UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-22959
1290 FUNDS
(Exact name of registrant as specified in charter)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
WILLIAM T. MACGREGOR ESQ.
Executive Vice President, General Counsel and Secretary
Equitable Investment Management Group, LLC
1290 Avenue of the Americas
New York, New York 10104
(Name and Address of Agent for Service)
Copies to:
MARK C. AMOROSI, ESQ.
K&L Gates LLP
1601 K Street N.W.
Washington, D.C. 20006
Registrant’s telephone number, including area code: (212) 554-1234
Date of fiscal year end: October 31
Date of reporting period: October 31, 2021
| Item 1. | Reports to Stockholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
Annual Report
October 31, 2021
1290 Funds
Annual Report
October 31, 2021
Table of Contents
Market Overview for the year ended October 31, 2021
In the past year, the economy and financial markets continued to be impacted by the global COVID-19 pandemic and the vaccine rollout. Looking at the U.S. economy, the course of the economic recovery after October 2020 is apparent: fourth-quarter 2020 annualized real gross domestic product (GDP) growth rose 4.3%. As vaccination began to take hold across the developed world, first and second quarter 2021 growth saw booming rates of 6.3% and 6.7%, respectively. This exuberance tapered off over summer, however, due to growing concerns over global supply chain dislocations and the outlook for inflation. As of this writing, the initial estimate for third quarter GDP growth was a relatively subdued 2.0%.
Along with most countries around the world, the Federal Reserve Board (Fed) maintained an accommodative monetary policy stance during the reporting period, keeping the U.S. federal funds rate in a range between 0.00% and 0.25%, and maintaining its monthly bond purchases quantitative easing. As the period drew to a close, however, the central bank had announced its intention to remove some of its stimulus in late 2021.
Despite the stimulus, interest rates in the U.S. began to inch upwards, and the global fixed-income markets experienced periods of high volatility. Overall, bonds declined over the twelve-months ended October 31, 2021. A number of other factors impacted the market, including repercussions from the COVID-19 pandemic, the sharply falling and then rising global growth pattern, inflation concerns and Fed policy announcements. Most spread sectors (non-Treasuries) outperformed similar-duration Treasuries, partially driven by investors’ search for higher yields in the low interest-rate environment.
Global equities recorded strong double-digit returns for the 12-month period, with the MSCI ACWI Index returning 37.3%. Accommodative monetary policy, vaccination in the developed world, and strong company earnings growth were key supports throughout most of the period. Volatility increased late in the period, over various factors, mainly the accelerating economic recovery and worries over inflation. Surging oil and commodity prices stoked these inflationary fears, holding equities back periodically. From September onward, worsening supply-chain constraints and the negative economic impact of the coronavirus delta variant were compounded by the convergence of politically divisive budget and spending plan negotiations in the U.S. A slowdown in China’s economy also weighed on global risk sentiment. Against this backdrop, large cap U.S. stocks showed little differentiation by style, with large cap value stocks up 43.8% over the past year, large cap core stocks up 43.5% and large cap growth stocks up 43.2%, as measured by their Russell indices. Small-cap value stocks significantly outperformed large-caps, and intervals of market rotation helped them outperform their growth-style peers by around 25 percentage points, as well. The core Russell 2000® Index returned 50.8% for the 12-month period ended October 31, 2021.
Source: Equitable Investment Management Group, LLC. As of October 31, 2021. This information is provided for general information only and is not intended to provide specific advice or recommendations for any individual investor. PAST PERFORMANCE IS NO GUARANTEE OP FUTURE RESULTS. No investment is risk-free. Bond investments are subject to interest rate risk so that when interest rates rise, the prices of bonds can decrease and the investor can lose principal value. High yield bonds are subject to a high degree of credit and market risk. International securities carry additional risks including currency exchange fluctuation and different government regulations, economic conditions or accounting standards. Smaller company stocks involve a greater risk than is customarily associated with more established companies. Index performance is referenced for illustrative purposes only. You cannot invest directly in an index. Fund holdings and sector allocations are subject to change. Please see the Portfolio of Investments for a complete list of fund holdings.
1
NOTES ON PERFORMANCE (Unaudited)
Total Returns
Performance of the 1290 Funds as shown on the following pages compares each Fund’s performance to that of a broad-based securities index and, with respect to certain Funds, customized composite benchmarks. Each Fund’s rates of return are net of investment advisory fees and expenses of the Fund. Each Fund has a separate investment objective it seeks to achieve by following a separate investment policy. There is no guarantee that these objectives will be attained. The objectives and policies of each Fund will affect its return and its risk. Keep in mind that past performance is not an indication of future results.
Benchmarks
60% S&P 500® Index/40% Bloomberg U.S. Aggregate Bond Index (formerly known as Bloomberg Barclays U.S. Aggregate Bond Index) is a hypothetical combination of unmanaged indexes. The composite index combines the total return of the S&P 500® Index at a weighting of 60% and the Bloomberg Barclays U.S. Aggregate Bond Index at a weighting of 40%.
