shareholders will indirectly bear a proportionate
share of the REITs’ operating expenses, in addition to paying Fund
expenses. The
value of REIT common stock may decline when interest rates rise. REITs
tend to be small- to mid-capitalization securities and, as such, are
subject to the risks
of investing in small- to mid-capitalization securities. |
Foreign
Exposure Risk
Exposure
to non-U.S.
issuers carries potential risks not associated with exposure
to U.S.
issuers. Such risks may include, but are not limited to: (1) currency
exchange
rate fluctuations, (2) political and financial instability, (3) less liquidity,
(4) lack of uniform accounting, auditing and financial reporting standards, (5)
greater
volatility, (6) different government regulation and supervision of foreign stock
exchanges, brokers and listed companies, and (7) delays or
failures in
transaction
payment
and settlement
in some foreign markets. The Fund’s exposure to a foreign issuer may subject the
Fund to regulatory, political, currency, security,
economic and other risks associated with that country. Global economic and
financial markets have become increasingly interconnected and conditions
(including recent volatility,
terrorism, war and political
instability) and events (including natural disasters) in one country, region or
financial market may
adversely impact issuers in a different country, region or financial
market.
Futures
Contracts Risk
Futures
contracts are derivative instruments pursuant to a contract where the parties
agree to a fixed price for an agreed amount of securities or other underlying
assets at an agreed date. The
use of such derivative instruments may expose the Fund to additional risks, such
as credit risk, liquidity risk, and counterparty
risk, that it would not be subject to if it invested directly in the securities
underlying those derivatives. There
can be no assurance that any strategy
used will succeed. There may at times be an imperfect correlation between the
movement in the prices of futures contracts and the value of their underlying
instruments or indexes. There also can be no assurance that, at all times, a
liquid market will exist for offsetting a futures contract that the Fund
has
previously bought or sold, and this may result in the inability to close a
futures contract when desired. Futures contracts may experience potentially
dramatic
price changes, which will increase the volatility of the Fund and may involve a
small investment of cash (the amount of initial and variation margin)
relative
to the magnitude of the risk assumed (the potential increase or decrease in the
price of the futures contract). Futures
contracts on indices
expose the Fund
to volatility in an underlying index.
Use of derivatives is a highly specialized activity that can involve investment
techniques and risks different from, and in
some respects greater than, those associated with investing in more traditional
investments. Derivatives can be highly complex and highly volatile and may
perform
in unanticipated ways.
Interest
Rate Risk
Generally,
the value of investments with interest rate risk, such as fixed-income
securities, will move in the opposite direction as movements in interest rates.
Factors
including central bank monetary policy, rising inflation rates, and changes in
general economic conditions may cause interest rates to rise, which could
cause
the value of the Fund’s investments to decline. Interest rate increases,
including significant or rapid increases, may result in a decline in the value
of bonds
held by the Fund, lead to heightened volatility in the fixed-income markets and
adversely affect the liquidity of certain fixed-income investments, any of
which
may result in substantial losses to the Fund. Interest
rate changes may have a more pronounced effect on the market value of fixed-rate
instruments than
on floating-rate instruments. The value of floating rate and variable securities
may decline if their interest rates do not rise as quickly, or as much, as
general
interest rates. The
prices of fixed-income securities are also affected by their durations.
Fixed-income securities with longer durations generally have greater
sensitivity to changes in interest rates than those with shorter durations.
Rising interest rates may cause the value of the Fund’s investments with
longer
durations and terms to maturity to decline, which may adversely affect the value
of the Fund. For example, if a bond has a duration of eight years, a
1%
increase in interest rates could be expected to result in an 8% decrease in the
value of the bond. Fluctuations in interest rates may also affect the liquidity
of
fixed income securities and instruments held by the
Fund.
Investment
Risk
An
investment in the Fund is not a deposit with a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government
agency.
When you sell your shares of the Fund, they could be worth less than what you
paid for them. Therefore, you may lose money by investing
in the Fund.
Issuer
Risk
The
value of, and/or the return generated by, a security may decline for a number of
reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer’s goods or services, as
well as the historical and prospective earnings of the issuer and the
value
of its assets.
Large-Capitalization
Companies Risk
The
securities of large market capitalization companies may underperform other
segments of the market because such companies may be less responsive to
competitive
challenges and opportunities and, at times, such companies may be out of favor
with investors. Many larger-capitalization companies also may be unable
to attain the high growth rates of successful smaller companies, especially
during periods of economic expansion.
Liquidity
Risk
The
Fund is susceptible to the risk that certain investments held by the Fund may
have limited marketability, be subject to restrictions on sale, be difficult or
impossible
to purchase or sell at favorable times or prices or become less liquid in
response to market developments or adverse credit events that may affect
issuers
or guarantors of a security. An inability to sell a portfolio position can
adversely affect the Fund’s value or prevent the Fund from being able to take
advantage
of other investment opportunities. Market prices for such instruments may be
volatile. During periods of substantial market volatility, an investment
or even an entire market segment may become illiquid, sometimes abruptly, which
can adversely affect the Fund’s ability to limit losses. The Fund could
lose money if it is unable to dispose of an investment at a time that is most
beneficial to the Fund. The Fund may be required to dispose of investments
at
unfavorable times or prices to satisfy obligations, which may result in losses
or may be costly to the Fund. For
example, liquidity risk may be magnified in
4Prospectus
– Fund Summaries
rising
interest rate environments in the event of higher-than-normal redemption
rates.
Unexpected
redemptions may force the Fund to sell certain investments
at unfavorable prices to meet redemption requests or other cash
needs. Judgment
plays a greater role in pricing illiquid investments than in investments
with more active markets.
Market
Risk
The
Fund is subject to the risk that the securities markets will move down,
sometimes rapidly and unpredictably, based on overall economic conditions and
other
factors, which may negatively affect the Fund’s performance. Equity securities
generally have greater price volatility than fixed-income securities,
although
under certain market conditions fixed-income securities may have comparable or
greater price volatility. During a general downturn in the securities
markets,
multiple assets may decline in value simultaneously. Prices in many financial
markets have increased significantly over the last decade, but there have
also
been periods of adverse market and financial developments and cyclical change
during that timeframe, which have resulted in unusually high levels of
volatility
in domestic and foreign financial markets that has caused losses for investors
and may occur again in the future. The value of a security may decline
due
to adverse issuer-specific conditions, general market conditions unrelated to a
particular issuer, such as changes in interest or inflation rates, or factors
that
affect a particular industry or industries. Changes in the financial condition
of a single issuer or market segment also can impact the market as a whole.
Geopolitical
and other events, including war, terrorism, economic uncertainty, trade
disputes, pandemics, public health crises, natural disasters and related
events
have led, and in the future may continue to lead, to instability in world
economies and markets generally and reduced liquidity in equity, credit and
fixed-income
markets, which may disrupt economies and markets and adversely affect the value
of your investment. Changes in value may be temporary or may
last for extended periods.
Policy
changes by the U.S. government and/or Federal Reserve and political events
within the U.S. and abroad, such as changes in the U.S. presidential
administration
and Congress, the U.S. government’s inability at times to agree on a long-term
budget and deficit reduction plan, the threat or
occurrence of
a federal
government shutdown and threats or
the occurrence of a failure
to increase the federal government’s debt limit,
which could result in a default on the government’s
obligations, may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly
and to a significant degree.
Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or
other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems
and may have an adverse impact upon a single issuer, a group of issuers, or the
market at large.
The
financial markets generally move in cycles, with periods of rising prices
followed by periods of declining prices. The value of your investment may
reflect these
fluctuations.
|
■ |
Recent
Market Events Risk.
Both U.S. and international markets have experienced significant
volatility in recent months and years. As a result of such volatility,
investment returns may fluctuate significantly. Moreover, the risks
discussed herein associated with an investment in the Fund may be
increased. |
| |
Although
interest rates were unusually low in recent years in the U.S. and
abroad, in 2022, the Federal Reserve and certain foreign central banks
began to raise
interest rates as part of their efforts to address rising inflation. It is
difficult to accurately predict the pace at which interest rates may
continue to increase,
the timing, frequency or magnitude of any such increases, or when such
increases might stop. Additionally, various economic and political factors
could
cause the Federal Reserve or another foreign central bank to change their
approach in the future and such actions may result in an economic
slowdown
in the U.S. and abroad. Unexpected increases in interest rates could lead
to market volatility or reduce liquidity in certain sectors of the market.
Deteriorating
economic fundamentals may, in turn, increase the risk of default or
insolvency of particular issuers, negatively impact market value, cause
credit
spreads to widen, and reduce bank balance sheets. Any of these could cause
an increase in market volatility, reduce liquidity across various markets
or
decrease confidence in the markets. Additionally, high public debt in the
U.S. and other countries creates ongoing systemic and market risks and
policymaking
uncertainty. |
| |
In
March 2023, the shutdown of certain financial institutions in
the U.S. and questions regarding the viability of other financial
institutions raised economic concerns
over disruption in the U.S. and global banking systems. There can be no
certainty that the actions taken by the U.S. or foreign governments will
be
effective in mitigating the effects of financial institution failures on
the economy and restoring public confidence in the U.S. and global banking
systems. |
| |
Some
countries, including the U.S., have in recent years adopted more
protectionist trade policies. Slowing global economic growth; risks
associated with a trade
agreement between the United Kingdom and the European Union; the risks
associated with ongoing trade negotiations with China; and the
possibility
of changes to some international trade agreements; political or economic
dysfunction within some nations, including major producers of oil; and
dramatic
changes in commodity and currency prices could have adverse effects that
cannot be foreseen at the present
time. |
| |
Tensions,
war, or open conflict between nations, such as between Russia and Ukraine,
in the Middle East or in eastern Asia could affect the economies of
many
nations, including the United States. The duration of ongoing hostilities
in the Middle East and between Russia and Ukraine, and any sanctions and
related
events cannot be predicted. Those events present material uncertainty and
risk with respect to markets globally and the performance of the Fund
and
its investments or operations could be negatively
impacted. |
| |
Regulators
in the U.S. have proposed and recently adopted a number of changes
to regulations involving the markets and issuers, some of which apply to
the
Fund. The full effect of various newly-adopted regulations is not
currently known. Additionally, it is not clear whether the proposed
regulations will be adopted.
However, due to the broad scope of the new and proposed regulations,
certain changes could limit the Fund’s ability to pursue its investment
strategies
or make certain investments, or may make it more costly for the Fund to
operate, which may impact
performance. |
| |
Economists
and others have expressed increasing concern about the potential effects
of global climate change on property and security values. Certain
issuers,
industries and regions may be adversely affected by the impacts of climate
change, including on the demand for and the development of goods and
services
and related production costs, and the impacts of legislation, regulation
and international accords related to climate change, as well as any
indirect consequences
of regulation or business trends driven by climate
change. |
Mid-Capitalization
Companies Risk
Investing
in the securities of mid-capitalization companies involves greater risk and the
possibility of greater price volatility, which at times can be rapid and
unpredictable,
than investing in larger-capitalization and more established companies. Since
mid-capitalization companies may have narrower commercial markets
and more limited operating history, product lines, and managerial and financial
resources than larger, more established companies, the securities of
these
companies may lack sufficient market liquidity, and they can be particularly
sensitive to changes in overall economic conditions, interest rates, borrowing
costs
and earnings.
Mortgage-Backed
and Mortgage-Related Securities Risk
Investments
in mortgage-backed and mortgage-related securities are influenced by the factors
affecting the mortgages underlying the securities or the housing
market. These securities tend to be more sensitive to changes in interest rates
than other types of debt securities. Investments in mortgage-backed and
mortgage-related securities also are subject to market risks for fixed-income
securities, which include, but are not limited to, credit risk, interest rate
risk, prepayment
and extension risk, callable securities risk, valuation risk, liquidity risk,
and restricted securities risk. A decline in the credit quality of the issuers
of mortgage-backed
and mortgage-related securities or instability in the markets for such
securities may affect the value and liquidity of such securities, which
Prospectus
– Fund Summaries5
could
result in losses to the Fund. These securities are also subject to the risk of
default on the underlying mortgages, particularly during periods of market
downturn,
and an unexpectedly high rate of defaults on the underlying assets will
adversely affect the security’s value.
|
■ |
Collateralized
Mortgage Obligation (“CMOs”) Risk.
CMOs may offer a higher yield than U.S. government securities, but they
may also be subject to greater price
fluctuation and credit risk. In addition, CMOs typically will be issued in
a variety of classes or series, which have different maturities and are
retired in sequence.
In the event of a default by an issuer of a CMO, there is no assurance
that the collateral securing such CMO will be sufficient to pay principal
and interest.
It is possible that there will be limited opportunities for trading CMOs
in the OTC market, the depth and liquidity of which will vary from time to
time. |
|
■ |
Commercial
Mortgage-Backed Securities (“CMBS”) Risk.
CMBS reflect
the risks of
investing in the real estate securing the underlying mortgage loans. These
risks
reflect the effects of local and other economic conditions on real estate
markets, the ability of tenants to make loan payments, and the ability of
a property
to attract and retain tenants.
CMBS may not be backed by the full faith and credit of the U.S. Government
and are subject to risk of default on the underlying
mortgages, particularly during periods of economic downturn. CMBS are
subject to a greater degree of prepayment and extension risk than
many
other forms of fixed-income securities, and CMBS may be less liquid and
exhibit greater price volatility than other types of mortgage- or
asset-backed securities.
