Lord Abbett Investment Trust
PROSPECTUS
APRIL 1, 2025
CLASS
TICKER
CLASS
TICKER
CLASS
TICKER
LORD ABBETT
A....................
LABFX
I .....................
LABYX
R4 .................
BLASX
MULTI-ASSET BALANCED
C ...................
BFLAX
P....................
LABPX
R5 .................
BLATX
OPPORTUNITY FUND
F....................
BLAFX
R2 .................
BLAQX
R6 .................
BLAVX
F3..................
LOBFX
R3 .................
BLARX
LORD ABBETT
A....................
ISFAX
I .....................
ISFYX
R4 .................
LIXSX
MULTI-ASSET INCOME
C ...................
ISFCX
P....................
N/A
R5 .................
LIXTX
FUND
F....................
LIGFX
R2 .................
LIGQX
R6 .................
LIXVX
F3..................
ISFOX
R3 .................
LIXRX
LORD ABBETT
A....................
LACFX
I .....................
LCFYX
R4 .................
LCFSX
CONVERTIBLE FUND
C ...................
LACCX
P....................
LCFPX
R5 .................
LCFTX
F....................
LBFFX
R2 .................
LBCQX
R6 .................
LCFVX
F3..................
LOCFX
R3 .................
LCFRX
LORD ABBETT
A....................
LCRAX
I .....................
LCRYX
R4 .................
LCRSX
CORE FIXED INCOME
C ...................
LCRCX
P....................
N/A
R5 .................
LCRTX
FUND
F....................
LCRFX
R2 .................
LCRQX
R6 .................
LCRVX
F3..................
LCROX
R3 .................
LCRRX
LORD ABBETT
A....................
LAPLX
I .....................
LAPIX
R5 .................
LAPVX
CORE PLUS BOND FUND
C ...................
LAPCX
R2 .................
N/A
R6 .................
LAPWX
F....................
LPLFX
R3 .................
LAPQX
F3..................
LOPLX
R4 .................
LAPUX
LORD ABBETT
A....................
LFRAX
I .....................
LFRIX
R5 .................
LRRTX
FLOATING RATE FUND
C ...................
LARCX
R2 .................
LFRRX
R6 .................
LRRVX
F....................
LFRFX
R3 .................
LRRRX
F3..................
LFROX
R4 .................
LRRKX
LORD ABBETT
A....................
LHYAX
I .....................
LAHYX
R4 .................
LHYSX
HIGH YIELD FUND
C ...................
LHYCX
P....................
N/A
R5 .................
LHYTX
F....................
LHYFX
R2 .................
LHYQX
R6 .................
LHYVX
F3..................
LHYOX
R3 .................
LHYRX
LORD ABBETT
A....................
LAGVX
I .....................
LAUYX
R4 .................
LAUKX
INCOME FUND
C ...................
LAUSX
P....................
N/A
R5 .................
LAUTX
F....................
LAUFX
R2 .................
LAUQX
R6 .................
LAUVX
F3..................
LOGVX
R3 .................
LAURX
LORD ABBETT
A....................
LIFAX
I .....................
LIFIX
R5 .................
LIFTX
INFLATION FOCUSED
C ...................
LIFCX
R2 .................
LIFQX
R6 .................
LIFVX
FUND
F....................
LIFFX
R3 .................
LIFRX
F3..................
LIFOX
R4 .................
LIFKX
The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission have
not approved or disapproved of these securities or determined whether this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
INVESTMENT PRODUCTS: NOT FDIC INSURED–NO BANK GUARANTEE–MAY LOSE VALUE
.
CLASS
TICKER
CLASS
TICKER
CLASS
TICKER
LORD ABBETT
A....................
LDCAX
I .....................
LSCIX
R5 .................
LSCUX
SHORT DURATION
C ...................
LDCCX
R2 .................
N/A
R6 .................
LDCVX
CORE BOND FUND
F....................
LDCFX
R3 .................
