rising interest rates are
currently heightened because the Federal Reserve has raised, and may continue to
raise, interest rates and inflation is elevated. Actions taken by the Federal
Reserve Board or foreign central banks to stimulate or stabilize economic
growth, such as decreases or increases in short-term interest rates, may
adversely affect markets, which could, in turn, negatively impact Fund
performance.
Inflation-Protected
Securities Risk –
The value of
inflation-protected securities generally fluctuates in response to changes in
real interest rates (stated interest rates adjusted to factor in inflation). In
general, the price of an inflation-protected debt security can decrease when
real interest rates increase, and can increase when real interest rates
decrease. Interest payments on inflation-protected debt securities will
fluctuate as the principal and/or interest is adjusted for inflation and can be
unpredictable. The market for inflation-protected securities may be less
developed or liquid, and more volatile, than certain other securities
markets.
Credit
Risk –
Credit risk is
the risk that the issuer of a security or other instrument will not be able to
make principal and interest payments when due. Changes in an issuer’s financial
strength, credit rating or the market’s perception of an issuer’s
creditworthiness may also affect the value of the Fund’s investment in that
issuer. The degree of credit risk depends on both the financial condition of the
issuer and the terms of the obligation. Periods of market volatility may
increase credit risk.
Foreign
Investments Risk –
Investments in
foreign securities may be riskier, more volatile, and less liquid than
investments in U.S. securities. Differences between the U.S. and foreign
regulatory regimes and securities markets, including the less stringent investor
protection, less stringent accounting, corporate governance, financial reporting
and disclosure standards of some foreign markets, as well as political and
economic developments in foreign countries and regions and the U.S. (including
the imposition of sanctions, tariffs, or other governmental restrictions), may
affect the value of the Fund’s investments in foreign securities. Changes in
currency exchange rates may also adversely affect the Fund’s foreign
investments.
Emerging
Markets Risk –
The risks
related to investing in foreign securities are generally greater with respect to
investments in companies that conduct their principal business activities in
emerging markets or whose securities are traded principally on exchanges in
emerging markets. The risks of investing in emerging markets include risks of
illiquidity, increased price volatility, smaller market capitalizations, less
government regulation and oversight, less extensive and less frequent
accounting, financial, auditing and other reporting requirements, significant
delays in settlement of trades, risk of loss resulting from problems in share
registration and custody and substantial economic and political disruptions. In
addition, the imposition of exchange controls (including repatriation
restrictions), sanctions, confiscations, trade restrictions (including tariffs)
and other government restrictions by the United States and other governments may
also result in losses. Frontier markets are those emerging markets that are
considered to be among the smallest, least mature and least liquid, and as a
result, the risks of investing in emerging markets are magnified in frontier
markets.
Currency
Risk –
The risk that
the value of the Fund’s investments in foreign securities or currencies will be
affected by the value of the applicable currency relative to the U.S. dollar.
When the Fund sells a foreign currency or foreign currency denominated security,
its value may be worth less in U.S. dollars even if the investment increases in
value in its local market. U.S. dollar-denominated securities of foreign issuers
may also be affected by currency risk, as the revenue earned by issuers of these
securities may also be affected by changes in the issuer’s local
currency.
Commodity
Related Investments Risk –
Exposure to the
commodities markets may subject the Fund to greater volatility than investments
in traditional securities, which may cause rapid and substantial changes in the
value of the Fund’s holdings. These investments may be affected by changes in
overall market movements, commodity index volatility, changes in interest rates,
lack of liquidity, speculation, or factors affecting a particular commodity,
such as weather, disease, embargoes, tariffs and international economic,
political, regulatory and market developments.
Derivatives
Risk –
Derivatives are
instruments whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. Derivatives may be riskier than other
types of investments because they may be more sensitive to changes in economic
or market conditions than other types of investments and could result in losses
that significantly exceed the Fund’s original investment. Successful use of
derivative instruments by the Fund depends on the sub-adviser’s judgment with
respect to a number of factors and the Fund’s performance could be worse and/or
more volatile than if it had not used these instruments. In addition, the
fluctuations in the value of derivatives may not correlate perfectly with the
value of any portfolio assets being hedged, the performance of the asset class
to which the sub-adviser seeks exposure, or the overall securities
markets.