Bloomberg U.S. Aggregate Bond Index (formerly knows as Bloomberg Barclays U.S. Aggregate Bond Index) covers the U.S. dollar denominated investment-grade, fixed-rate, taxable bond market of securities. The index includes bonds from the Treasury, government-related and corporate securities, agency fixed rate and hybrid adjustable mortgage pass through securities, asset-backed securities and commercial mortgage-backed securities.
ICE BofA U.S. 3-Month Treasury Bill Index measures the returns of negotiable debt obligations issued by the U.S. government and backed by its full faith and credit, having a maturity of three months.
ICE BofA U.S. High Yield Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. Qualifying securities must have at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $100 million. It is capitalization-weighted.
Morgan Stanley Capital International (MSCI) World (Net) Index (“MSCI World (Net) Index”) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The index consists of 23 developed market country indexes.
Russell 2500™ Value Index measures the performance of those Russell 2500TM Index companies with lower price-to-book ratios and lower forecasted growth values. It is market-capitalization weighted.
Standard & Poor’s 500® Composite Stock Price Index (“S&P 500® Index”) is a weighted index of common stocks of 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities. The index is capitalization weighted, thereby giving greater weight to companies with the largest market capitalizations.
The Standard & Poor’s Target Date Index Series (each, an “S&P Target Date Index”) comprises eleven multi-asset class indices, each corresponding to a particular target retirement date. The asset allocation for each index in the series is determined once a year through survey of large fund management companies that offer target date products. Each index is fully investable, with varying levels of exposure to equities, fixed income and commodities.
Glossary
Bloomberg Commodity Total Return Index is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 13 week (3 Month) U.S. Treasury Bills.
Bloomberg U.S. Aggregate Bond Index covers the U.S. dollar denominated investment-grade, fixed-rate, taxable bond market of securities. The index includes bonds from the Treasury, government-related and corporate securities, agency fixed rate and hybrid adjustable mortgage pass through securities, asset-backed securities and commercial mortgage-backed securities.
Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index (formerly known as Bloomberg Barclays U.S. Corporate High Yield — 2% Issuer Cap Index) is a sub-index of the Bloomberg Barclays U.S. Corporate High Yield Index which measures the USD-denominated, high yield, fixed-rate corporate bond market. This sub-index caps exposure caps any issuer exposure to a fixed percentage of 2%.
CBOE Volatility Index (known as the VIX), is measure of constant, 30-day expected volatility of the U.S. stock market, derived from prices of the S&P 500 Index call and put options.
Credit ratings: Investment grade is a rating that signifies a municipal or corporate bond presents a relatively low risk of default. Bond rating firms like Standard & Poor’s and Moody’s use different designations, consisting of the upper- and lower-case letters “A” and “B,” to identify a bond’s credit quality rating. “AAA” and “AA” (high credit quality) and “A” and “BBB” (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations (“BB,” “BBB-,” “B,” “CCC,” etc.) are considered low credit quality, and are commonly referred to as “junk bonds.”
2
NOTES ON PERFORMANCE (Unaudited)
Corporate bonds are a type of debt security that is issued by a firm and sold to investors. Corporate bonds are typically seen as somewhat riskier than U.S. government bonds, so they usually have higher interest rates to compensate for this additional risk.
Derivative is a financial instrument with a price that is dependent upon or derived from one or more underlying assets.
Diversified spread is the sale of multiple, diversified futures contracts and the purchase of other multiple, diversified offsetting futures contracts. A spread tracks the difference between a long and short position.
Drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund. A drawdown is usually quoted as the percentage between the peak and the subsequent trough. If a trading account has $10,000 in it, and the funds drop to $9,000 before moving back above $10,000, then the trading account witnessed a 10% drawdown.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.
Factor returns are the returns attributable to a particular common factor.
Federal funds rate is the target interest rate set by the Federal Open Market Committee (FOMC) at which commercial banks borrow and lend their excess reserves to each other overnight.
Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. drawdown
Inflation is the decline of purchasing power of a given currency over time.
JPMorgan Emerging Markets Bond Index Global (“EMBI Global”) measures the performance of fix-rate for external-currency denominated debt instruments including brady bonds, loans, Eurobonds in emerging markets. Countries covered are Argentina, Brazil, Bulgaria, Mexico, Morocco, Nigeria, the Philippines, Poland, Russia, and South Africa. It covers more of the eligible instruments than the EMBI+ by relaxing somewhat the strict EMBI+ limits on secondary market trading liquidity.
Monetary policy accommodation is when a central bank sets low interest rates so that credit is easily attainable. This makes borrowing easy for business, which stimulates investment and expansion of operations.
Morgan Stanley Capital International (MSCI) ACWI Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of 23 developed markets and 26 emerging markets. The index covers approximately 85% of the global investment opportunities.