LDCRX
F3..................
LSCOX
R4 .................
LSCSX
LORD ABBETT
A....................
LALDX
I .....................
LLDYX
R4 .................
LDLKX
SHORT DURATION
C ...................
LDLAX
P....................
N/A
R5 .................
LDLTX
INCOME FUND
F....................
LDLFX
R2 .................
LDLQX
R6 .................
LDLVX
F3..................
LOLDX
R3 .................
LDLRX
LORD ABBETT
A....................
LTRAX
I .....................
LTRYX
R4 .................
LTRKX
TOTAL RETURN FUND
C ...................
LTRCX
P....................
LTRPX
R5 .................
LTRTX
F....................
LTRFX
R2 .................
LTRQX
R6 .................
LTRHX
F3..................
LTROX
R3 .................
LTRRX
TABLE OF CONTENTS
FUND SUMMARY
Multi-Asset Balanced Opportunity Fund
3
Multi-Asset Income Fund
17
Convertible Fund
31
Core Fixed Income Fund
43
Core Plus Bond Fund
55
Floating Rate Fund
68
High Yield Fund
80
Income Fund
93
Inflation Focused Fund
105
Short Duration Core Bond Fund
119
Short Duration Income Fund
131
Total Return Fund
143
Tax Information
155
Payments to Broker-Dealers and Other Financial Intermediaries
155
MORE INFORMATION ABOUT THE FUNDS
Investment Objectives
156
Principal Investment Strategies
157
Principal Risks
204
Additional Information About Investment and Operational Risks
269
Disclosure of Portfolio Holdings
275
Management and Organization of the Funds
275
INFORMATION FOR MANAGING YOUR FUND ACCOUNT
Choosing a Share Class
281
Sales Charges
289
Sales Charge Reductions and Waivers
291
Financial Intermediary Compensation
295
Purchases
300
Exchanges
302
Redemptions
303
Account Services and Policies
306
Distributions and Taxes
314
FINANCIAL INFORMATION
Multi-Asset Balanced Opportunity Fund
318
Multi-Asset Income Fund
322
Convertible Fund
326
Core Fixed Income Fund
330
Core Plus Bond Fund
334
Floating Rate Fund
338
High Yield Fund
342
Income Fund
346
Inflation Focused Fund
350
Short Duration Core Bond Fund
354
Short Duration Income Fund
358
Total Return Fund
362
APPENDIX
Appendix A: Intermediary-Specific Sales
Charge Reductions and Waivers
A-1
Appendix B: Underlying Funds of the Funds-of-Funds
B-1
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
3
FUND SUMMARY
Multi-Asset Balanced Opportunity Fund
INVESTMENT OBJECTIVE
The Fund’s investment objective is to seek current income and capital growth.
FEES AND EXPENSES
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 charge discounts if you and certain
members of your family invest, or agree to invest in the future, at least $100,000 in
the Lord Abbett Family of Funds. More information about these and other discounts
is available from your financial intermediary and in “Sales Charge Reductions and
Waivers” on page 291 of the prospectus, Appendix A to the prospectus, titled
“Intermediary-Specific Sales Charge Reductions and Waivers,” and “Purchases,
Redemptions, Pricing, and Payments to Dealers” on page 9-1 of Part II of the
statement of additional information (“SAI”).
