Q1 2017
Quarterly Commentary
®
AC ALTERNATIVES® Market Neutral Value
TICKERS (CLASS) Inv: ACVVX > Inst: ACVKX > A: ACVQX > C: ACVHX > R: ACVWX
AC Alternatives Market Neutral Value posted a gain during the first quarter of 2017 and
outperformed its benchmark, the Bloomberg Barclays U.S. 1-3 Month Treasury Bill
Index.
OBJECTIVE
Equity Markets Continued to Rise
Major U.S. stock market benchmarks hit record highs during the quarter on favorable
corporate earnings reports and generally optimistic economic growth outlooks. The
markets moderated from earlier highs as the quarter ended, and questions arose over
PORTFOLIO MANAGEMENT TEAM
care, tax regulations, and infrastructure spending. In March, the Federal Reserve took
another step toward its stated goal of normalizing interest rates by raising its target
range for the federal funds rate (an overnight interest rate banks charge each other for
loans) by 0.25%. In this environment, lower-quality securities (B or worse) outperformed
higher-quality (B+ or better) names, and growth as a style outperformed value.
Rising Markets Lifted Long Positions
long positions. More specifically, Mead Johnson Nutrition, a pediatric nutrition company,
was a top contributor to performance. Its stock rose significantly on news it would be
acquired by Reckitt Benckiser at a 30% premium. Additionally, a convertible position in
Microchip Technology rose after the company reported quarterly sales, gross and
operating margins, earnings per share, and free cash flow that significantly beat
share guidance.
an athletic apparel retailer positively impacted performance after the company reported
weaker-than-expected fourth-quarter earnings. The company also provided weak
guidance for the first quarter of 2017.
Short Positions Were Challenged by Rising Markets
short position in a specialty retailer. Its stock rose (causing the short position to detract
from returns) after the company reported earnings and sales results that were better
than expected. A short position in a provider of government health care plans also
detracted from performance. Its stock rose on the failed repeal of the Affordable Care
Act.
Positioning for the Future
The team continues to follow its disciplined, bottom-up process, selecting securities one
at a time for the portfolio. The team looks for securities of companies that it believes are
misvalued on both the long and short side of the market with consideration for both
individual opportunities identified by the team.
Long-term capital growth, independent of
equity market conditions.
Start Date
Industry
Company
Phil Davidson, CFA
1980
1993
Michael Liss, CFA, CPA
1991
1998
Kevin Toney, CFA
1993
1999
Brian Woglom, CFA
1998
2005
Dan Gruemmer, CFA
2004
2009
TOP 10 EQUITY HOLDINGS (%)
Royal Dutch Shell PLC
4.68
Intel Corp (conv) 2.95% 12/15/2035
3.64
iShares U.S. Real Estate ETF
3.16
Wal-Mart Stores Inc
2.82
Pfizer Inc
2.36
Schlumberger Ltd
2.06
Microchip Technology Inc (conv)
1.625% 2/15/25
2.05
Consumer Discretionary Select Sector
SPDR Fund
1.87
Chubb Ltd
1.85
Medtronic PLC
1.81
As of 2/28/2017
The holdings listed should not be considered recommendations to
purchase or sell a particular security. Equity holdings are grouped to
include common shares, depository receipts, rights and warrants issued by
the same company. Fund holdings subject to change.
AC Alternatives® Market Neutral Value
Data presented reflects past performance. Past performance is no guarantee of future results. Current performance may be
higher or lower than the performance shown. To obtain performance data current to the most recent month end, please visit
americancentury.com. Investment return and share value will fluctuate, and redemption value may be more or less than original
cost. Data assumes reinvestment of dividends and capital gains. For information about other share classes available, please consult
the prospectus. There is no guarantee that the investment objectives will be met. Dividends and yields represent past performance and
there is no guarantee that they will continue to be paid.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD ENDED 3/31/2017 (%)
Class
Qtr (%)
1 Year (%)
3 Year (%)
5 Year (%)
10 Year (%)
Since Inception (%)
Inception Date
Investor
2.09
2.97
3.83
3.15
-
3.51
10/31/2011
Institutional
2.16
3.23
4.02
3.37
-
3.72
10/31/2011
A
2.02
2.72
3.57
2.90
-
3.26
10/31/2011
A (with 5.75% sales charge)
-3.81
-3.21
1.55
1.69
-
2.13
-
Bloomberg Barclays U.S. 1-3 Month
Treasury Bill Index
0.10
0.30
0.14
0.11
-
-
-
Performance less than one year, when quoted, is not annualized.