Small movements in interest rates (both increases and decreases) may
quickly and significantly reduce the value of
CMBS. |
Multiple
Sub-Advisor Risk
The
Manager may allocate the Fund’s assets among multiple sub-advisors, each of
which is responsible for investing its allocated portion of the Fund’s assets.
To
a significant extent, the Fund’s performance will depend on the success of the
Manager in selecting and overseeing the sub-advisors and allocating the
Fund’s
assets to sub-advisors. The sub-advisors’ investment styles may not work
together as planned, which could adversely affect the performance of the
Fund.
In addition, because each sub-advisor makes its trading decisions independently,
the sub-advisors may purchase or sell the same security at the same time
without aggregating their transactions. This may cause unnecessary brokerage and
other expenses.
Other
Investment Companies Risk
To
the extent that the Fund invests in shares of other registered investment
companies, the Fund will indirectly bear the fees and expenses charged by those
investment
companies in addition to the Fund’s direct fees and expenses. To the extent the
Fund invests in other investment companies that invest in equity securities,
fixed-income securities and/or foreign securities, or that track an index, the
Fund is subject to the risks associated with the underlying investments
held
by the investment company or the index fluctuations to which the investment
company is subject. The Fund will be subject to the risks associated with
investments
in those companies, including but not limited to the
following:
|
■ |
Government
Money Market Funds Risk.
Investments in government money market funds are subject to interest rate
risk, credit risk, and market risk. Interest
rate risk is the risk that rising interest rates could cause the value of
such an investment to decline. Credit risk is the risk that the issuer,
guarantor or
insurer of an obligation, or the counterparty to a transaction, may fail
or become less able or unwilling, to make timely payment of interest or
principal or otherwise
honor its obligations, or that it may default
completely. |
Preferred
Stock Risk
Preferred
stocks are sensitive to movements in interest rates. Preferred stocks may be
less liquid than common stocks and, unlike common stocks, participation
in
the growth of an issuer may be limited. Distributions on preferred stocks
generally are payable at the discretion of an issuer and after required payments
to bond
holders. In certain situations, an issuer may call or redeem its preferred stock
or convert it to common stock. The market prices of preferred stocks are
generally
more sensitive to actual or perceived changes in the issuer’s financial
condition or prospects than are the prices of debt
securities.
Prepayment
and Extension Risk
Prepayment
and
extension risk
is the risk that a
bond or other fixed-income security or investment might, in the case of
prepayment risk, be called or otherwise
converted, prepaid or redeemed before maturity and, in the case of extension
risk, that the investment might not be prepaid as expected.
Due to a decline
in interest rates or excess cash flow into the issuer, a debt security may be
called or otherwise converted, prepaid or redeemed before maturity. If this
occurs,
no additional interest will be paid on the investment. The Fund may have to
reinvest the proceeds in another investment at a lower rate, may not
benefit
from an increase in value that may result from declining interest rates, and may
lose any premium it paid to acquire the security,
any of which could result
in a reduced yield to the Fund.
The rate of prepayments tends to increase as interest rates fall, which could
cause the average maturity of the portfolio to
shorten. Conversely,
extension risk
is the risk that a decrease in prepayments may, as a result of higher interest
rates or other factors, result in the extension of
a security’s effective maturity, increase the risk of default or
delayed payment, heighten interest rate risk and increase the potential for a
decline in an
investment’s
price. In addition, as a consequence of a decrease in prepayments, the amount of
principal available to the Fund for investment would be reduced.
Extensions of obligations could cause the Fund to exhibit additional volatility
and hold securities paying lower-than-market rates of interest. Either
case
could hurt the Fund’s performance.
Redemption
Risk
The
Fund may experience periods of high levels of redemptions that could cause the
Fund to sell assets at inopportune times or at a loss or depressed value.
Heavy
redemptions could hurt the Fund’s performance. The sale of assets to meet
redemption requests may create net capital gains, which could cause the
Fund
to have to distribute substantial capital gains. Redemption risk is greater to
the extent that one or more investors or intermediaries control a large
percentage
of investments in the Fund. In addition, redemption risk is heightened during
periods of declining or illiquid markets. A
rise in interest rates or other
market developments may cause investors to move out of fixed-income securities
on a large scale.
During periods of heavy redemptions, the Fund may borrow
funds through the interfund credit facility or from a bank line of credit, which
may increase costs.
Sector
Risk
When
the Fund focuses its investments in certain sectors of the economy, its
performance could
fluctuate more widely than if the Fund were invested more evenly
across sectors. Issuers
in the same economic sector may be similarly affected by economic or market
events, making the Fund more vulnerable to unfavorable
developments in that economic sector than funds that invest more broadly.
Additionally, individual
sectors may be more volatile, and may perform
differently, than the broader market. As the Fund’s portfolio changes over time,
the Fund’s exposure to a particular sector may become higher or lower.
|
■ |
Financials
Sector Risk.
Companies in the Financials sector are subject to extensive governmental
regulation and intervention, which may result in financial penalties
and limits on the scope of their activities, the amounts and types of
loans and other financial commitments they can make, the interest rates
and fees
they can charge, the scope of their activities, the prices they can
charge, the amount of capital they must maintain and, potentially, their
size. The impact
of recent or future regulation on the Financials sector, including more
stringent capital requirements, cannot be predicted. In addition, fiscal,
regulatory
and monetary policies, economic conditions, interest rate changes, credit
rating downgrades, and decreased liquidity in the credit markets may
cause
an adverse impact in a broad range of markets, including U.S. and
international credit and interbank money markets, thereby affecting a wide
range of
companies in the Financials sector. Cybersecurity incidents and technology
malfunctions and failures have become increasingly frequent and have
caused significant
losses to companies in this sector, which also may negatively impact the
Fund. |
6Prospectus
– Fund Summaries
Secured,
Partially Secured and Unsecured Obligation Risk
Debt
obligations may be secured, partially secured or unsecured. Interests in secured
and partially-secured obligations have the benefit of collateral and,
typically,
of restrictive covenants limiting the ability of the borrower to further
encumber its assets. However, there is no assurance that the liquidation of
collateral
from a secured or partially-secured obligation would satisfy the borrower’s
obligation, or that the collateral can be liquidated. Furthermore, there is a
risk
that the value of any collateral securing an obligation in which the Fund has an
interest may decline and that the collateral may not be sufficient to cover
the
amount owed on the obligation. In the event the borrower defaults, the Fund’s
access to the collateral may be limited or delayed by bankruptcy or other
insolvency
laws. Unsecured debt, including senior unsecured and subordinated debt, will not
be secured by any collateral and will be effectively subordinated to
a borrower’s secured indebtedness (to the extent of the collateral securing such
indebtedness). With respect to unsecured obligations, the Fund lacks any
collateral
on which to foreclose to satisfy its claim in whole or in part. Such instruments
generally have greater price volatility than that of fully secured holdings
and may be less liquid.
Securities
Lending Risk
To
the extent the Fund lends its securities, it may be subject to the following
risks: (i) the securities in which the Fund reinvests cash collateral may
decrease in value,
causing the Fund to incur a loss, or may not perform sufficiently to cover the
Fund’s payment to the borrower of a pre-negotiated fee or “rebate” for
the
use of that cash collateral in connection with the loan; (ii) non-cash
collateral may decline in value, resulting in the Fund becoming under-secured;
(iii) delays
may occur in the recovery of loaned securities from borrowers, which could
result in the Fund being unable to vote proxies or settle transactions or
cause
the Fund to incur increased costs; and (iv) if the borrower becomes subject to
insolvency or similar proceedings, the Fund could incur delays in its ability
to
enforce its rights in its collateral.
Securities
Selection Risk
Securities
selected for the Fund may not perform to expectations. This could result in the
Fund’s underperformance compared to its performance
index(es), or other
funds with similar investment objectives or
strategies.
Segregated
Assets Risk
In
connection with certain transactions that may give rise to future payment
obligations, the Fund may be required to maintain a segregated amount of, or
otherwise
earmark, cash or liquid securities to cover the obligation. Segregated assets
generally cannot be sold while the position they are covering is outstanding,
unless they are replaced with other assets of equal value. The need to segregate
cash or other liquid securities could limit the Fund’s ability to pursue
other opportunities as they arise.
U.S.
Government Securities and Government-Sponsored Enterprises
Risk
A
security backed by the U.S. Treasury or the full faith and credit of the United
States is guaranteed only as to the stated
interest rate and face value at maturity,
not its current market price.
The market prices for such securities are not guaranteed and will fluctuate.
Certain
securities
held by the Fund that are issued
by government-sponsored enterprises, such as the Federal National Mortgage
Association (‘‘Fannie Mae’’), Federal Home Loan Mortgage Corporation
(‘‘Freddie
Mac’’), Federal Home Loan Bank (‘‘FHLB’’), and
Federal
Farm Credit Bank (“FFCB”), are
not guaranteed by the U.S. Treasury and are not backed by the
full faith and credit of the U.S. government, and no assurance can be given that
the U.S. government will provide financial support if these organizations
do
not have the funds to meet future payment obligations. U.S. government
securities and securities of government-sponsored enterprises
are also subject to credit
risk, interest rate risk and market risk. The rising U.S. national debt may lead
to adverse impacts on the value of U.S. government securities due to
potentially
higher costs for the U.S. government to obtain new financing.
It is possible that the U.S. government and government-sponsored enterprises
will not
have the funds to meet their payment obligations in the
future.
Value
Stocks Risk
Value
stocks are subject to the risk that their intrinsic or full value may never be
realized by the market, that a stock judged to be undervalued may be
appropriately
priced, or that their prices may decline. Although value stocks tend to be
inexpensive relative to their earnings, they can continue to be inexpensive
for long periods of time. The Fund’s investments in value stocks seek to limit
potential downside price risk over time; however, value stock prices
still
may decline substantially. In addition, the Fund may produce more modest gains
as a trade-off for this potentially lower risk. The Fund’s investment in
value
stocks could cause the Fund to underperform funds that use a growth or non-value
approach to investing or have a broader investment
style.
Variable
and Floating Rate Securities Risk
The
coupons on variable and floating-rate securities are not fixed and may fluctuate
based upon changes in market rates. A variable rate security has a coupon
that is adjusted at pre-designated periods in response to changes in the market
rate of interest on which the coupon is based. The coupon on a floating
rate security is generally based on an interest rate, such as a money-market
index, Secured
Overnight Financing Rate (“SOFR”), or a Treasury bill rate. Variable
and floating rate securities are subject to interest rate risk and credit risk.
As short-term interest rates decline, the coupons on variable and floating-rate
securities typically decrease. Alternatively, during periods of rising
short-term interest rates, the coupons on variable and floating-rate securities
typically
increase. Changes in the coupons of variable and floating-rate securities may
lag behind changes in market rates or may have limits on the maximum
increases
in the coupon rates. The value of variable and floating-rate securities may
decline if their coupons do not rise as much, or as quickly, as interest rates
in
general. Conversely, variable and floating rate securities will not generally
increase in value if interest rates decline. Certain types of variable and
floating rate
instruments may be subject to greater liquidity risk than other debt
securities.
Fund
Performance
The
bar chart and table below provide an indication of risk by showing changes in
the Fund’s performance over time. The bar chart shows how the Fund’s
performance
has varied from year to year. The table shows how the Fund’s average annual
total returns compare to a composite index and the two broad-based
securities market indices that comprise the composite index, for the periods
indicated.
The
chart and the table show the performance of the Fund’s Investor Class shares for
all periods. C Class shares automatically convert to A Class shares 8
years
after purchase, if the conversion is available through your financial
intermediary. In the table below, the performance for C Class shares reflects
the conversion
of C Class shares to A Class shares after 8
years.
You
may obtain updated performance information on the Fund’s website at
www.americanbeaconfunds.com.
Past
performance (before and after taxes) is not necessarily
an indication of how the Fund will perform in the
future.
Prospectus
– Fund Summaries7
|
| |
|
Calendar
year total returns for Investor Class Shares.
Year Ended 12/31 |
|
|
Highest
Quarterly Return:
15.36% 4th
Quarter 2020
01/01/2014
through 12/31/2023
Lowest
Quarterly Return:
-19.59% 1st
Quarter 2020
01/01/2014
through
12/31/2023 |
Average
annual total returns
for periods ended December 31, 2023
|
|
|
|
| |
|
|
Inception
Date of
Class |
1
Year |
5
Years |
10
Years |
|
Investor
Class |
|
|
|
|
|
Returns
Before Taxes |
|
|
|
|
|
Returns
After Taxes on Distributions |
|
|
|
|
|
Returns
After Taxes on Distributions and Sales of Fund Shares |
|
|
|
|
|
|
|
|
| |
|
|
Inception
Date of
Class |
1
Year |
5
Years |
10
Years |
|
Share
Class
(Before Taxes) |
|
|
|
|
|
A |
|
|
|
|
|
C |
|
|
|
|
|
Y |
|
|
|
|
|
Advisor |
|
|
|
|
|
R5 |
|
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| * |
As
noted above, the 10-year performance for C Class shares reflects the
conversion of C Class shares to A Class shares after 8 years. If C Class
shares were not converted to A Class
shares after 8 years, and were instead held for the full 10-year period,
performance would have been
5.64%. |
|
|
|
| |
|
|
1
Year |
5
Years |
10
Years |
|
Index
(Reflects no deduction for fees, expenses, or taxes) |
|
|
|
|
Balanced
Composite Index (40% Bloomberg US Aggregate Bond Index/60% Russell
1000®
Value Index) |
|
|
|
|
Bloomberg
US Aggregate Bond Index |
|
|
|
|
Russell
1000®
Value Index |
|
|
|
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local income
taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. The
return after taxes on distributions and sale of Fund shares
may exceed the return before taxes due to an assumed tax benefit from any losses
on a sale of Fund shares at the end of the measurement period.