Shareholder Fees
(1)
(Fees paid directly from your investment)
Class
A
C
F, F3, I, P, R2, R3, R4, R5, and R6
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
2.25%
None
None
Maximum Deferred Sales Charge (Load)
(as a percentage of offering price or redemption
proceeds, whichever is lower)
None
(2)
1.00%
(3)
None
Annual Fund Operating Expenses
(Expenses that you pay each year as a percentage of the value of your investment)
Class
A
C
F
F3
I
P
Management Fees
0.10%
0.10%
0.10%
0.10%
0.10%
0.10%
Distribution and Service (12b-1) Fees
0.25%
1.00%
0.10%
None
None
0.45%
Other Expenses
0.15%
0.15%
0.15%
0.07%
0.15%
0.15%
Acquired Fund Fees and Expenses
(4)
0.73%
0.73%
0.73%
0.73%
0.73%
0.73%
Total Annual Fund Operating Expenses
1.23%
1.98%
1.08%
0.90%
0.98%
1.43%
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
4
Annual Fund Operating Expenses
(continued)
(Expenses that you pay each year as a percentage of the value of your investment)
Class
R2
R3
R4
R5
R6
Management Fees
0.10%
0.10%
0.10%
0.10%
0.10%
Distribution and Service (12b-1) Fees
0.60%
0.50%
0.25%
None
None
Other Expenses
0.15%
0.15%
0.15%
0.15%
0.07%
Acquired Fund Fees and Expenses
(4)
0.73%
0.73%
0.73%
0.73%
0.73%
Total Annual Fund Operating Expenses
1.58%
1.48%
1.23%
0.98%
0.90%
(1)
A shareholder transacting in share classes without a front-end sales charge may be required to pay a commission to its
financial intermediary. Please contact your financial intermediary for more information about whether such a commission
may apply to your transaction.
(2)
A contingent deferred sales charge (“CDSC”) of 1.00% may be assessed on certain Class A shares purchased or
acquired without a sales charge if they are redeemed before the first day of the month in which the one-year anniversary
of the purchase falls.
(3)
A CDSC of 1.00% may be assessed on Class C shares if they are redeemed before the first anniversary of their
purchase.
(4)
Includes interest expense from certain underlying affiliated funds of 0.16%. Excluding interest expense of the applicable
underlying affiliated funds, Total Annual Fund Operating Expenses are 1.07%, 1.82%, 0.92%, 0.74%, 0.82%, 1.27%,
1.42%, 1.32%, 1.07%, 0.82% and 0.74% for Class A, Class C, Class F, Class F3, Class I, Class P, Class R2, Class R3,
Class R4, Class R5 and Class R6, respectively.
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. Class
C shares automatically convert to Class A shares after eight years. The expense
example for Class C shares for the ten-year period reflects the conversion to Class A
shares. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
5
Class
If Shares Are Redeemed
If Shares Are Not Redeemed
1 Year
3 Years
5 Years
10 Years
1 Year
3 Years
5 Years
10 Years
Class A Shares
$
347
$
607
$
885
$
1,680
$
347
$
607
$
885
$
1,680
Class C Shares
$
301
$
621
$
1,068
$
2,113
$
201
$
621
$
1,068
$
2,113
Class F Shares
$
110
$
343
$
595
$
1,317
$
110
$
343
$
595
$
1,317
Class F3 Shares
$
92
$
287
$
498
$
1,108
$
92
$
287
$
498
$
1,108
Class I Shares
$
100
$
312
$
542
$
1,201
$
100
$
312
$
542
$
1,201
Class P Shares
$
146
$
452
$
782
$
1,713
$
146
$
452
$
782
$
1,713
Class R2 Shares
$
161
$
499
$
860
$
1,878
$
161
$
499
$
860
$
1,878
Class R3 Shares
$
151
$
468
$
808
$
1,768
$
151
$
468
$
808
$
1,768
Class R4 Shares
$
125
$
390
$
676
$
1,489
$
125
$
390
$
676
$
1,489
Class R5 Shares
$
100
$
312
$
542
$
1,201
$
100
$
312
$
542
$
1,201
Class R6 Shares
$
92
$
287
$
498
$
1,108
$
92
$
287
$
498
$
1,108
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 the
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 31% of the
average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is a “fund-of-funds” that invests in affiliated investment companies (the
“underlying funds”) managed by Lord, Abbett & Co. LLC (“Lord Abbett”). Under
normal conditions, through the underlying funds, the Fund indirectly invests in U.S.
equity securities across all market capitalization ranges and all investment styles,
fixed income securities of various types, and select foreign (including emerging
market) securities. The Fund tactically allocates its assets among these asset classes
in response to market conditions or to seek to capitalize on investment opportunities.
