Risks
An investment in the Strategy involves certain risks, including, among others, the following:
Market Risk
Investment return and principal value will fluctuate, depending on general market conditions and other factors, and it is possible to lose money by investing.
Value Investing Risk
Value investors seek to invest in companies whose stock prices are low in relation to their real worth or future prospects. Undervalued securities are, by definition, out of favor with investors, and there is no way to predict when, if ever, the securities may return to favor.
Concentration Risk
The chance that investment performance may be hurt disproportionately by the poor performance of relatively few stocks. The Strategy tends to invest a high percentage of assets in its largest holdings.
Large Company Risk
Large-capitalization securities tend to have less overall volatility than those issued by smaller capitalization companies, however, large-capitalization securities may underperform securities of smaller capitalization companies during periods when such stocks are in favor.
Mid-Size Company Risk
Mid-capitalization securities may be more vulnerable to adverse developments than those of larger companies due to such companies' limited product lines, markets, financing sources, and management depth. Mid-capitalization securities may be affected to a greater extent by the underperformance of a sector or changing market conditions.
Small Company Risk
Small-capitalization securities may be more volatile and less liquid due to the companies' size, limited product lines, markets, financing sources, and management depth. Small-capitalization securities may be affected to a greater extent by the underperformance of a sector or changing market conditions.
Non-U.S. Securities Risk
The Strategy may invest in securities issued by non-U.S. issuers, which securities may be denominated in U.S. dollars or foreign currencies. Investments in non-U.S. securities may involve additional risks including exchange rate fluctuation, political or economic instability, the imposition of exchange controls, expropriation, limited disclosure and illiquid markets.
Interest Rate Risk
Fixed income securities are subject to interest rate risk because the prices of fixed income securities tend to move in the opposite direction of interest rates. When interest rates rise, fixed income security prices fall. When interest rates fall, fixed income security prices rise. Changing interest rates may have sudden and unpredictable effects in the markets and on the Strategy's investments. In general, fixed income securities with longer maturities are more sensitive to changes in interest rates.
Credit Risk
The chance that the issuer of a security will fail to pay interest or principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that security to decline.
Non-Investment Grade Debt Securities Risk
Non-investment grade debt securities (commonly referred to as "high yield" or "junk" bonds) are speculative and involve a greater risk of default and price change than investment grade debt securities due to the issuer›s creditworthiness. The market prices of these securities may fluctuate more than the market prices of investment grade debt securities and may decline significantly in response to adverse economic changes or issuer developments.
Call Risk
Call risk is the risk, especially during periods of falling interest rates, that a bond issuer will call or repay a higher-yielding bond before its maturity date, forcing the Strategy to reinvest in bonds with lower interest rates than the original obligations.
Debt Securities Liquidity Risk
Debt securities purchased by the Strategy that are liquid at the time of purchase may subsequently become illiquid due to, among other things, events relating to the issuer of the securities (e.g., changes to the market's perception of the credit quality of the issuer), market events, economic conditions, investor perceptions or lack of market participants. The Strategy may be unable to sell illiquid securities on short notice or only at a price below current value.
Mortgage-Backed (and Other Asset-Backed) Securities Risk
Mortgage-backed securities (and other asset-backed securities) are generally structured for the securities holders to receive periodic payments as the securities issuer receives payments on the mortgages (or loans) in an underlying asset pool. Sometimes these securities are issued in separate tranches, which can mean the securities holders of one tranche receive payment in full before the securities holders of another tranche receive any payments. Also sometimes credit support is provided for these securities, which can mean the securities issuer, an affiliated party or a third party provides additional assets, or makes additional promises, with respect to payment to the securities holders. Risks to the securities holders can include (i) the underlying asset pool may not pay as expected (which could mean sooner or later than expected), (ii) the securities issuer may have insufficient cash to make payment on the securities generally, or on certain tranches of the securities and (iii) the credit support may be insufficient to make payment on the securities.
Government-Sponsored Enterprises Risk
Obligations of U.S. Government agencies and authorities (such as Fannie Mae and Freddie Mac) are supported by varying degrees of credit but generally are not backed by the full faith and credit of the U.S. Government. No assurance can be given that the U.S. Government will provide financial support to its agencies and authorities if it is not obligated by law to do so. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
Derivatives Risk
Derivatives are instruments, such as futures and forward contracts, whose value is derived from that of other assets, rates or indices. The use of derivatives for non-hedging purposes may be considered to carry more risk than other types of investments. Derivative instruments are subject to a number of risks including counterparty, liquidity, interest rate, market, credit and management risks, and the risk of improper valuation. Changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index, and in some cases the Strategy could lose more than the principal amount invested.
Failure to Meet Investment Objective
There can be no assurance that the Strategy will meet its investment objective.