INFLATION-INDEXED
SECURITIES RISK. Inflation-indexed
debt securities, such as TIPS, are subject to the same risks as other types of
debt securities, including credit risk, interest rate risk, liquidity risk and
valuation risk. The principal amount of an inflation-indexed security typically
increases with inflation and decreases with deflation, as measured by a
specified index. Although the holders of TIPS receive no less than the par value
of the security at maturity, if the Fund purchases TIPS in the secondary market
whose principal values have previously been adjusted upward and there is a
period of subsequent declining inflation rates, the Fund may receive at maturity
less than it invested and incur a loss.
INTEREST
RATE RISK. Interest rate risk
is the risk that the value of the debt securities in the Fund’s portfolio will
decline because of rising market interest rates. Interest rate risk is generally
lower for shorter term debt securities and higher for longer-term debt
securities. The Fund may be subject to a greater risk of rising interest rates
than would normally be the case during periods of low interest rates. Duration
is a reasonably accurate measure of a debt security’s price sensitivity to
changes in interest rates and a common measure of interest rate risk. Duration
measures a debt security’s expected life on a present value basis, taking into
account the debt security’s yield, interest payments and final maturity. In
general, duration represents the expected percentage change in the value of a
security for an immediate 1% change in interest rates. For example, the price of
a debt security with a three-year duration would be expected to drop by
approximately 3% in response to a 1% increase in interest rates. Therefore,
prices of debt securities with shorter durations tend to be less sensitive to
interest rate changes than debt securities with longer durations. Higher
sensitivity to interest rates is generally correlated with higher levels of
volatility and, therefore, greater risk. As the value of a debt security changes
over time, so will its duration.
LEVERAGE
RISK.
Leverage may result in losses that exceed the amount originally invested and may
accelerate the rates of losses. Leverage tends to magnify, sometimes
significantly, the effect of any increase or decrease in the Fund’s exposure to
an asset or class of assets and may cause the value of the Fund’s shares to be
volatile and sensitive to market swings.
LIQUIDITY
RISK.
The Fund may hold certain investments that may be subject to restrictions on
resale, trade over-the-counter or in limited volume, or lack an active trading
market. Accordingly, the Fund may not be able to sell or close out of such
investments at favorable times or prices (or at all), or at the prices
approximating those at which the Fund currently values them. Illiquid securities
may trade at a discount from comparable, more liquid investments and may be
subject to wide fluctuations in market value.
MANAGEMENT
RISK.
The Fund is subject to management risk because it is an actively managed
portfolio. In managing the Fund’s investment portfolio, the portfolio managers
will apply investment techniques and risk analyses that may not produce the
desired result. There can be no guarantee that the Fund will meet its investment
objectives.
MARKET
MAKER RISK. The Fund faces
numerous market trading risks, including the potential lack of an active market
for Fund shares due to a limited number of market markers. Decisions by market
makers or authorized participants to reduce their role or step away from these
activities in times of market stress could inhibit the effectiveness of the
arbitrage process in maintaining the relationship between the underlying values
of the Fund’s portfolio securities and the Fund’s market price. The Fund may
rely on a small number of third-party market makers to provide a market for the
purchase and sale of shares. Any trading halt or other problem relating to the
trading activity of these market makers could result in a dramatic change in the
spread between the Fund’s net asset value and the price at which the Fund’s
shares are trading on the Exchange, which could result in a decrease in value of
the Fund’s shares. This reduced effectiveness could result in Fund shares
trading at a discount to net asset value and also in greater than normal
intraday bid-ask spreads for Fund shares.
MARKET
RISK.
Market risk is the risk that a particular investment, or shares of the Fund in
general, may fall in value. Securities are subject to market fluctuations caused
by real or perceived adverse economic, political, and regulatory factors or
market developments, changes in interest rates and perceived trends in
securities prices. Shares of the Fund could decline in value or underperform
other investments. In addition, local, regional or global events such as war,
acts of terrorism, market manipulation, government defaults, government
shutdowns, regulatory actions, political changes, diplomatic developments, the
imposition of sanctions and other similar measures, spread of infectious
diseases or other public health issues, recessions, natural disasters, or other
events could have a significant negative impact on the Fund and its investments.
Any of such circumstances could have a materially negative impact on the value
of the Fund’s shares, the liquidity of an investment, and may result in
increased market volatility. During any such events, the Fund’s shares may trade
at increased premiums or discounts to their net asset value, the bid/ask spread
on the Fund’s shares may widen and the returns on investment may
fluctuate.
MORTGAGE-RELATED
SECURITIES RISK. Mortgage-related
securities are subject to the same risks as investments in other types of debt
securities, including credit risk, interest rate risk, liquidity risk and
valuation risk. However, these investments make the Fund more susceptible to
adverse economic, political or regulatory events that affect the value of real
estate.