The Fund uses a “blend” strategy to gain investment exposure to both growth and
value stocks, or to stocks with characteristics of both.
Equity securities in which an underlying fund may invest include common stocks,
preferred stocks, equity interests in trusts (including real estate investment trusts
(“REITs”) and privately offered trusts), partnerships, joint ventures, limited liability
companies and vehicles with similar legal structures, and other instruments with
similar characteristics.
Currently, the underlying funds invest in fixed income securities consisting
principally of high-yield debt securities, investment grade debt securities, mortgage-
related and other asset-backed securities, municipal bonds, U.S. Government
securities, convertible securities, bank loans, inflation-linked investments, and cash
equivalents. Certain of the underlying funds may invest up to 100% of their assets in
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
6
fixed income securities that are below investment grade (commonly referred to as
“high-yield” or “junk” bonds).
Securities of foreign companies include emerging market companies, American
Depositary Receipts (“ADRs”), and other similar depositary receipts, and may be
traded on a U.S. or non-U.S. securities exchange and may be denominated in non-
U.S. currencies.
In addition to investing in the underlying funds, the Fund may invest directly in any
type of derivative as part of its investment strategies or for risk management
purposes. Currently, the Fund may invest in derivatives consisting principally of
futures, forwards, options, and swaps. To the extent that the Fund invests directly in
derivatives, the Fund intends to do so primarily for non-hedging purposes. The
market value of the Fund’s directly held positions in derivatives, determined at the
time of the most recent position established, will not exceed 50% of the Fund’s net
assets. The Fund currently expects, however, that under normal conditions the
market value of such instruments, determined at the time of the most recent position
established, will not exceed 35% of the Fund’s net assets. These percentage
limitations exclude Fund assets indirectly invested in derivatives through the
underlying funds.
The Fund’s portfolio management team tactically allocates the Fund’s assets among
the underlying funds based on market conditions, interest rate changes, and
regulatory developments, among other considerations. The investment team may
also consider the risks and return potential presented by environmental, social, and
governance (“ESG”) factors in investment decisions. The Fund may sell or reallocate
its investments among the underlying funds for a variety of reasons, such as to
secure gains, limit losses, redeploy assets, increase cash, or satisfy redemption
requests, among others. The Fund may deviate from the investment strategy
described above for temporary defensive purposes. The Fund may miss certain
investment opportunities if defensive strategies are used and thus may not achieve its
investment objective.
PRINCIPAL RISKS
As with any investment in a mutual fund, investing in the Fund involves risk,
including the risk that you may receive little or no return on your investment. When
you redeem your shares, they may be worth more or less than what you paid for
them, which means that you may lose a portion or all of the money you invested in
the Fund. The principal risks of investing in the Fund also are the principal risks of
investing in the underlying funds. These risks, which could adversely affect the
Fund’s performance, include:
•
Underlying Funds Risk:
The assets of the Fund are invested principally in the
underlying funds. As a result, the investment performance of the Fund is
directly related to the investment performance of the underlying funds in which
it invests. The Fund is exposed to the same risks as the underlying funds in
direct proportion to the allocation of its assets among the underlying funds. To
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
7
the extent that the Fund invests a significant portion of its assets in a single
underlying fund it may be more susceptible to risks associated with that fund
and its investments. It is possible that the holdings of underlying funds may
contain securities of the same issuers, thereby increasing the Fund’s exposure to
such issuers. There can be no assurance that the investment objective of any
underlying fund will be achieved. In addition, the Fund’s shareholders will
indirectly bear their proportionate share of the underlying funds’ fees and
expenses, as well as their proportionate share of the Fund’s fees and expenses.
•
Affiliated Underlying Funds Risk:
The Fund invests principally in underlying
funds advised by Lord Abbett, which presents certain conflicts of interest.