If
you
are a tax-exempt entity or hold your Fund shares through a tax-deferred
arrangement, such as an individual retirement account (“IRA”) or a 401(k) plan,
the
after-tax returns do not apply to your situation.
After-tax
returns are shown only for Investor Class shares of the Fund; after-tax returns
for other share classes
will vary.
Management
The
Manager
The
Fund has retained American Beacon Advisors, Inc. to serve as its
Manager.
Sub-Advisors
The
Fund’s assets are currently allocated among the Manager and the following
investment sub-advisors:
|
■ |
Barrow,
Hanley, Mewhinney & Strauss, LLC |
|
■ |
Hotchkis
and Wiley Capital Management, LLC |
Portfolio
Managers
|
|
| |
|
American
Beacon Advisors, Inc. |
Paul
B. Cavazos
Senior
Vice President & Chief Investment Officer
Since
2016
Kirk
L. Brown
Senior
Portfolio Manager
Since
2016 |
Samuel
Silver
Vice
President, Fixed Income Investments
Since
2014
Erin
Higginbotham
Senior
Portfolio Manager
Since
2011 |
8Prospectus
– Fund Summaries
|
|
| |
|
Barrow,
Hanley, Mewhinney & Strauss, LLC |
Mark
Giambrone
Portfolio
Manager/Senior Managing Director
Since
2015
J.
Scott McDonald
Portfolio
Manager/Senior Managing Director
Co-Head
of Fixed Income
Since
1998
Justin
Martin
Portfolio
Manager/Director
Since
2021 |
Deborah
A. Petruzzelli
Portfolio
Manager/Managing Director
Since
2003
Matthew Routh
Portfolio
Manager/Director
Since
2021 |
|
Hotchkis
and Wiley Capital Management, LLC |
George
Davis
Principal,
Portfolio Manager, and Executive Chairman
Since
1989
Scott
McBride
Portfolio
Manager and Chief Executive Officer
Since
2004 |
Judd
Peters
Portfolio
Manager
Since
2003
Patricia
McKenna
Principal
and Portfolio Manager
Since
1995 |
Purchase
and Sale of Fund Shares
You
may buy or sell shares of the Fund through a retirement plan, an investment
professional, a broker-dealer, or other financial intermediary. You may
purchase
or redeem shares of the Fund on any day the New York Stock Exchange (“NYSE”) is
open, at the Fund’s net asset value (“NAV”) per share next calculated
after your order is received in proper form, subject to any applicable sales
charge. The Manager may, in its sole discretion, allow certain individuals
to
invest directly in the Fund. For more information regarding eligibility to
invest directly please see “About Your Investment - Purchase and Redemption of
Shares.”
Direct mutual fund account shareholders may buy subsequent shares or sell shares
in various ways:
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Internet |
www.americanbeaconfunds.com |
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Phone |
To
reach an American Beacon representative call 1-800-658-5811, option
1
Through
the Automated Voice Response Service call 1-800-658-5811, option 2
(Investor Class only) |
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Mail |
American
Beacon Funds
P.O.
Box 219643
Kansas
City, MO 64121-9643 |
Overnight
Delivery:
American
Beacon Funds
430
W. 7th Street, Suite 219643
Kansas
City, MO 64105-1407 |
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New
Account |
Existing
Account |
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Share
Class |
Minimum
Initial Investment Amount |
Purchase/Redemption
Minimum by Check/ACH/Exchange |
Purchase/Redemption
Minimum by Wire |
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C |
$1,000 |
$50 |
$250 |
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A,
Investor |
$2,500 |
$50 |
$250 |
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Advisor |
$2,500 |
$50 |
None |
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Y |
$100,000 |
$50 |
None |
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R5 |
$250,000 |
$50 |
None |
Tax
Information
Dividends,
capital gains distributions,
and other distributions, if any, that you receive as
a result of your investment in
the Fund are subject to federal income tax
and may also be subject to state and local income taxes, unless you are a
tax-exempt entity or your account is tax-deferred, such as an
individual retirement
account (“IRA”) or a 401(k) plan (in which case you may be taxed later, upon the
withdrawal of your investment from such account or plan).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and the Fund’s distributor, Resolute
Investment
Distributors, Inc., or the Manager may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other intermediary and your
individual financial professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your financial intermediary’s
website for more information.
Prospectus
– Fund Summaries9
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American
Beacon
Garcia
Hamilton Quality Bond FundSM
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Investment
Objective
The
Fund’s investment objective is high current income consistent with preservation
of capital.
Fees
and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below.
More information is available from
your financial professional and in “Choosing Your Share Class” on page
67
of the Prospectus.
Shareholder
Fees
(fees paid directly from your investment)
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Share
Class |
Y |
R6 |
R5 |
Investor |
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Maximum
sales charge imposed on purchases (as a percentage of offering
price) |
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Maximum
deferred sales charge (as a percentage of the lower of original offering
price or redemption
proceeds) |
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Annual
Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your
investment) |
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Share
Class |
Y |
R6 |
R5 |
Investor |
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Management
Fees |
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Distribution
and/or Service (12b-1) Fees |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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Fee
Waiver and/or expense reimbursement1
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Total
Annual Fund Operating Expenses after fee waiver and/or expense
reimbursement |
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| 1 |
American
Beacon Advisors, Inc. (the “Manager”) has contractually agreed to waive
fees and/or reimburse expenses of the Fund’s Y Class, R6 Class, R5
Class, and Investor Class shares
through December
31, 2025 to
the extent that Total Annual Fund Operating Expenses exceed 0.51% for the
Y Class, 0.41% for the R6 Class, 0.45% for the R5 Class, and
0.83% for the Investor Class (excluding taxes, interest, brokerage
commissions, acquired fund fees and expenses, securities lending fees,
expenses associated with securities sold
short, litigation, and other extraordinary expenses). The contractual
expense reimbursement can be changed or terminated only in the discretion
and with the approval of a majority
of the Fund’s Board of Trustees. The Manager will itself waive fees and/or
reimburse expenses of the Fund to maintain the contractual expense ratio
caps for each applicable
class of shares or make arrangements with other service providers to do
so. The Manager may also, from time to time, voluntarily waive fees and/or
reimburse expenses
of the Fund. The Manager can be reimbursed by the Fund for any contractual
or voluntary fee waivers or expense reimbursements if reimbursement to the
Manager (a) occurs
within three years from the date of the Manager’s waiver/reimbursement and
(b) does not cause the Total Annual Fund Operating Expenses of a class to
exceed the lesser of
the contractual percentage limit in effect at the time of the
waiver/reimbursement or the time of the
recoupment. |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that
you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that
your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same, except that the Example reflects the fee waiver/expense
reimbursement arrangement
for each share class through December
31, 2025. Although
your actual costs may be higher or lower, based on these assumptions,
whether you redeem or hold your shares, your costs would
be:
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
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Y |
$52 |
$194 |
$372 |
$888 |
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R6 |
$42 |
$163 |
$317 |
$767 |
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R5 |
$46 |
$175 |
$339 |
$816 |
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Investor |
$85 |
$308 |
$582 |
$1,363 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual
Fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 72%
of the
average value of its portfolio.
Principal
Investment Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets (plus the
amount of any borrowings for investment purposes) in investment grade
bonds.
For purposes of the 80% policy, investment grade bonds include other investment
grade debt securities. The Fund considers investment grade debt securities
to be debt securities that are rated A-/A3
or better by S&P Global Ratings (“S&P”), Moody’s Investors Service, Inc.
(“Moody’s”) or Fitch Ratings Inc. (“Fitch”).
The
types of investment grade debt securities that the Fund invests in primarily
include obligations of the U.S. Government, its agencies and instrumentalities,
including
U.S. Government-sponsored enterprises (some of which are not backed by the full
faith and credit of the U.S. Government), corporate bonds, debentures,
and mortgage-backed and mortgage-related securities, including mortgage
pass-through securities. These types of obligations may have fixed-rate
or floating-rate coupons (or variable rate coupons), which pay interest at
variable rates based on a lending rate, such as the
Secured Overnight Financing
Rate (“SOFR”), and are commonly referred to as fixed income securities or bonds.
If an investment held by the Fund is downgraded below investment
grade, the sub-advisor may sell the security or request the Manager’s permission
to continue to hold the security.
10Prospectus
– Fund Summaries
In
selecting investment grade debt securities within the corporate sector, the
sub-advisor first focuses on the largest U.S. issuers and companies rated
A-/A3
or better
by at least two rating
agencies. The sub-advisor then utilizes
screens to identify issuers that carry high levels of unquantifiable risk that
could have a financial
impact on the issuers, which includes risks associated with environmental,
social, and/or governance (“ESG”) considerations. This includes, but is not
limited
to, risks associated with
foreign companies, Yankee bonds, alcohol, tobacco, gambling, and defense
contractors.
Issuers identified as having a higher risk
profile during this stage are either excluded from further consideration or
subject to further evaluation to determine their inclusion in the
investable
universe.
The sub-advisor then utilizes
research and/or rankings provided by one or more third parties to analyze and
scale the remaining issuers
based on the sustainability
of their operations and their consideration of ESG
principles as an integrated part of the sub-advisor’s evaluation and investment
process. These investment
considerations are not solely determinative in any investment decision.
Thereafter, if the sub-advisor deems securities to be comparable from an
investment
perspective, the sub-advisor generally expects to select for the Fund’s
portfolio the securities with the highest ranking
consistent with the sub-advisor’s
proprietary
scale methodology.
Under
normal circumstances, the Fund seeks to maintain a weighted-average duration
that is 25% above or below the then-current duration of the Fund’s benchmark,
the Bloomberg US Aggregate Bond Index (“Benchmark”). As of December 29,
2023,
the Benchmark’s duration was 6.2 years, which means that the
Fund’s duration would have been expected to range from approximately 4.6 years
to approximately 7.7 years at that time. The Benchmark’s duration is
expected
to change over time and could be higher or lower at a future date, and the
Fund’s duration may change accordingly. Duration is an indicator of a
bond’s
price sensitivity to a change in interest rates. For example, a duration of
eight years means that a security’s price would be expected to decrease by
approximately
8% with a 1% increase in interest rates. The Fund may invest in securities of
any maturity, but typically invests in securities with maximum maturities
of up to 30 years.
The
sub-advisor follows a fixed income investment strategy that focuses on high
current income, given its outlook for interest rates, and the preservation of
capital.
In selecting securities for the Fund, the sub-advisor employs a top-down
approach, which includes a broad fundamental analysis of the current fixed
income
markets, including duration, the yield curve, and the performance of market
sectors. Through this analysis, the sub-advisor creates defined parameters
for
the selection of investments for the Fund’s portfolio and implements a
proprietary investment process comprised of qualitative and quantitative
components.
The
Fund may have a focused portfolio of fewer companies than other diversified
funds. The Fund may have significant exposure to the Financials sector.
However,
as the sector composition of the Fund’s portfolio changes over time, the Fund’s
exposure to the Financials sector may be lower at a future date, and
the
Fund’s exposure to other market sectors may be higher. The Fund may engage in
active and frequent trading of portfolio securities to achieve its principal
investment
strategies. The Fund may invest cash balances in a government money market fund
advised by the Manager, with respect to which the Manager receives
a management fee.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective and you
could lose part or all of your investment in the
Fund.
The Fund is not a complete
investment program and may not be appropriate for all investors. Investors
should carefully consider their own investment goals and risk tolerance
before
investing in the Fund. The principal risks of investing in the Fund listed below
are presented in alphabetical order and not in order of importance or
potential
exposure. Among other matters, this presentation is intended to facilitate your
ability to find particular risks and compare them with the risks of other
funds. Each risk summarized below is considered a “principal risk” of investing
in the Fund, regardless of the order in which it appears.
Callable
Securities Risk
The
Fund may invest in fixed-income securities with call features. A call feature
allows the issuer of the security to redeem or call the security prior to its
stated maturity
date. In periods of falling interest rates, issuers may be more likely to call
in securities that are paying higher coupon rates than prevailing interest
rates.
In the event of a call, the Fund would lose the income that would have been
earned to maturity on that security, and the proceeds received by the Fund
may
be invested in securities paying lower coupon rates and may not benefit from any
increase in value that might otherwise result from declining interest
rates.
Counterparty
Risk
The
Fund is subject to the risk that a party or participant to a transaction, such
as a broker,
will be unwilling or unable to satisfy its obligation to make timely
principal,
interest or settlement payments or to otherwise honor its obligations to the
Fund.
Credit
Risk
The
Fund is subject to the risk that the issuer, guarantor or insurer of an
obligation, or the counterparty to a transaction,
may fail, or become less able or unwilling,
to make timely payment of interest or principal or otherwise honor its
obligations or default completely. Changes in the actual or perceived
creditworthiness
of an issuer, or a downgrade or default affecting any of the Fund’s securities,
could affect the Fund’s performance. Generally, the longer the maturity
and the lower the credit quality of a security, the more sensitive it is to
credit risk.