Mortgage backed security (MBS) is a type of asset-backed security that is secured by a mortgage or collection of mortgages.
Russell 2000® Index is an unmanaged index which measures the performance of approximately 2000 of the smallest companies in the Russell 3000® Index, which represents approximately 10% of the total market capitalization of the Russell 3000® Index. It is market-capitalization weighted.
Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. It is market-capitalization weighted.
Quantitative easing is the introduction of new money into the money supply by a central bank.
Shiller Barclays Cyclically Adjusted Price-to-Earnings (CAPE) Total Return Index aims to identify undervalued sectors in the large-cap equity market based on a modified CAPE® ratio, which is designed to assess longer term equity valuations by using an inflation adjusted earnings horizon.
Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices.
Spread Sectors are nongovernmental fixed income investments with higher yields at greater risk than governmental investments.
Swap is a derivative contract through which two parties exchange financial instruments.
Treasury securities, or Treasuries, are debt obligations of the U.S. government. When you buy a U.S. Treasury security, you are lending money to the federal government for a specified period of time.
Yield refers to the earnings generated and realized on an investment over a particular period of time.
Yield spread is the difference between yields on differing debt instruments of varying maturities, credit ratings, issuer, or risk level, calculated by deducting the yield of one instrument from the other.
Spread tightening is when that difference contracts.
3
1290 DIVERSIFIED BOND FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
INVESTMENT SUB-ADVISER
| Ø | | Brandywine Global Investment Management, LLC (Brandywine Global) |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | |
| | | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | 6.73 | % | | | 6.04 | % | | | 5.04 | % |
| | | | with Sales Charge (a) | | | | 1.87 | | | | 5.06 | | | | 4.28 | |
Fund – Class I Shares* | | | | | | | 6.85 | | | | 6.29 | | | | 5.29 | |
Fund – Class R Shares* | | | | | | | 6.44 | | | | 5.77 | | | | 4.77 | |
Bloomberg U.S. Aggregate Bond Index | | | | | | | (0.48 | ) | | | 3.10 | | | | 3.29 | |
| |
* Date of inception 7/6/15. (a) A 4.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Diversified Bond Fund and the Bloomberg U.S. Aggregate Bond Index from 7/6/15 to 10/31/21. The performance of the Bloomberg U.S. Aggregate Bond Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the Bloomberg U.S. Aggregate Bond Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratios for Class A, I and R shares were 1.42%, 1.17% and 1.67%, respectively. The net expense ratios for Class A, I and R shares were 0.75%, 0.50% and 1.00%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 6.85% for the year ended October 31, 2021. The Fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, returned (0.48)% over the same year.
Overview — Brandywine Global Investment Management, LLC (Brandywine Global)
As economic conditions improved over the past year, short-term U.S. Treasury yields moved sharply higher. The two-year Treasury yield began the reporting period at 0.14% and ended the period at 0.48%. Its low of 0.09% occurred on February 5, 2021 and its high of 0.50% took place just days before the reporting period ended, on October 27 and 28, 2021. Long-term U.S. Treasury yields also moved higher, as positive economic data triggered inflationary concerns and fears that the Fed may remove its monetary policy accommodations sooner than previously anticipated. The ten-year Treasury yield began the reporting period at 0.88% and ended the period at 1.55%. Its low of 0.78% occurred on November 4, 2020, and its high of 1.74% took place on March 19 and March 31, 2021.
All told, the Bloomberg U.S. Aggregate Bond Index returned -0.48% for the twelve-months ended October 31, 2021. For comparison purposes, riskier fixed-income securities, including high-yield bond and emerging market debt, produced better results. Over the fiscal year, the Bloomberg U.S. Corporate High Yield — 2% Issuer Cap Index and the JPMorgan Emerging Markets Bond Index Global (“EMBI Global”) returned 10.07% and 4.06%, respectively.
Fund Highlights
The subadvisor believes the flexibility of the investment guidelines allowed them to position the Fund to take advantage of tactical opportunities and reallocate when risk on/risk off sentiment presented itself.
4
1290 DIVERSIFIED BOND FUND (Unaudited)
Portfolio Positioning:
| • | | U.S. Government, Investment Grade Corporate, and Agency Mortgage-Backed Securities (MBS) — The Fund maintained a short position on U.S. real yields, or the difference between long-end nominal yields and the rate of inflation. While this position was modestly reduced through the purchase of U.S. Treasuries, that reduction was intended to be a temporary hedge around uncertain near-term factors. On an intermediate-term basis, the subadvisor has maintained its view that the U.S. growth picture is likely to be more robust than what is priced into Treasury yields currently. They believe that the likely path forward for rates is ultimately higher, not lower, although shorter term data has the potential to underwhelm. Regarding the investment-grade bond positioning, they have been slowly reducing exposure from peak levels in 2020. There was an opportunistic build in investment-grade corporates during October (2021) as the Fund was able to take advantage of some spread widening events globally. |
| • | | International Sovereigns (Developed Markets) — