American Beacon Ionic Strategic Arbitrage Fund

C000156383 Fund Overview

American Beacon Ionic Strategic Arbitrage Fund is a US mutual fund managed by American Beacon Funds, categorised as Emerging Markets Blend / Core Equity. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.

• Type: US mutual fund
• Manager: American Beacon Funds
• Category: Emerging Markets Blend / Core Equity
• Assets under management: $12.28M
• SEC CIK: 0000809593
• SEC series ID: S000049467
• Share class ID: C000156383

C000156383 Investment Objective and Strategy

American Beacon Ionic Strategic Arbitrage Fund describes its objective and strategy as follows, from its latest prospectus filed with the SEC by American Beacon Funds.

Investment objective

The Fund's investment objective is to seek capital appreciation with low volatility and reduced correlation to equities and interest rates.

Principal investment strategy

"The Fund seeks to achieve its investment objective by implementing a strategic arbitrage strategy comprised of: convertible arbitrage, credit/rates relative value arbitrage, equity arbitrage and volatility arbitrage. The Fund seeks to employ a ""market neutral,"" strategy, meaning that the Fund's returns are not intended to be closely correlated to the stock market as a whole, interest rates, or a particular market index. The allocation of the Fund's assets among its arbitrage strategies and the use of various hedging strategies are intended to enhance returns and mitigate downside risk. The Fund will invest in a portfolio of instruments, including, but not limited to, convertible securities, common stock, preferred stock, American Depository Receipts (""ADRs""), exchange-traded funds (""ETFs""), exchange-traded notes (""ETNs""), closed-end funds, and derivative instruments, which may include, but are not limited to, equity options (including equity index options) and futures (including equity index futures and options thereon), currency forwards (generally for hedging purposes), warrants, credit default swaps, total return swaps, currency swaps, interest rate swaps, and mortgage derivatives (which may include, collateralized mortgage obligations (""CMOs""), mortgage-backed securities and stripped mortgage-backed securities, such as interest only (""IOs"") and principal only (""POs"") obligations).

The Fund may invest in the securities and financial instruments of issuers of any market capitalization, securities issued pursuant to Rule 144A, as well as securities and financial instruments of foreign and emerging market issuers, which may be denominated in currencies other than the U.S. Dollar. The Fund may invest in debt securities of any credit quality or maturity, including high yield, below-investment grade debt securities (commonly referred to as ""junk bonds""). The Fund's arbitrage strategies generally seek to exploit differences in the prices of, or the price relationships between, various types of securities. The Fund intends to allocate its assets among arbitrage investment strategies in the following manner: 30-50% to Convertible Arbitrage. Convertible arbitrage generally seeks to capitalize on the pricing of a company's convertible securities relative to its common stock, typically by the purchase of convertible securities and short sales of the underlying common stock.

It seeks to generate consistent returns and benefit from corporate events, or changes in volatility or credit assumptions. 15-30% to Credit/Rates Relative Value Arbitrage. The Fund's credit/rates relative value arbitrage strategy seeks to invest in mortgage and other derivatives that the Fund considers to be inexpensive relative to key characteristics of such investments. For example, the Fund may identify a mortgage backed security that trades at a perceived discount to the implied pre-payment risk, which is the risk related to the early payment of principal. This strategy seeks to consistently produce income while actively managing duration risk (i.e., the price sensitivity to changes in interest rates). The credit/rates relative value arbitrage strategy also seeks to invest in closed-end funds that are trading at a discount to net asset value (""NAV"").

By purchasing a closed-end fund trading at a discount to its NAV and shorting an ETF or another closed-end fund holding similar investments, the Fund will attempt to capture this discount. Investments in such closed-end funds have the potential for appreciation as the discount between a fund's price and its NAV narrows, and also can generate cash flow through periodic dividend payments. 25-45% to Equity Arbitrage. The Fund's equity arbitrage strategy seeks to capture inefficiencies between the prices of an issuer's securities, such as, for example, prices of different classes of an issuer's equity securities, or between an issuer's warrants and common stock. This strategy also may seek to invest in the securities of companies involved, or potentially involved, in corporate events, such as mergers, tender offers, or other actions.

A common example of such a type of investment is the attempt to capture the spread between the prices of the securities of companies involved in a tender offer by acquiring the securities of a target company in anticipation of their appreciation and selling short the acquirer's securities in anticipation of their depreciation. The Fund's equity arbitrage strategy can generally be expected to produce returns that fluctuate with company-specific events rather than changes in the broader market. 5-25% to Volatility Arbitrage. The volatility arbitrage strategy seeks to capitalize on the movement of prices, regardless of direction. Volatility arbitrage involves both purchases and sales (writing) of options, futures and other derivatives as well as purchases and short selling of their underlying securities.

This strategy seeks to generate a positive return during periods of significant declines in the broader markets in order to reduce the Fund's beta, which is its risk exposure to equity securities and interest rates. The foregoing allocation targets are not fixed guidelines, and the sub-advisor will monitor and adjust the allocation of the Fund's assets among the four strategies from time to time based on a variety of factors, including qualitative assessments of market conditions, liquidity, targeted exposure levels, ability to implement appropriate hedges, and active risk management. To implement its arbitrage strategies, the Fund will engage in short sales of securities and the use of options. When the Fund sells a security short, it borrows the security from a third party and sells it at the then current market price.

The Fund is then obligated to buy the security on a later date so that it can return the security to the lender. The Fund intends to invest in derivative instruments for both hedging and investment purposes. The Fund may also use derivatives to increase its economic exposure to a particular security, currency or index in a cost effective manner, for example, by purchasing options on an ETF, rather than purchasing shares in the ETF itself, or by entering into a total return swap on an index, rather than buying the individual components of the index. The Fund generally will engage in active and frequent trading of portfolio securities to achieve its investment objective. In response to adverse market, economic or other conditions, including the absence of attractive arbitrage opportunities, the Fund may temporarily invest a substantial portion of its assets in cash or cash equivalent securities.

During such periods, the Fund may not achieve its investment objective. The Fund is non-diversified, which means that it is not limited to a percentage of assets that it may invest in any one issuer."

C000156383 Costs and Fees

C000156383 costs about $248 per $10,000 invested per year in fund expenses.

• Net expense ratio: 2.48%
• Gross expense ratio: 2.69%
• Portfolio turnover: 556%
• Brokerage commissions: 34.18 bps of average net assets (SEC N-CEN)

C000156383 Cashflows

Over the 12 months to 2019-09, American Beacon Ionic Strategic Arbitrage Fund had net outflows of $12.38M, from monthly SEC N-PORT filings.

C000156383 Debt Constituents

No individual debt constituents are reported in American Beacon Ionic Strategic Arbitrage Fund's latest SEC N-PORT filing.

C000156383 Prospectus and SEC Filings

Official American Beacon Ionic Strategic Arbitrage Fund filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.

• Prospectus (485BPOS) — filed 2019-05-08
• Prospectus (485BPOS) — filed 2018-05-21
• Prospectus supplement (497) — filed 2018-12-04
• Portfolio holdings (N-PORT) — filed 2019-11-27
• Annual census, amended (N-CEN/A) — filed 2019-11-04

Related Funds

Other Emerging Markets Blend / Core Equity funds tracked on ABC INVEST:

• Strategic Advisers Fidelity Emerging Markets Fund (FGOMX)
• iShares MSCI South Korea ETF (EWY)
• Strategic Advisers Emerging Markets Fund (FSAMX)
• iShares MSCI Taiwan ETF (EWT)
• iShares MSCI Brazil ETF (EWZ)

Data Sources

ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.