Generally, Lord Abbett will receive more revenue from investing in the
underlying funds than it would if it invested in unaffiliated funds. In addition,
Lord Abbett is subject to conflicts of interest in allocating portfolio assets
among the various underlying funds because the fees payable to Lord Abbett by
underlying funds differ.
Lord Abbett may have an incentive to select underlying
funds that will result in the greatest net management fee revenue to Lord Abbett
and its affiliates, even if that results in increased expenses for the Fund. In
addition, the Fund’s investments in affiliated underlying funds may be
beneficial to Lord Abbett in managing the underlying funds, by helping the
underlying funds achieve economies of scale or by enhancing cash flows to the
underlying funds. If the Fund invests in an underlying fund with higher
expenses, the Fund’s performance would be lower than if the Fund had invested
in an underlying fund with comparable performance but lower expenses.
•
New Underlying Funds Risk:
The Fund may invest in underlying funds that
are recently organized. There can be no assurance that a new underlying fund
will reach or maintain a sufficient asset size to effectively implement its
investment strategy. In addition, until the Fund achieves sufficient scale, the
Fund may experience proportionally higher expenses than it would experience if
it invested in a fund with a larger asset base.
•
Portfolio Management Risk:
If the strategies used and investments selected by
the Fund’s portfolio management team fail to produce the intended result, the
Fund may suffer losses or underperform other funds with the same investment
objective or strategies, even in a favorable market.
•
Market Risk:
The market values of securities will fluctuate, sometimes sharply
and unpredictably, based on overall economic conditions, governmental actions
or intervention, market disruptions caused by trade disputes, tariffs or other
factors, political developments, and other factors. Prices of equity securities tend
to rise and fall more dramatically than those of debt securities.
•
Equity Securities Risk:
Equity securities, as well as equity-like securities such
as convertible debt securities, may experience significant volatility. Such
securities may fall sharply in response to adverse events affecting overall
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
8
markets, a particular industry or sector, or an individual company’s financial
condition.
•
Industry and Sector Risk:
Although the Fund does not employ an industry or
sector focus, its exposure to specific industries or sectors will increase from time
to time based on the portfolio management team’s perception of investment
opportunities. If the Fund is overweight in a single industry or sector relative to
its benchmark index, the Fund will face an increased risk that the value of its
portfolio will decrease because of events disproportionately affecting that
industry or sector. Furthermore, investments in particular industries or sectors
may be more volatile than the broader market as a whole.
•
Large Company Risk:
Larger, more established companies may be less able to
respond quickly to certain market developments. In addition, larger companies
may have slower rates of growth as compared to successful, but less well-
established, smaller companies.
•
Mid-Sized and Small Company Risk:
Investments in mid-sized and small
companies may involve greater risks than investments in larger, more
established companies. Securities of mid-sized and small companies tend to be
more sensitive to changing economic, market, and industry conditions and tend
to be more volatile and less liquid than equity securities of larger companies,
especially over the short term. The securities of mid-sized and small companies
tend to trade less frequently than those of larger, more established companies,
which can adversely affect the pricing of these securities and the ability to sell
these securities in the future.
•
Blend Style Risk:
Growth stocks typically trade at higher multiples of current
earnings than other stocks. Growth stocks often are more sensitive to market
fluctuations than other securities because their market prices are highly sensitive
to future earnings expectations. At times when it appears that these expectations
may not be met, prices of growth stocks typically fall. Growth stocks may be
more volatile than securities of slower-growing issuers. The prices of value
stocks may lag the stock market for long periods of time if the market fails to
recognize the company’s intrinsic worth. Value investing also is subject to the
risk that a company judged to be undervalued may actually be appropriately
priced or even overpriced. A portfolio that combines growth and value styles
may diversify these risks and lower its volatility, but there is no assurance this
strategy will achieve that result.