Cybersecurity
and Operational Risk
Operational
risks arising from, among other problems, human errors, systems and technology
disruptions or failures, or cybersecurity incidents may negatively impact
the Fund and its service providers as well as the ability of shareholders to
transact in
the Fund’s shares,
and result in financial losses. Cybersecurity incidents
may allow an unauthorized party to gain access to Fund assets, shareholder data,
or proprietary information, or cause the Fund or its service providers,
as well as securities trading venues and their service providers, to suffer data
corruption or lose operational functionality. Cybersecurity incidents
can
result from deliberate attacks or unintentional events. It is not possible for
the Fund or its service providers to identify all of the operational risks that
may affect
the Fund or to develop processes and controls to completely eliminate or
mitigate their occurrence or effects. The Fund cannot control the cybersecurity
plans
and systems of its service providers, its counterparties or the issuers of
securities in which the Fund invests. The
issuers of the Fund’s investments are likely
to be
dependent on computers for their
operations
and require ready access to their
data and the
internet to conduct their business. Thus, cybersecurity incidents
could also affect issuers of the
Fund’s investments,
leading to significant loss of value.
Debentures
Risk
Debentures
are unsecured debt securities. The holder of a debenture is protected only by
the general creditworthiness of the issuer. The
Fund may invest in both
corporate and government debentures.
Environmental,
Social, and/or Governance Investing Risk
The
use of environmental, social, and/or governance (“ESG”) considerations
by the sub-advisor may cause the Fund to make different investments than
funds that
have a similar investment style but do not incorporate such considerations in
their strategy. As with the use of any investment considerations involved in
investment
decisions, there is no guarantee that the use of any ESG investment
considerations will result in the selection of issuers that will outperform
other issuers
or help reduce risk in the Fund. The
Fund may choose not to, or may not be able to, take advantage of certain
investment opportunities due to these considerations,
which may adversely affect investment performance.
The Fund may underperform funds that do not incorporate these considerations or
incorporate
different ESG considerations. Although the sub-advisor has established its
own process to oversee ESG integration in accordance with the Fund’s
Prospectus
– Fund Summaries11
strategies,
successful integration of ESG factors will depend on the sub-advisor’s
skill in researching, identifying, and applying these factors, as well as on the
availability
of relevant data. The
sub-advisor may use ESG research and/or ratings information provided by one or
more third parties in performing this analysis and
considering ESG risks.
The regulatory landscape with respect to ESG investing in the United States is
evolving and any future rules or regulations may require
the Fund to change its investment process with respect to the integration of ESG
factors.
Focused
Holdings Risk
Because
the Fund may have a focused portfolio of fewer companies than other diversified
funds, the increase or decrease of the value of a single investment may
have a greater impact on the Fund’s net asset value (“NAV”) and total return
when compared to other diversified funds.
High
Portfolio Turnover Risk
Portfolio
turnover is a measure of the Fund’s trading activity over a one-year period. A
portfolio turnover rate of 100% would indicate that the Fund sold and
replaced
the entire value of its securities holdings during the period. The Fund may
engage in active and frequent trading and may have a high portfolio turnover
rate, which could increase the Fund’s transaction costs, have a negative impact
on performance, and generate higher capital gain distributions to shareholders
than if the Fund had a lower portfolio turnover
rate.
Interest
Rate Risk
Generally,
the value of investments with interest rate risk, such as fixed-income
securities, will move in the opposite direction as
movements in interest rates. Factors
including central bank monetary policy, rising inflation rates, and changes in
general economic conditions may cause interest rates to rise, which could
cause
the value of the Fund’s investments to decline. Interest rate
increases, including significant or rapid increases, may result in a decline in
the value of bonds
held by the Fund, lead to heightened volatility in the fixed-income markets and
adversely affect the liquidity of certain fixed-income investments, any of
which
may result
in substantial losses to the Fund. The
prices of fixed-income securities are also affected by their durations.
Fixed-income securities with longer
durations generally have greater sensitivity to changes in interest
rates
than those with shorter durations.
Rising interest rates may cause the value of the
Fund’s investments with longer durations and terms to maturity to decline, which
may adversely affect the value of the Fund. For example, if a bond has a
duration
of eight years, a 1% increase in interest rates could be expected to result in
an 8% decrease in the value of the bond. Fluctuations
in interest rates may
also affect the liquidity of fixed income securities and instruments held by the
Fund.
Investment
Risk
An
investment in the Fund is not a deposit with a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government
agency.
When you sell your shares of the Fund, they could be worth less than what you
paid for them. Therefore, you may lose money by investing
in the Fund.
Issuer
Risk
The
value of, and/or the return generated by, a security may decline for a number of
reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer’s goods or services, as
well as the historical and prospective earnings of the issuer and the
value
of its assets.
Liquidity
Risk
The
Fund is susceptible to the risk that certain investments held by the Fund may
have limited marketability, be subject to restrictions on sale, be difficult or
impossible
to purchase or sell at favorable times or prices or become less liquid in
response to market developments or adverse credit events that may affect
issuers
or guarantors of a security. An inability to sell a portfolio position can
adversely affect the Fund’s value or prevent the Fund from being able to take
advantage
of other investment opportunities. Market prices for such instruments may be
volatile. During periods of substantial market volatility, an investment
or even an entire market segment may become illiquid, sometimes abruptly, which
can adversely affect the Fund’s ability to limit losses. The Fund could
lose money if it is unable to dispose of an investment at a time that is most
beneficial to the Fund. The Fund may be required to dispose of investments
at
unfavorable times or prices to satisfy obligations, which may result in losses
or may be costly to the Fund. For
example, liquidity risk may be magnified in rising
interest rate environments in the event of higher-than-normal redemption
rates.
Unexpected
redemptions may force the Fund to sell certain investments
at unfavorable prices to meet redemption requests or other cash
needs. Judgment
plays a greater role in pricing illiquid investments than in investments
with more active markets.
Market
Risk
The
Fund is subject to the risk that the securities markets will move down,
sometimes rapidly and unpredictably, based on overall economic conditions and
other
factors, which may negatively affect the Fund’s performance. Equity securities
generally have greater price volatility than fixed-income securities,
although
under certain market conditions fixed-income securities may have comparable or
greater price volatility. During a general downturn in the securities
markets,
multiple assets may decline in value simultaneously. Prices in many financial
markets have increased significantly over the last decade, but there have
also
been periods of adverse market and financial developments and cyclical change
during that timeframe, which have resulted in unusually high levels of
volatility
in domestic and foreign financial markets that has caused losses for investors
and may occur again in the future. The value of a security may decline
due
to adverse issuer-specific conditions, general market conditions unrelated to a
particular issuer, such as changes in interest or inflation rates, or factors
that
affect a particular industry or industries. Changes in the financial condition
of a single issuer or market segment also can impact the market as a whole.
Geopolitical
and other events, including war, terrorism, economic uncertainty, trade
disputes, pandemics, public health crises, natural disasters and related
events
have led, and in the future may continue to lead, to instability in world
economies and markets generally and reduced liquidity in equity, credit and
fixed-income
markets, which may disrupt economies and markets and adversely affect the value
of your investment. Changes in value may be temporary or may
last for extended periods.
Policy
changes by the U.S. government and/or Federal Reserve and political events
within the U.S. and abroad, such as changes in the U.S. presidential
administration
and Congress, the U.S. government’s inability at times to agree on a long-term
budget and deficit reduction plan, the threat or
occurrence of
a federal
government shutdown and threats or
the occurrence of a failure
to increase the federal government’s debt limit,
which could result in a default on the government’s
obligations, may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly
and to a significant degree.
Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or
other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems
and may have an adverse impact upon a single issuer, a group of issuers, or the
market at large.
The
financial markets generally move in cycles, with periods of rising prices
followed by periods of declining prices. The value of your investment may
reflect these
fluctuations.
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Recent
Market Events Risk.
Both U.S. and international markets have experienced significant
volatility in recent months and years. As a result of such volatility,
investment returns may fluctuate significantly. Moreover, the risks
discussed herein associated with an investment in the Fund may be
increased. |
12Prospectus
– Fund Summaries
| |
Although
interest rates were unusually low in recent years in the U.S. and
abroad, in 2022, the Federal Reserve and certain foreign central banks
began to raise
interest rates as part of their efforts to address rising inflation. It is
difficult to accurately predict the pace at which interest rates may
continue to increase,
the timing, frequency or magnitude of any such increases, or when such
increases might stop. Additionally, various economic and political factors
could
cause the Federal Reserve or another foreign central bank to change their
approach in the future and such actions may result in an economic
slowdown
in the U.S. and abroad. Unexpected increases in interest rates could lead
to market volatility or reduce liquidity in certain sectors of the market.
Deteriorating
economic fundamentals may, in turn, increase the risk of default or
insolvency of particular issuers, negatively impact market value, cause
credit
spreads to widen, and reduce bank balance sheets. Any of these could cause
an increase in market volatility, reduce liquidity across various markets
or
decrease confidence in the markets. Additionally, high public debt in the
U.S. and other countries creates ongoing systemic and market risks and
policymaking
uncertainty. |
| |
In
March 2023, the shutdown of certain financial institutions in
the U.S. and questions regarding the viability of other financial
institutions raised economic concerns
over disruption in the U.S. and global banking systems. There can be no
certainty that the actions taken by the U.S. or foreign governments will
be
effective in mitigating the effects of financial institution failures on
the economy and restoring public confidence in the U.S. and global banking
systems. |
| |
Some
countries, including the U.S., have in recent years adopted more
protectionist trade policies. Slowing global economic growth; risks
associated with a trade
agreement between the United Kingdom and the European Union; the risks
associated with ongoing trade negotiations with China; and the
possibility
of changes to some international trade agreements; political or economic
dysfunction within some nations, including major producers of oil; and
dramatic
changes in commodity and currency prices could have adverse effects that
cannot be foreseen at the present
time. |
| |
Tensions,
war, or open conflict between nations, such as between Russia and Ukraine,
in the Middle East or in eastern Asia could affect the economies of
many
nations, including the United States. The duration of ongoing hostilities
in the Middle East and between Russia and Ukraine, and any sanctions and
related
events cannot be predicted. Those events present material uncertainty and
risk with respect to markets globally and the performance of the Fund
and
its investments or operations could be negatively
impacted. |
| |
Regulators
in the U.S. have proposed and recently adopted a number of changes
to regulations involving the markets and issuers, some of which apply to
the
Fund. The full effect of various newly-adopted regulations is not
currently known. Additionally, it is not clear whether the proposed
regulations will be adopted.
However, due to the broad scope of the new and proposed regulations,
certain changes could limit the Fund’s ability to pursue its investment
strategies
or make certain investments, or may make it more costly for the Fund to
operate, which may impact
performance. |
| |
Economists
and others have expressed increasing concern about the potential effects
of global climate change on property and security values. Certain
issuers,
industries and regions may be adversely affected by the impacts of climate
change, including on the demand for and the development of goods and
services
and related production costs, and the impacts of legislation, regulation
and international accords related to climate change, as well as any
indirect consequences
of regulation or business trends driven by climate
change. |
Mortgage-Backed
and Mortgage-Related Securities Risk
Investments
in mortgage-backed and mortgage-related securities are influenced by the factors
affecting the mortgages underlying the securities or the housing
market. These securities tend to be more sensitive to changes in interest rates
than other types of debt securities. Investments in mortgage-backed and
mortgage-related securities also are subject to market risks for fixed-income
securities, which include, but are not limited to, credit risk, interest rate
risk, prepayment
and extension risk, callable securities risk, valuation risk, liquidity risk,
and restricted securities risk. A decline in the credit quality of the issuers
of mortgage-backed
and mortgage-related securities or instability in the markets for such
securities may affect the value and liquidity of such securities, which
could
result in losses to the Fund. These securities are also subject to the risk of
default on the underlying mortgages, particularly during periods of market
downturn,
and an unexpectedly high rate of defaults on the underlying assets will
adversely affect the security’s value.
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■ |
Mortgage
Pass-Through Securities Risk.
Mortgage pass-through securities provide for the “pass through” of the
monthly payments made by individual borrowers
on their residential or commercial mortgage loans, net of any fees by the
security issuer and guarantor, as applicable, to the holder of the
security.
Mortgage
pass-through securities are sensitive to interest rate changes, and
small
movements in interest rates,
both increases and decreases,
may quickly
and significantly affect the value of certain mortgage pass-through
securities. Mortgage pass-through securities involve interest rate risk,
credit risk, prepayment
risk and extension
risk. |
Other
Investment Companies Risk
To
the extent that the Fund invests in shares of other registered investment
companies, the Fund will indirectly bear the fees and expenses charged by those
investment
companies in addition to the Fund’s direct fees and expenses. To the extent the
Fund invests in other investment companies that invest in equity securities,
fixed-income securities and/or foreign securities, or that track an index, the
Fund is subject to the risks associated with the underlying investments
held
by the investment company or the index fluctuations to which the investment
company is subject. The Fund will be subject to the risks associated with
investments
in those companies, including but not limited to the
following:
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■ |
Government
Money Market Funds Risk.
Investments in government money market funds are subject to interest rate
risk, credit risk, and market risk. Interest
rate risk is the risk that rising interest rates could cause the value of
such an investment to decline. Credit risk is the risk that the issuer,
guarantor or
insurer of an obligation, or the counterparty to a transaction, may fail
or become less able or unwilling, to make timely payment of interest or
principal or otherwise
honor its obligations, or that it may default
completely. |
Prepayment
and Extension Risk
Prepayment
and
extension risk
is the risk that a
bond or other fixed-income security or investment might, in the case of
prepayment risk, be called or otherwise
converted, prepaid or redeemed before maturity and, in the case of extension
risk, that the investment might not be prepaid as expected.