EXPENSES & SALES CHARGES (%)
Gross Expense Ratio
Investor
Institutional
A
4.09
3.89
4.34
Net Expense Ratio (after fee waiver)
3.84
3.64
4.09
The total expense ratio (excluding dividends and interest expense on securities sold short) was 1.66% for Investor Class, 1.46% for Institutional Class, and 1.91% for A Class.This fund's total expense ratio excludes dividends on
short sales. These are the dividends paid to the lenders of the borrowed securities. The expense relating to dividends on short sales will vary depending on whether the securities the fund sells short pay dividends and on the size of
any such dividends.
The gross expense ratio is the
total annual operating costs, expressed as a percentage of the
average net assets for a given time period. It is gross of any fee waivers or expense reimbursement. The net expense ratio is
the expense ratio after the application of any waivers or reimbursement. This is the actual ratio that investors paid during the
most recent fiscal year. Please see the prospectus for more information.
Expense ratio is as of the fund's current prospectus.
The Institutional Class minimum investment amount is $5 million ($3 million for endowments and foundations) per fund. A contingent deferred sales charge (CDSC) of 1% for A Shares is only charged at redemption within the first
year on purchases over $1MM. There is no initial sales charge in these situations. C Class shares are subject to a contingent deferred sales charge (CDSC) of 1% and the charges will be imposed on certain redemptions within 12
months.
Returns or yields for the fund would have been lower if .25% of the management fee had not been waived. The advisor expects this waiver to continue until July 31, 2017, and cannot terminate it prior to such date without the
approval of the Board of Directors. Review the annual or semiannual report for the most current information.
You should consider the
investment objectives, risks, and charges and expenses carefully before you invest. The
prospectus or
summary prospectus, which can be obtained at americancentury.com, contains this and other information about the fund, and should be read
carefully before investing.
The opinions expressed are those of the portfolio investment team and are no guarantee of the future performance of any American
Century Investments portfolio. Statements regarding specific holdings represent personal views and compensation has not been received
in connection with such views. This information is for an educational purpose only and is not intended to serve as investment advice.
Alternative mutual funds often hold a variety of non-traditional investments, and also often employ more complex trading strategies than
traditional mutual funds. Each of these different alternative asset classes and investment strategies have unique risks making them more
suitable for investors with an above average tolerance for risk.
Fund shown may take short positions. A short position arises when the fund sells stock that it does not own but was borrowed in
anticipation that the market price of the stock will decline. If the market price declines, the fund can replace the borrowed stock at a lower
price and capture the value represented by the difference between the higher sale price and the lower replacement price. Conversely, if the
price of the stock goes up after the fund borrows the stock, the fund will lose money because it will have to pay more to replace the
borrowed stock than it received when it sold the stock short. Any loss will be increased by the amount of compensation, interest or
dividends, and transaction costs the fund must pay to the lender of the borrowed security. In addition, because the
loss on a short
sale stems from increases in the value of the stock sold short, the extent of such loss, like the price of the stock sold short, is theoretically
unlimited. By contrast, a
loss on a long position arises from decreases in the value of the stock and therefore is limited by the fact
that a
value cannot drop below zero. In addition, the fund may not be able to close out a short position at a particular time or price
advantageous to the fund and there is some risk the lender of the stock sold short will terminate the loan at an inopportune time.
The letter ratings indicate that credit worthiness of the underlying bonds in the portfolio and generally range from AAA (highest) to D
(lowest).
Under normal circumstances the
security selection process may result in the managers taking long positions in a market sector or
industry that is not offset, or not offset to the same extent, by corresponding short positions in the same market sector or industry, and vice
versa. This may result in increased risk and opportunity for loss should the securities in a particular market sector or industry not perform
as predicted by our security selection process. The
portfolio turnover may be very high which could result in relatively high
transaction costs which could hurt the
performance and cause capital gains tax liabilities.
Source: Bloomberg Index Services Ltd. Bloomberg Barclays U.S. 1-3 Month Treasury Bill Index is the 1- to 3-month component of the U.S.
Treasury Bill Index, which includes U.S. Treasury bills with a remaining maturity from 1 up to 12 months and excludes zero coupon strips.
American Century Investment Services, Inc., Distributor
©2017 American Century Proprietary Holdings, Inc. All rights reserved.
IN-FLY-92055
Non-FDIC Insured May Lose Value
No Bank Guarantee