•
Fixed Income Securities Risk:
The Fund is subject to the general risks and
considerations associated with investing in debt securities, including the risk
that issuers will fail to make timely payments of principal or interest or default
altogether. Lower-rated securities in which the Fund may invest may be more
volatile and may decline more in price in response to negative issuer
developments or general economic news due to their increased credit risk
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
9
relative to other fixed-income investments. In addition, as interest rates rise, the
Fund’s investments typically will lose value.
•
High Yield Securities Risk:
High yield securities (commonly referred to as
“junk” bonds) typically pay a higher yield than investment grade securities, but
may have greater price fluctuations and have a higher risk of default than
investment grade securities. The market for high yield securities may be less
liquid due to such factors as interest rate sensitivity, negative perceptions of the
junk bond markets generally, and less secondary market liquidity. This may
make such securities more difficult to sell at an acceptable price, especially
during periods of financial distress, increased market volatility, or significant
market decline.
•
Loan Risk:
Investments in floating or adjustable rate loans are subject to
increased credit and liquidity risks. Loan prices also may be adversely affected
by supply-demand imbalances caused by conditions in the loan market or
related markets. Below investment grade loans, like high-yield debt securities,
or junk bonds, usually are more credit sensitive than interest rate sensitive,
although the value of these instruments may be affected by interest rate swings
in the overall fixed income market. Loans may be subject to structural
subordination and may be subordinated to other obligations of the borrower or
its subsidiaries.
•
Government Securities Risk:
The Fund invests in securities issued or
guaranteed by the U.S. Government or its agencies and instrumentalities (such
as the Government National Mortgage Association (“Ginnie Mae”), the Federal
National Mortgage Association (“Fannie Mae”), or the Federal Home Loan
Mortgage Corporation (“Freddie Mac”)). Different types of U.S. government
securities are subject to different levels of credit risk, including the risk of
default, depending on the nature of the particular government support for that
security. Unlike Ginnie Mae securities, securities issued or guaranteed by U.S.
Government-related organizations, such as Fannie Mae and Freddie Mac, 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 would provide financial support.
•
Municipal Securities Risk:
Municipal securities are subject to the same risks
affecting fixed income securities in general. In addition, the prices of municipal
securities may be adversely affected by legislative or political changes, tax
rulings, judicial action, changes in market and economic conditions, and the
fiscal condition of the municipal issuer, including an insolvent municipality
filing for bankruptcy. The Fund may be more sensitive to these events and
conditions if it invests a substantial portion of its assets in the municipal
securities of similar projects (such as those relating to education, health care,
housing, transportation, and utilities), in particular types of municipal securities
(such as general obligation bonds, private activity bonds, and special tax bonds),
or in the securities of issuers located within a single state, municipality, territory
(such as Puerto Rico), or geographic area. The market for municipal securities
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
10
generally is less liquid than other securities markets, which may make it more
difficult for the Fund to sell its municipal securities. Nongovernmental users of
facilities financed by tax-exempt revenue bonds (
e.g.
, companies in the electric
utility and health care industries) may have difficulty making payments on their
obligations in the event of an economic downturn. This would negatively affect
the valuation of municipal securities issued by such facilities.
•
Mortgage-Related and Other Asset-Backed Securities Risk:
Mortgage-
related securities, including commercial mortgage-backed securities (“CMBS”)
and other privately issued mortgage-related securities, and other asset-backed
securities may be particularly sensitive to changes in prevailing interest rates
and economic conditions, including delinquencies and defaults. The prices of
mortgage-related and other asset-backed securities, depending on their structure
and the rate of payments, can be volatile. They are subject to prepayment risk
(higher than expected prepayment rates of mortgage obligations due to a fall in
market interest rates) and extension risk (lower than expected prepayment rates
of mortgage obligations due to a rise in market interest rates). These risks
increase the Fund’s overall interest rate risk. Some mortgage-related securities
receive government or private support, but there is no assurance that such
support will remain in place.