Due to a decline
in interest rates or excess cash flow into the issuer, a debt security may be
called or otherwise converted, prepaid or redeemed before maturity. If this
occurs,
no additional interest will be paid on the investment. The Fund may have to
reinvest the proceeds in another investment at a lower rate, may not
benefit
from an increase in value that may result from declining interest rates, and may
lose any premium it paid to acquire the security,
any of which could result
in a reduced yield to the Fund.
The rate of prepayments tends to increase as interest rates fall, which could
cause the average maturity of the portfolio to
shorten. Conversely,
extension risk
is the risk that a decrease in prepayments may, as a result of higher interest
rates or other factors, result in the extension of
a security’s effective maturity, increase the risk of default or
delayed payment, heighten interest rate risk and increase the potential for a
decline in an
investment’s
price. In addition, as a consequence of a decrease in prepayments, the amount of
principal available to the Fund for investment would be reduced.
Extensions of obligations could cause the Fund to exhibit additional volatility
and hold securities paying lower-than-market rates of interest. Either
case
could hurt the Fund’s performance.
Redemption
Risk
The
Fund may experience periods of high levels of redemptions that could cause the
Fund to sell assets at inopportune times or at a loss or depressed value.
Heavy
redemptions could hurt the Fund’s performance. The sale of assets to meet
redemption requests may create net capital gains, which could cause the
Fund
to have to distribute substantial capital gains. Redemption risk is greater to
the extent that one or more investors or intermediaries control a large
percentage
of investments in the Fund. In addition, redemption risk is heightened during
periods of declining or illiquid markets. A
rise in interest rates or
Prospectus
– Fund Summaries13
other
market developments may cause investors to move out of fixed-income securities
on a large scale.
During periods of heavy redemptions, the Fund may borrow
funds through the interfund credit facility or from a bank line of credit, which
may increase costs.
Sector
Risk
When
the Fund focuses its investments in certain sectors of the economy, its
performance could
fluctuate more widely than if the Fund were invested more evenly
across sectors. Issuers
in the same economic sector may be similarly affected by economic or market
events, making the Fund more vulnerable to unfavorable
developments in that economic sector than funds that invest more broadly.
Additionally, individual
sectors may be more volatile, and may perform
differently, than the broader market. As the Fund’s portfolio changes over time,
the Fund’s exposure to a particular sector may become higher or lower.
|
■ |
Financials
Sector Risk.
Companies in the Financials sector are subject to extensive governmental
regulation and intervention, which may result in financial penalties
and limits on the scope of their activities, the amounts and types of
loans and other financial commitments they can make, the interest rates
and fees
they can charge, the scope of their activities, the prices they can
charge, the amount of capital they must maintain and, potentially, their
size. The impact
of recent or future regulation on the Financials sector, including more
stringent capital requirements, cannot be predicted. In addition, fiscal,
regulatory
and monetary policies, economic conditions, interest rate changes, credit
rating downgrades, and decreased liquidity in the credit markets may
cause
an adverse impact in a broad range of markets, including U.S. and
international credit and interbank money markets, thereby affecting a wide
range of
companies in the Financials sector. Cybersecurity incidents and technology
malfunctions and failures have become increasingly frequent and have
caused significant
losses to companies in this sector, which also may negatively impact the
Fund. |
Secured,
Partially Secured and Unsecured Obligation Risk
Debt
obligations may be secured, partially secured or unsecured. Interests in secured
and partially-secured obligations have the benefit of collateral and,
typically,
of restrictive covenants limiting the ability of the borrower to further
encumber its assets. However, there is no assurance that the liquidation of
collateral
from a secured or partially-secured obligation would satisfy the borrower’s
obligation, or that the collateral can be liquidated. Furthermore, there is a
risk
that the value of any collateral securing an obligation in which the Fund has an
interest may decline and that the collateral may not be sufficient to cover
the
amount owed on the obligation. In the event the borrower defaults, the Fund’s
access to the collateral may be limited or delayed by bankruptcy or other
insolvency
laws. Unsecured debt, including senior unsecured and subordinated debt, will not
be secured by any collateral and will be effectively subordinated to
a borrower’s secured indebtedness (to the extent of the collateral securing such
indebtedness). With respect to unsecured obligations, the Fund lacks any
collateral
on which to foreclose to satisfy its claim in whole or in part. Such instruments
generally have greater price volatility than that of fully secured holdings
and may be less liquid.
Securities
Selection Risk
Securities
selected for the Fund may not perform to expectations. This could result in the
Fund’s underperformance compared to its performance
index(es), or other
funds with similar investment objectives or
strategies.
U.S.
Government Securities and Government-Sponsored Enterprises
Risk
A
security backed by the U.S. Treasury or the full faith and credit of the United
States is guaranteed only as to the stated
interest rate and face value at maturity,
not its current market price.
The market prices for such securities are not guaranteed and will fluctuate.
Certain
securities
held by the Fund that are issued
by government-sponsored enterprises, such as the Federal National Mortgage
Association (‘‘Fannie Mae’’), Federal Home Loan Mortgage Corporation
(‘‘Freddie
Mac’’), Federal Home Loan Bank (‘‘FHLB’’), and
Federal
Farm Credit Bank (“FFCB”), are
not guaranteed by the U.S. Treasury and are not backed by the
full faith and credit of the U.S. government, and no assurance can be given that
the U.S. government will provide financial support if these organizations
do
not have the funds to meet future payment obligations. U.S. government
securities and securities of government-sponsored enterprises
are also subject to credit
risk, interest rate risk and market risk. The rising U.S. national debt may lead
to adverse impacts on the value of U.S. government securities due to
potentially
higher costs for the U.S. government to obtain new financing.
It is possible that the U.S. government and government-sponsored enterprises
will not
have the funds to meet their payment obligations in the
future.
U.S.
Treasury Obligations Risk
The
market
value
of U.S. Treasury obligations may vary due to fluctuations
in interest rates. In addition, changes to the financial condition or credit
rating of the
U.S. government may cause the value of the Fund’s investments in obligations
issued by the U.S. Treasury to decline. Certain political events in the U.S.,
such
as a prolonged government shutdown or potential default on the national debt,
may also cause investors to lose confidence in the U.S. government and
may
cause the value of U.S. Treasury obligations to
decline.
Variable
and Floating Rate Securities Risk
The
coupons on variable and floating-rate securities are not fixed and may fluctuate
based upon changes in market rates. A variable rate security has a coupon
that is adjusted at pre-designated periods in response to changes in the market
rate of interest on which the coupon is based. The coupon on a floating
rate security is generally based on an interest rate, such as a money-market
index, Secured
Overnight Financing Rate (“SOFR”), or a Treasury bill rate. Variable
and floating rate securities are subject to interest rate risk and credit risk.
As short-term interest rates decline, the coupons on variable and floating-rate
securities typically decrease. Alternatively, during periods of rising
short-term interest rates, the coupons on variable and floating-rate securities
typically
increase. Changes in the coupons of variable and floating-rate securities may
lag behind changes in market rates or may have limits on the maximum
increases
in the coupon rates. The value of variable and floating-rate securities may
decline if their coupons do not rise as much, or as quickly, as interest rates
in
general. Conversely, variable and floating rate securities will not generally
increase in value if interest rates decline. Certain types of variable and
floating rate
instruments may be subject to greater liquidity risk than other debt
securities.
Fund
Performance
The
bar chart and table below provide an indication of risk by showing changes in
the Fund’s performance over time. The bar chart shows how the Fund’s
performance
has varied from year to year. The table shows how the Fund’s average annual
total returns compare to a broad-based market index
for the periods
indicated.
The
chart and the table show the performance of the Fund’s Investor Class shares for
all periods. In
the table below, for the period prior to February 28, 2019, the
performance of the R6 Class shares reflects the returns of the R5 Class shares
of the Fund. The R6 Class shares would have had similar annual returns to
the
R5 Class shares of the Fund because the shares of each class represent
investments in the same portfolio securities. However, as reflected in the table
in the
“Fees and Expenses of the Fund” section of this Fund Summary, the expenses of
the R5 Class shares differ from those of the R6 Class shares, which would
affect performance. To
the extent that the R5 Class shares may have had lower expenses than the R6
Class shares prior to February 28, 2019, the performance
of the R5 Class shares would likely have been higher than the performance the R6
Class shares would have realized during the same period. The
performance
of the R6 Class shares shown in the table has not been adjusted for differences
in operating expenses between the R6 Class shares
and
R5 Class shares.
14Prospectus
– Fund Summaries
You
may obtain updated performance information on the Fund’s website at
www.americanbeaconfunds.com.
Past
performance (before and after taxes) is not necessarily
an indication of how the Fund will perform in the
future.
|
| |
|
Calendar
year total returns for Investor Class Shares.
Year Ended 12/31 |
|
|
Highest
Quarterly Return:
8.18% 4th
Quarter 2023
01/01/2017
through 12/31/2023
Lowest
Quarterly Return:
-5.80% 3rd
Quarter 2022
01/01/2017
through
12/31/2023 |
Average
annual total returns
for periods ended December 31, 2023
|
|
|
|
| |
|
|
Inception
Date of
Class |
1
Year |
5
Years |
Since
Inception |
|
Investor
Class |
|
|
|
|
|
Returns
Before Taxes |
|
|
|
|
|
Returns
After Taxes on Distributions |
|
|
|
|
|
Returns
After Taxes on Distributions and Sales of Fund Shares |
|
|
|
|
|
|
|
|
| |
|
|
Inception
Date of
Class |
1
Year |
5
Years |
Since
Inception
(04/04/2016) |
|
Share
Class
(Before Taxes) |
|
|
|
|
|
Y |
|
|
|
|
|
R6 |
|
|
|
|
|
R5 |
|
|
|
|
|
|
|
| |
|
|
|
|
Since
Inception
(04/04/2016) |
|
Index
(Reflects no deduction for fees, expenses, or taxes) |
|
|
|
|
Bloomberg
US Aggregate Bond Index |
|
|
|
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates and do not reflect the impact of state and local income
taxes.
Actual after-tax returns depend on an investor’s tax situation and may differ
from those shown. The
return after taxes on distributions and sale of Fund shares
may exceed the return before taxes due to an assumed tax benefit from any losses
on a sale of Fund shares at the end of the measurement period.
If
you
are a tax-exempt entity or hold your Fund shares through a tax-deferred
arrangement, such as an individual retirement account (“IRA”) or a 401(k) plan,
the
after-tax returns do not apply to your situation.
After-tax
returns are shown only for Investor Class shares of the Fund; after-tax returns
for other share classes
will vary.
Management
The
Manager
The
Fund has retained American Beacon Advisors, Inc. to serve as its
Manager.
Sub-Advisor
The
Fund’s investment sub-advisor is Garcia Hamilton & Associates,
L.P.
Portfolio
Managers
|
|
| |
|
Garcia
Hamilton & Associates, L.P. |
Gilbert
Andrew Garcia, CFA
Managing
Partner, Chief Investment Officer
Since
Fund Inception (2016)
Karen
H. Tass, CFA (MBA)
Partner,
Co-Deputy CIO, Portfolio Manager
Since
2024 |
Jeffrey
D. Detwiler, CFA (MS)
Partner,
Co-Deputy CIO, Portfolio Manager
Since
2024
Nancy
Rodriguez
Partner,
Portfolio Manager
Since
Fund Inception (2016) |
Prospectus
– Fund Summaries15
Purchase
and Sale of Fund Shares
You
may buy or sell shares of the Fund through a retirement plan, an investment
professional, a broker-dealer, or other financial intermediary. You may
purchase
or redeem shares of the Fund on any day the New York Stock Exchange (“NYSE”) is
open, at the Fund’s net asset value (“NAV”) per share next calculated
after your order is received in proper form, subject to any applicable sales
charge. The Manager may, in its sole discretion, allow certain individuals
to
invest directly in the Fund. For more information regarding eligibility to
invest directly please see “About Your Investment - Purchase and Redemption of
Shares.”
Direct mutual fund account shareholders may buy subsequent shares or sell shares
in various ways:
|
|
| |
|
Internet |
www.americanbeaconfunds.com |
|
Phone |
To
reach an American Beacon representative call 1-800-658-5811, option
1
Through
the Automated Voice Response Service call 1-800-658-5811, option 2
(Investor Class only) |
|
Mail |
American
Beacon Funds
P.O.
Box 219643
Kansas
City, MO 64121-9643 |
Overnight
Delivery:
American
Beacon Funds
430
W. 7th Street, Suite 219643
Kansas
City, MO 64105-1407 |
|
|
|
| |
|
|
New
Account |
Existing
Account |
|
Share
Class |
Minimum
Initial Investment Amount |
Purchase/Redemption
Minimum by Check/ACH/Exchange |
Purchase/Redemption
Minimum by Wire |
|
Investor |
$2,500 |
$50 |
$250 |
|
Y |
$100,000 |
$50 |
None |
|
R5 |
$250,000 |
$50 |
None |
|
R6 |
None |
$50 |
None |
Tax
Information
Dividends,
capital gains distributions,
and other distributions, if any, that you receive as
a result of your investment in
the Fund are subject to federal income tax
and may also be subject to state and local income taxes, unless you are a
tax-exempt entity or your account is tax-deferred, such as an
individual retirement
account (“IRA”) or a 401(k) plan (in which case you may be taxed later, upon the
withdrawal of your investment from such account or plan).
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and the Fund’s distributor, Resolute
Investment
Distributors, Inc., or the Manager may pay the intermediary for the sale of Fund
shares and related services. These payments may create a conflict of
interest by influencing the broker-dealer or other intermediary and your
individual financial professional to recommend the Fund over another investment.
Ask
your individual financial professional or visit your financial intermediary’s
website for more information.
16Prospectus
– Fund Summaries
|
| |
|
American
Beacon
International
Equity FundSM
|
|
Investment
Objective
The
Fund’s investment objective is long-term capital
appreciation.
Fees
and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund. You
may pay other fees, such as brokerage commissions
and other fees to financial intermediaries, which are not reflected in the
tables and examples below. You
may qualify for sales discounts
if you and your eligible family members invest, or agree to invest in the
future, at least $50,000
in all classes of the American Beacon Funds on an aggregated
basis.
More information about these and other discounts is available from your
financial professional and in “Choosing Your Share Class” on page 67
of the Prospectus and “Additional Purchase and Sale Information for A Class
Shares” on page 74 of the Statement of Additional Information
(“SAI”). With
respect to purchases of shares through specific intermediaries, you may find
additional information regarding sales charge discounts and waivers in
Appendix
A to the Fund’s Prospectus entitled “Intermediary Sales Charge Discounts,
Waivers and Other Information.”
Shareholder
Fees
(fees paid directly from your investment)
|
|
|
|
|
|
|
| |
|
Share
Class |
A |
C |
Y |
R6 |
Advisor |
R5 |
Investor |
|
Maximum
sales charge imposed on purchases (as a percentage
of offering price) |
|
|
|
|
|
|
|
|
Maximum
deferred sales charge (as a percentage of the lower
of original offering price or redemption proceeds) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Annual
Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your
investment) |
|
Share
Class |
A |
C |
Y |
R6 |
Advisor |
R5 |
Investor |
|
Management
Fees |
|
|
|
|
|
|
|
|
Distribution
and/or Service (12b-1) Fees |
|
|
|
|
|
|
|
|
Other
Expenses |
|
|
|
|
|
|
|
|
Acquired
Fund Fees and Expenses |
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses2
|
|
|
|
|
|
|
|
|
Fee
Waiver and/or expense reimbursement3
|
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses after fee waiver
and/or expense reimbursement |
|
|
|
|
|
|
|
| 1 |
A
contingent deferred sales charge (‘‘CDSC’’) of 0.50% will be charged on
certain purchases of $1,000,000 or more of A Class shares that are
redeemed in whole or part within 18
months of purchase.
|
| 2 |
The
Total Annual Fund Operating Expenses do not correlate to the ratio of
expenses to average net assets provided in the Fund’s Financial Highlights
table, which reflects the operating
expenses of the Fund and does not include Acquired Fund Fees and
Expenses.
|
| 3 |
American
Beacon Advisors, Inc. (the “Manager”) has contractually agreed to waive
fees and/or reimburse expenses of the Fund’s R6 Class shares, through
December
31, 2025,
to
the extent that Total Annual Fund Operating Expenses exceed 0.69% for the
R6 Class shares (excluding taxes, interest, brokerage commissions,
acquired fund fees and expenses,
securities lending fees, expenses associated with securities sold short,
litigation, and other extraordinary expenses). The contractual expense
reimbursement can be changed
or terminated only in the discretion and with the approval of a majority
of the Fund’s Board of Trustees. The Manager will itself waive fees and/or
reimburse expenses of the
Fund to maintain the contractual expense ratio caps for each applicable
class of shares or make arrangements with other service providers to do
so. The Manager may also, from
time to time, voluntarily waive fees and/or reimburse expenses of the
Fund. The Manager can be reimbursed by the Fund for any contractual or
voluntary fee waivers or expense
reimbursements if reimbursement to the Manager (a) occurs within three
years from the date of the Manager’s waiver/reimbursement and (b) does not
cause the Total Annual
Fund Operating Expenses of a class to exceed the lesser of the contractual
percentage limit in effect at the time of the waiver/reimbursement or the
time of the recoupment. |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Example assumes that
you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that
your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same, except that the Example reflects the fee waiver/expense
reimbursement
arrangement for the R6 Class shares through December
31, 2025.
C Class shares automatically convert to A Class shares 8 years after
purchase,
if the conversion is available through your financial intermediary. This Example
reflects your costs as though C Class shares were held for the full 10-year
period. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
|
|
|
|
| |
|
Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
|
A |
$690 |
$933 |
$1,195 |
$1,943 |
|
C |
$300 |
$618 |
$1,061 |
$2,293 |
|
Y |
$89 |
$277 |
$481 |
$1,069 |
|
R6 |
$71 |
$234 |
$418 |
$952 |
|
Advisor |
$130 |
$405 |
$701 |
$1,542 |
|
R5 |
$81 |
$255 |
$443 |
$987 |
|
Investor |
$115 |
$358 |
$621 |
$1,372 |
Assuming
no redemption of shares:
|
|
|
|
| |
|
Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
|
C |
$200 |
$618 |
$1,061 |
$2,293
|
Prospectus
– Fund Summaries17
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate
higher transaction costs and may result in higher taxes when Fund shares are
held in a taxable account. These costs, which are not reflected in annual
Fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 46%
of the
average value of its portfolio.
Principal
Investment Strategies
Under
normal circumstances, at least 80% of the Fund’s net assets (plus the amount of
any borrowings for investment purposes) are invested in common stocks
and securities convertible into common stocks (collectively, “stocks”) of
issuers based in at least three different countries located outside the United
States.
The Fund’s investments in stocks may include depositary receipts, which may
include American depositary receipts (“ADRs”), and U.S. dollar-denominated
foreign stocks traded on U.S. exchanges. The Fund will primarily invest in
countries comprising the MSCI®
EAFE Index. The MSCI EAFE Index
is designed to represent the performance of large- and mid-capitalization
securities across 21 developed markets countries, including countries in
Europe,
Australasia and the Far East, and excluding the U.S. and Canada. It covers
approximately 85% of the free float-adjusted market capitalization in each
country.
Companies included in the MSCI EAFE Index are selected from among the larger
capitalization companies in these markets. The Fund principally invests
in large-capitalization and mid-capitalization companies, and to a lesser extent
in small-capitalization companies. The Fund may use futures contracts,
foreign
currency forward contracts, including non-deliverable forward contracts
(“NDFs”), and currency swaps as a hedge against foreign currency fluctuations.
The
Manager allocates the assets of the Fund among different sub-advisors. The
Manager believes that this strategy may help the Fund outperform other
investment
styles over the longer term while reducing volatility and downside
risk.
The
sub-advisors select stocks that, in their opinion, have most or all of the
following characteristics (relative to that stock’s country, sector or
industry):
|
■ |
above-average
return on equity or earnings growth
potential, |
|
■ |
below-average
price to earnings or price to cash flow
ratio, |
|
■ |
below-average
price to book value ratio,
and |
|
■ |
above-average
dividend yields. |
The
sub-advisors may consider potential changes in currency exchange rates when
choosing stocks. Each of the sub-advisors determines the earnings growth
prospects
of companies based upon a combination of internal and external research using
fundamental analysis and considering changing economic trends. The
decision to sell a stock is typically based on the belief that the company is no
longer considered undervalued or shows deteriorating fundamentals, or that
better
investment opportunities exist in other stocks. The Fund may have significant
exposure to issuers
located in, or with economic ties to, Europe and the United
Kingdom. However, as the geographic
composition of the Fund’s portfolio changes over time, the Fund’s exposure to
Europe
and/or the United Kingdom
may decline, and the Fund’s exposure to other geographic
areas may increase.
Each
sub-advisor’s investment processes incorporate the sub-advisor’s environmental,
social and/or governance (“ESG”) analysis as a consideration in the assessment
of potential portfolio investments. However, as ESG information is just one
investment consideration, ESG considerations are not solely determinative
in any investment decision made by a sub-advisor. In addition, the sub-advisors
do not use ESG considerations to limit, restrict or otherwise exclude
companies or sectors from the Fund’s investment universe. A sub-advisor may use
ESG research and/or ratings information provided by one or more third
parties in performing this analysis and considering ESG
risks.
The
Fund may invest cash balances in a government money market fund advised by the
Manager, with respect to which the Manager receives a management fee.
The Fund also may purchase and sell equity index futures contracts to gain
market exposure on cash balances or reduce market exposure in anticipation
of
liquidity needs. The Fund may seek to earn additional income by lending its
securities to certain qualified broker-dealers and
institutions.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective and you
could lose part or all of your investment in the Fund.
The
Fund is not designed
for investors who need an assured level of current income and is intended to be
a long-term investment. The Fund is not a complete investment
program and may not be appropriate for all investors. Investors should carefully
consider their own investment goals and risk tolerance
before investing in the Fund.
The principal
risks of investing in the Fund listed below are presented in alphabetical order
and not in order of importance
or potential exposure. Among other matters, this presentation is intended to
facilitate your ability to find particular risks and compare them with
the
risks of other funds. Each risk summarized below is considered a “principal
risk” of investing in the Fund, regardless of the order in which it
appears.
Convertible
Securities Risk
The
value of a convertible security typically increases or decreases with the price
of the underlying common stock. In general, a convertible security is subject
to
the market risks of stocks when the underlying stock’s price is high relative to
the conversion price and is subject to the market risks of debt securities when
the
underlying stock’s price is low relative to the conversion price. The general
market risks of debt securities that are common to convertible securities
include,
but are not limited to, interest rate risk and credit risk. Many convertible
securities have credit ratings that are below investment grade and are subject
to
the same risks as an investment in below investment grade debt securities
(commonly known as “junk bonds”). Lower-rated debt securities may fluctuate
more
widely in price and yield than investment grade debt securities and may fall in
price during times when the economy is weak or is expected to become
weak.
Convertible securities are subject to the risk that the credit standing of the
issuer may have an effect on the convertible security‘s investment value.
In
addition,
to the extent the Fund invests in convertible securities issued by small- or
mid-capitalization companies, it will be subject to the market risks of
investing
in such companies. The stocks of small- and mid-capitalization companies may
fluctuate more widely in price than the market as a whole and there may
also be less trading in small- or mid-capitalization stocks.
Convertible securities are sensitive to movement in interest
rates.
Counterparty
Risk
The
Fund is subject to the risk that a party or participant to a transaction, such
as a broker or a derivative counterparty, will be unwilling or unable to satisfy
its obligation
to make timely principal, interest or settlement payments or to otherwise honor
its obligations to the Fund.
Credit
Risk
The
Fund is subject to the risk that the issuer, guarantor or insurer of an
obligation, or the counterparty to a transaction,
may fail, or become less able or unwilling,
to make timely payment of interest or principal or otherwise honor its
obligations or default completely. Changes in the actual or perceived
creditworthiness
of an issuer, or a downgrade or default affecting any of the Fund’s securities,
could affect the Fund’s performance. Generally, the longer the maturity
and the lower the credit quality of a security, the more sensitive it is to
credit risk.
18Prospectus
– Fund Summaries
Currency
Risk
The
Fund may have exposure to foreign currencies.
Foreign currencies may fluctuate significantly over short periods of time, may
be affected unpredictably by intervention,
or the failure to intervene, of the U.S.
or foreign governments or central banks, and may be affected by currency
controls or political developments
in the U.S. or abroad. Foreign currencies may also decline in value relative to
the U.S. dollar and other currencies and thereby affect the Fund’s investments.
Cybersecurity
and Operational Risk
Operational
risks arising from, among other problems, human errors, systems and technology
disruptions or failures, or cybersecurity incidents may negatively impact
the Fund and its service providers as well as the ability of shareholders to
transact in
the Fund’s shares,
and result in financial losses. Cybersecurity incidents
may allow an unauthorized party to gain access to Fund assets, shareholder data,
or proprietary information, or cause the Fund or its service providers,
as well as securities trading venues and their service providers, to suffer data
corruption or lose operational functionality. Cybersecurity incidents
can
result from deliberate attacks or unintentional events. It is not possible for
the Fund or its service providers to identify all of the operational risks that
may affect
the Fund or to develop processes and controls to completely eliminate or
mitigate their occurrence or effects. The Fund cannot control the cybersecurity
plans
and systems of its service providers, its counterparties or the issuers of
securities in which the Fund invests. The
issuers of the Fund’s investments are likely
to be
dependent on computers for their
operations
and require ready access to their
data and the
internet to conduct their business. Thus, cybersecurity incidents
could also affect issuers of the
Fund’s investments,
leading to significant loss of value.
Derivatives
Risk
Derivatives
may involve significant risk. The use of derivative instruments may expose the
Fund to additional risks that it would not be subject to if it invested
directly
in the securities or other instruments underlying those derivatives, including
the high degree of leverage often embedded in such instruments, and potential
material and prolonged deviations between the theoretical value and realizable
value of a derivative. Some derivatives have the potential for unlimited
loss, regardless of the size of the Fund’s initial investment. The use of
derivatives may also increase any adverse effects resulting from the
underperformance
of strategies, asset classes and market exposures to which the Fund has
allocated its assets. Derivatives may at times be highly illiquid, and
the
Fund may not be able to close out or sell a derivative at a particular time or
at an anticipated price. Certain derivatives may be difficult to value, and
valuation
may be more difficult in times of market turmoil. Derivatives may also be more
volatile than other types of investments. The Fund may buy or sell derivatives
not traded on an exchange, which may be subject to heightened liquidity and
valuation risk. Derivative investments can increase portfolio turnover
and
transaction costs. Derivatives also are subject to counterparty risk and credit
risk. As a result, the Fund may not recover its investment or may only obtain
a
limited recovery, and any recovery may be delayed. Not all derivative
transactions require a counterparty to post collateral, which may expose the
Fund to greater
losses in the event of a default by a counterparty. There may be imperfect
correlation between the behavior of a derivative and that of the reference
instrument
underlying the derivative. An abrupt change in the price of a reference
instrument could render a derivative worthless. Derivatives may involve risks
different
from, and possibly greater than, the risks associated with investing directly in
the reference instrument. Suitable derivatives may not be available in all
circumstances,
and there can be no assurance that the Fund will use derivatives to reduce
exposure to other risks when that might have been beneficial. Ongoing
changes to the regulation of the derivatives markets and potential changes in
the regulation of funds using derivative instruments could limit the
Fund’s
ability to pursue its investment strategies. New regulation of derivatives may
make them more costly, or may otherwise adversely affect their liquidity,
value
or performance. In
addition, the Fund’s investments in derivatives are subject to the following
risks:
|
■ |
Foreign
Currency Forward Contracts Risk.