•
Inflation-Linked Investments Risk:
Unlike traditional fixed income securities,
the principal and interest payments of inflation-linked investments are adjusted
periodically based on the inflation rate. The value of the Fund’s inflation-linked
investments may be vulnerable to changes in expectations of inflation or interest
rates and there is no guarantee that the Fund’s use of these instruments will be
successful.
•
Inverse Floaters Risk:
The Fund, through the underlying funds, may invest in
inverse floaters. An inverse floater is a type of municipal bond derivative
instrument with a floating or variable interest rate that moves in the opposite
direction of the interest rate on another security, normally the floating rate note.
The value and income of an inverse floater generally is more volatile than the
value and income of a fixed rate municipal bond. The value and income of an
inverse floater generally fall when interest rates rise. Inverse floaters have
varying degrees of liquidity, and the market for these securities is relatively
volatile. An underlying fund’s net cash investment in inverse floaters is
significantly less than the value of the underlying municipal bonds. This creates
leverage, which increases as the value of the inverse floaters becomes greater in
proportion to the value of the underlying municipal bonds.
•
Credit Risk:
Debt securities are subject to the risk that the issuer or guarantor
of a security may not make interest and principal payments as they become due
or may default altogether. In addition, if the market perceives a deterioration in
the creditworthiness of an issuer, the value and liquidity of securities issued by
that issuer may decline. To the extent that the Fund holds below investment
grade securities, these risks may be heightened. Insured debt securities have the
PROSPECTUS – MULTI-ASSET BALANCED OPPORTUNITY FUND
11
credit risk of the insurer in addition to the credit risk of the underlying
investment being insured.
•
Interest Rate Risk:
As interest rates rise, prices of bonds (including tax-exempt
bonds) generally fall, typically causing the Fund’s investments to lose value.
Additionally, rising interest rates or lack of market participants may lead to
decreased liquidity in fixed income markets. Interest rate changes generally
have a more pronounced effect on the market value of fixed-rate instruments,
such as corporate bonds, than they have on floating rate instruments, and
typically have a greater effect on the price of fixed income securities with longer
durations. A wide variety of market factors can cause interest rates to rise,
including central bank monetary policy, rising inflation, and changes in general
economic conditions.
•
Foreign and Emerging Market Company Risk:
Investments in foreign
companies and in U.S. companies with economic ties to foreign markets
generally involve special risks. These companies may be more vulnerable to
economic, political, and social instability and subject to less government
supervision, lack of transparency, inadequate regulatory and accounting
standards, and foreign taxes. Foreign company securities also include American
Depositary Receipts (“ADRs”), which may be less liquid than the underlying
shares in their primary trading market. Foreign securities also may subject the
Fund’s investments to changes in currency exchange rates. Emerging market
securities generally are more volatile than other foreign securities, and are
subject to greater liquidity, regulatory, and political risks. Investments in
emerging markets may be considered speculative and generally are riskier than
investments in more developed markets. Emerging markets are more likely to
experience hyperinflation and currency devaluations. Securities of emerging
market companies may have far lower trading volumes and less liquidity than
securities of issuers in developed markets. In certain emerging market countries,
governments participate to a significant degree in their respective economies.
Action by these governments could have a significant adverse effect on market
prices of securities and payment of dividends. Companies with economic ties to
emerging markets may be susceptible to the same risks as companies organized
in emerging markets.
•
Foreign Currency Risk:
Investments in securities that are denominated or
receiving revenues in foreign currencies are subject to the risk that those
currencies will decline in value relative to the U.S. dollar, or, in the case of
hedged positions, that the U.S. dollar will decline in value relative to the
currency being hedged. Foreign currency exchange rates may fluctuate
significantly over short periods of time.
•
Sovereign Debt Risk:
Sovereign debt securities are subject to the risk that the
relevant sovereign government or governmental entity may delay or refuse to
pay interest or repay principal on its debt. There is no legal process for
collecting sovereign debt that is not repaid, nor are there bankruptcy