Foreign currency forward contracts, including non-deliverable forwards
(“NDFs”), are derivative instruments pursuant
to a contract where the parties agree to a fixed price for an agreed
amount of foreign currency at an agreed date or to buy or sell a specific
currency
at a future date at a price set at the time of the contract and include
the risks associated with fluctuations in currency. There are no
limitations on daily
price movements of forward contracts. There can be no assurance that any
strategy used will succeed. Not all forward contracts, including NDFs,
require
a counterparty to post collateral, which may expose the Fund to greater
losses in the event of a default by a counterparty. The use of foreign
currency
forward contracts may expose the Fund to additional risks, such as credit
risk, liquidity risk, and counterparty risk, that it would not be subject
to if it
invested directly in the securities or currencies underlying the foreign
currency forward
contract. |
|
■ |
Futures
Contracts Risk.
Futures contracts
are derivative instruments pursuant to a contract where the parties agree
to a fixed price for an agreed amount of securities
or other underlying assets at an agreed date. The use of such derivative
instruments may expose the Fund to additional risks, such as credit risk,
liquidity
risk, and counterparty risk, that it would not be subject to if it
invested directly in the securities underlying those derivatives. There
can be no assurance
that any strategy used will succeed. There may at times be an imperfect
correlation between the movement in the prices of futures contracts and
the
value of their underlying instruments or indexes. There also can be no
assurance that, at all times, a liquid market will exist for offsetting a
futures contract
that the Fund has previously bought or sold, and this may result in the
inability to close a futures contract when desired. Futures contracts may
experience
potentially dramatic price changes, which will increase the volatility of
the Fund and may involve a small investment of cash (the amount of
initial
and variation margin) relative to the magnitude of the risk assumed (the
potential increase or decrease in the price of the futures contract).
Futures
contracts
on indices
expose the Fund to volatility in an underlying index.
Foreign
currency futures contracts expose the Fund to risks associated with
fluctuations
in the value of foreign currencies.
Foreign currency futures contracts are similar to foreign currency forward
contracts, except that they are traded
on exchanges (and may have margin requirements) and are standardized as to
contract size and delivery date. The Fund may use foreign currency
futures
contracts for the same purposes as foreign currency forward contracts,
subject to Commodity Futures Trading Commission (“CFTC”)
regulations. |
|
■ |
Swap
Agreements Risk.
Swap agreements or “swaps” are transactions in which the Fund and a
counterparty agree to pay or receive payments at specified dates
based upon or calculated by reference to changes in specified prices or
rates or the performance of specified securities, indices or other assets
based on
a specified amount (the “notional” amount). Swaps can involve greater
risks than a direct investment in an underlying asset, because swaps
typically include
a certain amount of embedded leverage and as such are subject to leverage
risk. If swaps are used as a hedging strategy, the Fund is subject to the
risk
that the hedging strategy may not eliminate the risk that it is intended
to offset, due to, among other reasons, the occurrence of unexpected price
movements
or the non-occurrence of expected price movements. Swaps also may be
difficult to value. Swaps may be subject to liquidity risk and
counterparty
risk, and swaps that are traded over-the-counter are not subject to
standardized clearing requirements and may involve greater liquidity and
counterparty
risks. The
Fund may invest in the following types of
swaps: |
|
• |
Currency
swaps,
which may be subject to currency risk and credit
risk. |
Dividend
Risk
An
issuer of stock held by the Fund may choose not to declare a dividend or the
dividend rate might not remain at current levels or increase over time.
Dividend
paying stocks might not experience the same level of earnings growth or capital
appreciation as non-dividend paying stocks. Securities that pay dividends
may be sensitive to changes in interest rates and, as interest rates rise or
fall, the prices of such securities may fall.
Environmental,
Social, and/or Governance Investing Risk
The
use of environmental, social, and/or governance (“ESG”) considerations
by a sub-advisor may cause the Fund to make different investments than
funds that
have a similar investment style but do not incorporate such considerations in
their strategy. As with the use of any investment considerations involved in
investment
decisions, there is no guarantee that the use of any ESG investment
considerations will result in the selection of issuers that will outperform
other
Prospectus
– Fund Summaries19
issuers
or help reduce risk in the Fund. The Fund may underperform funds that do not
incorporate these considerations or incorporate different ESG considerations.
Although a sub-advisor has established its own process to oversee ESG
integration in accordance with the Fund’s strategies, successful integration
of ESG factors will depend on a sub-advisor’s skill in researching,
identifying, and applying these factors, as well as on the availability of
relevant data.
A
sub-advisor may use ESG research and/or ratings information provided by one or
more third parties in performing this analysis and considering ESG risks.
The regulatory landscape with respect to ESG investing in the United States is
evolving and any future rules or regulations may require the Fund to
change
its investment process with respect to the integration of ESG
factors.
Equity
Investments Risk
Equity
securities are subject to investment risk, issuer risk and market risk. In
general, the values of stocks and other equity securities fluctuate, and
sometimes widely
fluctuate, in response to changes in a company’s financial condition as well as
general market, economic and political conditions and other factors. The
Fund
may experience a significant or complete loss on its investment in an equity
security. In addition, stock prices may be particularly sensitive to rising
interest
rates, which increase borrowing costs and the costs of capital. The Fund may
invest in the following equity securities, which may expose the Fund to
the
following additional risks:
|
■ |
Common
Stock Risk.
The value of a company’s common stock may fall as a result of factors
affecting the company, companies in the same industry or sector,
or the financial markets overall. Common stock generally is subordinate to
preferred stock upon the liquidation or bankruptcy of the issuing
company. |
|
■ |
Depositary
Receipts and/or U.S. Dollar-Denominated Foreign Stocks Traded on U.S.
Exchanges Risk.
Depositary receipts and U.S. dollar-denominated foreign stocks
traded on U.S. exchanges are subject to certain of the risks associated
with investing directly in foreign securities, including, but not limited
to, currency
exchange rate fluctuations, political and financial instability in the
home country of a particular depositary receipt or foreign stock, less
liquidity, more
volatility, less government regulation and supervision and delays in
transaction
settlement. |
Foreign
Investing Risk
Non-U.S.
investments carry potential risks not associated with U.S. investments. Such
risks include, but are not limited to: (1) currency exchange rate fluctuations,
(2) political and financial instability, (3) less liquidity, (4) lack of uniform
accounting, auditing and financial reporting standards, (5) greater volatility,
(6) different government regulation and supervision of foreign stock exchanges,
brokers and listed companies, and (7) delays or failures in transaction
payment and settlement in some foreign markets. The Fund’s investment in a
foreign issuer may subject the Fund to regulatory, political, currency,
security,
economic and other risks associated with that country. Global economic and
financial markets have become increasingly interconnected and conditions
(including recent volatility, terrorism, war and political instability) and
events (including natural disasters) in one country, region or financial market
may
adversely impact issuers in a different country, region or financial
market.
Geographic
Concentration Risk
From
time to time, based on market or economic conditions, the Fund may invest a
significant portion of its assets in the securities of issuers located in, or
with
significant economic ties to, a single country or geographic region, which could
increase the risk that economic, market,
political,
business, regulatory, diplomatic,
social and environmental conditions in that particular country or geographic
region may have a significant impact on the Fund’s performance. Investing
in such a manner could cause the Fund’s performance to be more volatile than the
performance of more geographically diverse funds.
A decline in the
economies or financial markets of one country or region may adversely affect the
economies or financial markets of another.
|
■ |
European
Securities Risk.
The Fund’s performance may be affected by political, social and economic
conditions in Europe, such as growth of economic output
(the gross national product
of the countries in the region),
the rate of inflation, the rate at which capital is reinvested into
European economies, the success
of governmental actions to reduce budget deficits, the resource
self-sufficiency of European countries,
the monetary exchange rates between European
countries,
and conflict between European countries. The European financial markets
have experienced and may continue to experience volatility and
adverse trends due to concerns relating to economic downturns; rising
government debt levels and the possible default on government debt;
national unemployment
in several European countries; public
health crises; political unrest; economic sanctions; inflation; energy
crises; and war and military conflict, such
as the Russian invasion of Ukraine. A default
or debt restructuring
by any European country could adversely impact holders of that country’s
debt and sellers
of credit default swaps linked to that country’s creditworthiness, which
may be located in other countries. Such a default or debt restructuring
could affect
exposures to European
countries.
In addition, issuers have faced difficulties obtaining credit or
refinancing existing obligations, and financial markets have
experienced extreme volatility and declines in asset values and liquidity.
These
events have affected the exchange rate of the Euro and may continue to
significantly
affect European countries. |
| |
Responses
to financial problems by European governments, central banks, and others,
including austerity measures and other reforms, may not produce the
desired
results, may result in social unrest and may limit future growth and
economic recovery or may have unintended consequences. The Fund makes
investments
in securities of issuers that are domiciled in member states of the
European Union (the “EU”). The economies and markets of European
countries
are often closely connected and interdependent, and events in one country
in Europe can have an adverse impact on other European countries.
One
or more countries may abandon the Euro and/or withdraw from the EU. The
impact of these actions, especially if they occur in a disorderly fashion,
could
be significant and far-reaching. The United Kingdom’s withdrawal from the
EU could be an indication that one or more other countries may withdraw
from
the EU and/or abandon the Euro. These events and actions have affected,
and may in the future affect, the value and exchange rate of the Euro and
may
continue to significantly affect the economies of every country in Europe,
including countries that do not use the Euro and non-EU member
states. |
| |
The
continuing effects on the economies of European countries of the
Russia/Ukraine war and Russia’s response to sanctions imposed by
the U.S., EU, UK and
others, are impossible to predict, but have been and could continue to be
significant. For example, exports in Eastern Europe have been disrupted
for certain
key commodities, pushing commodity prices to record highs. Also, both
wholesale energy prices and energy prices charged to consumers in Europe
have
increased
significantly. |
|
■ |
United
Kingdom Securities Risk. The
Fund’s exposure to issuers located in, or with economic ties to, the
United Kingdom, could expose the Fund to risks associated
with investments in the United Kingdom to a greater extent than more
geographically diverse funds. Investments in United Kingdom issuers may
subject
the Fund to regulatory, political, currency, security, and economic risks
specific to the United Kingdom. The United Kingdom has one of the largest
economies
in Europe, and the United States and other European countries are
substantial trading partners of the United Kingdom. As a result, the
United Kingdom
economy may be impacted by changes to the economic condition of the United
States and other European countries.
Increasing
commodity prices and rising inflation levels caused or exacerbated by the
war between Russia and Ukraine recently prompted the United Kingdom
government to implement significant policy changes. It is difficult to
predict what effects such policies (or the suggestion of such policies)
may have
and the duration of those effects, which may last for extended periods.
These effects may negatively impact broad segments of business and the
population
and have a significant and rapid negative impact on the performance of the
Fund’s investments.
Additionally,
the transitional period following the United Kingdom’s departure from the
European Union (commonly referred to as “Brexit”) ended on December
31, 2020 and European Union law ceased to have effect in the United
Kingdom except to the extent retained by the United Kingdom by
unilateral
act. The United Kingdom and the European Union then reached a trade
agreement that was ratified by all applicable United Kingdom and
European
Union governmental bodies. The economic effects of Brexit, including
certain negative impacts on the ability of the United Kingdom to trade
|
20Prospectus
– Fund Summaries
|
|
seamlessly
with the European Union, are becoming clearer but some political,
regulatory and commercial uncertainty in relation to the longer term
impacts nevertheless
remains to be resolved. Accordingly, there remains a risk that the
aftermath of Brexit, including its ongoing effect on the United Kingdom’s
relationships
with other countries, including the United States, and with the European
Union, may negatively impact the value of investments held by the
Fund.
Although a sub-advisor may hedge the Fund’s currency exposures back to the
U.S. dollar, a depreciation of the British pound sterling and/or the Euro
in
relation to the U.S. dollar could adversely affect the Fund’s investments
denominated in British pound sterling or Euros that are not fully hedged
regardless
of the performance of the underlying
issuer. |
Hedging
Risk
If
the Fund uses a hedging instrument at the wrong time or judges the market
conditions incorrectly, or the hedged instrument does not correlate to the risk
sought
to be hedged, the hedge might be unsuccessful, reduce the Fund’s return, or
create a loss. In addition, hedges, even when successful in mitigating
risk,
may not prevent the Fund from experiencing losses on its investments. Hedging
instruments may also reduce or eliminate gains that may otherwise have
been
available had the Fund not used the hedging
instruments.
Investment
Risk
An
investment in the Fund is not a deposit with a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government
agency.
When you sell your shares of the Fund, they could be worth less than what you
paid for them. Therefore, you may lose money by investing
in the Fund.
Issuer
Risk
The
value of, and/or the return generated by, a security may decline for a number of
reasons that directly relate to the issuer, such as management performance,
financial leverage and reduced demand for the issuer’s goods or services, as
well as the historical and prospective earnings of the issuer and the
value
of its assets.
Large-Capitalization
Companies Risk
The
securities of large market capitalization companies may underperform other
segments of the market because such companies may be less responsive to
competitive
challenges and opportunities and, at times, such companies may be out of favor
with investors. Many larger-capitalization companies also may be unable
to attain the high growth rates of successful smaller companies, especially
during periods of economic expansion.
Market
Risk
The
Fund is subject to the risk that the securities markets will move down,
sometimes rapidly and unpredictably, based on overall economic conditions and
other
factors, which may negatively affect the Fund’s performance. Equity securities
generally have greater price volatility than fixed-income securities,
although
under certain market conditions fixed-income securities may have comparable or
greater price volatility. During a general downturn in the securities
markets,
multiple assets may decline in value simultaneously. Prices in many financial
markets have increased significantly over the last decade, but there have
also
been periods of adverse market and financial developments and cyclical change
during that timeframe, which have resulted in unusually high levels of
volatility
in domestic and foreign financial markets that has caused losses for investors
and may occur again in the future. The value of a security may decline
due
to adverse issuer-specific conditions, general market conditions unrelated to a
particular issuer, such as changes in interest or inflation rates, or factors
that
affect a particular industry or industries. Changes in the financial condition
of a single issuer or market segment also can impact the market as a whole.
Geopolitical
and other events, including war, terrorism, economic uncertainty, trade
disputes, pandemics, public health crises, natural disasters and related
events
have led, and in the future may continue to lead, to instability in world
economies and markets generally and reduced liquidity in equity, credit and
fixed-income
markets, which may disrupt economies and markets and adversely affect the value
of your investment. Changes in value may be temporary or may
last for extended periods.
Policy
changes by the U.S. government and/or Federal Reserve and political events
within the U.S. and abroad, such as changes in the U.S. presidential
administration
and Congress, the U.S. government’s inability at times to agree on a long-term
budget and deficit reduction plan, the threat or
occurrence of
a federal
government shutdown and threats or
the occurrence of a failure
to increase the federal government’s debt limit,
which could result in a default on the government’s
obligations, may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly
and to a significant degree.
Markets
and market participants are increasingly reliant upon both publicly available
and proprietary information data systems. Data imprecision, software or
other
technology malfunctions, programming inaccuracies, unauthorized use or access,
and similar circumstances may impair the performance of these systems
and may have an adverse impact upon a single issuer, a group of issuers, or the
market at large.
The
financial markets generally move in cycles, with periods of rising prices
followed by periods of declining prices. The value of your investment may
reflect these
fluctuations.
|
■ |
Recent
Market Events Risk.
Both U.S. and international markets have experienced significant
volatility in recent months and years. As a result of such volatility,
investment returns may fluctuate significantly. Moreover, the risks
discussed herein associated with an investment in the Fund may be
increased. |
| |
Although
interest rates were unusually low in recent years in the U.S. and
abroad, in 2022, the Federal Reserve and certain foreign central banks
began to raise
interest rates as part of their efforts to address rising inflation. It is
difficult to accurately predict the pace at which interest rates may
continue to increase,
the timing, frequency or magnitude of any such increases, or when such
increases might stop. Additionally, various economic and political factors
could
cause the Federal Reserve or another foreign central bank to change their
approach in the future and such actions may result in an economic
slowdown
in the U.S. and abroad. Unexpected increases in interest rates could lead
to market volatility or reduce liquidity in certain sectors of the market.
Deteriorating
economic fundamentals may, in turn, increase the risk of default or
insolvency of particular issuers, negatively impact market value, cause
credit
spreads to widen, and reduce bank balance sheets. Any of these could cause
an increase in market volatility, reduce liquidity across various markets
or
decrease confidence in the markets. Additionally, high public debt in the
U.S. and other countries creates ongoing systemic and market risks and
policymaking
uncertainty. |
| |
In
March 2023, the shutdown of certain financial institutions in
the U.S. and questions regarding the viability of other financial
institutions raised economic concerns
over disruption in the U.S. and global banking systems. There can be no
certainty that the actions taken by the U.S. or foreign governments will
be
effective in mitigating the effects of financial institution failures on
the economy and restoring public confidence in the U.S. and global banking
systems. |
| |
Some
countries, including the U.S., have in recent years adopted more
protectionist trade policies. Slowing global economic growth; risks
associated with a trade
agreement between the United Kingdom and the European Union; the risks
associated with ongoing trade negotiations with China; and the
possibility
of changes to some international trade agreements; political or economic
dysfunction within some nations, including major producers of oil; and
dramatic
changes in commodity and currency prices could have adverse effects that
cannot be foreseen at the present
time. |
Prospectus
– Fund Summaries21
| |
Tensions,
war, or open conflict between nations, such as between Russia and Ukraine,
in the Middle East or in eastern Asia could affect the economies of
many
nations, including the United States. The duration of ongoing hostilities
in the Middle East and between Russia and Ukraine, and any sanctions and
related
events cannot be predicted. Those events present material uncertainty and
risk with respect to markets globally and the performance of the Fund
and
its investments or operations could be negatively
impacted. |
| |
Regulators
in the U.S. have proposed and recently adopted a number of changes
to regulations involving the markets and issuers, some of which apply to
the
Fund. The full effect of various newly-adopted regulations is not
currently known. Additionally, it is not clear whether the proposed
regulations will be adopted.
However, due to the broad scope of the new and proposed regulations,
certain changes could limit the Fund’s ability to pursue its investment
strategies
or make certain investments, or may make it more costly for the Fund to
operate, which may impact
performance. |
| |
Economists
and others have expressed increasing concern about the potential effects
of global climate change on property and security values. Certain
issuers,
industries and regions may be adversely affected by the impacts of climate
change, including on the demand for and the development of goods and
services
and related production costs, and the impacts of legislation, regulation
and international accords related to climate change, as well as any
indirect consequences
of regulation or business trends driven by climate
change. |
Market
Timing Risk
The
Fund is subject to the risk of market timing activities by investors due to the
nature of the Fund’s investments, which requires the Fund, in certain
instances,
to fair value certain of its investments. Some investors may engage in frequent
short-term trading in the Fund to take advantage of any price differentials
that may be reflected in the net asset value (“NAV”) of the Fund’s shares.
Frequent trading by Fund shareholders poses risks to other shareholders
in
the Fund, including (i) the dilution of the Fund’s NAV, (ii) an increase in the
Fund’s expenses, and (iii) interference with the ability to execute efficient
investment
strategies.
Mid-Capitalization
Companies Risk
Investing
in the securities of mid-capitalization companies involves greater risk and the
possibility of greater price volatility, which at times can be rapid and
unpredictable,
than investing in larger-capitalization and more established companies. Since
mid-capitalization companies may have narrower commercial markets
and more limited operating history, product lines, and managerial and financial
resources than larger, more established companies, the securities of
these
companies may lack sufficient market liquidity, and they can be particularly
sensitive to changes in overall economic conditions, interest rates, borrowing
costs
and earnings.
Multiple
Sub-Advisor Risk
The
Manager may allocate the Fund’s assets among multiple sub-advisors, each of
which is responsible for investing its allocated portion of the Fund’s assets.
To
a significant extent, the Fund’s performance will depend on the success of the
Manager in selecting and overseeing the sub-advisors and allocating the
Fund’s
assets to sub-advisors. The sub-advisors’ investment styles may not work
together as planned, which could adversely affect the performance of the
Fund.
In addition, because each sub-advisor makes its trading decisions independently,
the sub-advisors may purchase or sell the same security at the same time
without aggregating their transactions. This may cause unnecessary brokerage and
other expenses.
Other
Investment Companies Risk
To
the extent that the Fund invests in shares of other registered investment
companies, the Fund will indirectly bear the fees and expenses charged by those
investment
companies in addition to the Fund’s direct fees and expenses. To the extent the
Fund invests in other investment companies that invest in equity securities,
fixed-income securities and/or foreign securities, or that track an index, the
Fund is subject to the risks associated with the underlying investments
held
by the investment company or the index fluctuations to which the investment
company is subject. The Fund will be subject to the risks associated with
investments
in those companies, including but not limited to the
following:
|
■ |
Government
Money Market Funds Risk.
Investments in government money market funds are subject to interest rate
risk, credit risk, and market risk. Interest
rate risk is the risk that rising interest rates could cause the value of
such an investment to decline. Credit risk is the risk that the issuer,
guarantor or
insurer of an obligation, or the counterparty to a transaction, may fail
or become less able or unwilling, to make timely payment of interest or
principal or otherwise
honor its obligations, or that it may default
completely. |
Securities
Lending Risk
To
the extent the Fund lends its securities, it may be subject to the following
risks: (i) the securities in which the Fund reinvests cash collateral may
decrease in value,
causing the Fund to incur a loss, or may not perform sufficiently to cover the
Fund’s payment to the borrower of a pre-negotiated fee or “rebate” for
the
use of that cash collateral in connection with the loan; (ii) non-cash
collateral may decline in value, resulting in the Fund becoming under-secured;
(iii) delays
may occur in the recovery of loaned securities from borrowers, which could
result in the Fund being unable to vote proxies or settle transactions or
cause
the Fund to incur increased costs; and (iv) if the borrower becomes subject to
insolvency or similar proceedings, the Fund could incur delays in its ability
to
enforce its rights in its collateral.
Securities
Selection Risk
Securities
selected for the Fund may not perform to expectations. This could result in the
Fund’s underperformance compared to its performance
index(es), or other
funds with similar investment objectives or
strategies.
Segregated
Assets Risk
In
connection with certain transactions that may give rise to future payment
obligations, the Fund may be required to maintain a segregated amount of, or
otherwise
earmark, cash or liquid securities to cover the obligation. Segregated assets
generally cannot be sold while the position they are covering is outstanding,
unless they are replaced with other assets of equal value. The need to segregate
cash or other liquid securities could limit the Fund’s ability to pursue
other opportunities as they arise.
Small-Capitalization
Companies Risk
Investing
in the securities of small-capitalization companies involves greater risk and
the possibility of greater price volatility, which at times can be rapid and
unpredictable,
than investing in larger-capitalization and more established companies. Since
small-capitalization companies may have narrower commercial markets,
and more limited operating history, product lines, and managerial and financial
resources than larger, more established companies, the securities of
these
companies may lack sufficient market liquidity and they can be particularly
sensitive to changes in overall economic conditions, interest rates, borrowing
costs
and earnings.
Valuation
Risk
Certain
of the Fund’s assets may be valued at a price different from the price at which
they can be sold. This risk may be especially pronounced for investments
that are illiquid or may become illiquid, or securities that trade in relatively
thin markets and/or markets that experience extreme volatility. The valuation
of the Fund’s investments in an accurate and timely manner may be impacted by
technological issues and/or errors by third party service providers,
such
as pricing services or accounting
agents.
22Prospectus
– Fund Summaries
Value
Stocks Risk
Value
stocks are subject to the risk that their intrinsic or full value may never be
realized by the market, that a stock judged to be undervalued may be
appropriately
priced, or that their prices may decline. Although value stocks tend to be
inexpensive relative to their earnings, they can continue to be inexpensive
for long periods of time. The Fund’s investments in value stocks seek to limit
potential downside price risk over time; however, value stock prices
still
may decline substantially. In addition, the Fund may produce more modest gains
as a trade-off for this potentially lower risk. The Fund’s investment in
value
stocks could cause the Fund to underperform funds that use a growth or non-value
approach to investing or have a broader investment
style.
Fund
Performance
The
bar chart and table below provide an indication of risk by showing changes in
the Fund’s performance over time. The bar chart shows how the Fund’s
performance
has varied from year to year. The table shows how the Fund’s average annual
total returns compare to a broad-based market index, as
well as an additional
broad-based market index, for the periods
indicated.
The
chart and the table show the performance of the Fund’s Investor Class shares for
all periods. In the table below, for the period prior to February 28, 2017,
the
performance of the R6 Class shares reflects the returns of the R5 Class shares
of the Fund. The R6 Class shares would have had similar annual returns to
the
R5 Class shares of the Fund because the shares of each class represent
investments in the same portfolio securities. However, as reflected in the table
in the
“Fees and Expenses of the Fund” section of this Fund Summary, the expenses of
the R5 Class shares of the Fund differ from those of the R6 Class shares,
which
would affect performance. To
the extent that the R5 Class shares may have had lower expenses than the R6
Class shares prior to February 28, 2017, the
performance of the R5 Class shares would likely have been higher than the
performance the R6 Class shares would have realized during the same period.
The
performance of the R6 Class shares
shown in the table has not been adjusted for differences in operating expenses
between the R6 Class shares and R5
Class
shares. C
Class shares automatically convert to A Class shares 8 years after purchase, if
the conversion is available through your financial intermediary. In the
table below, the performance for C Class shares reflects the conversion of C
Class shares to A Class shares after 8
years.
You
may obtain updated performance information on the Fund’s website at
www.americanbeaconfunds.com.
Past
performance (before and after taxes) is not necessarily
an indication of how the Fund will perform in the
future.
|
| |
|
Calendar
year total returns for Investor Class Shares.
Year Ended 12/31 |
|
|
Highest
Quarterly Return:
20.71% |
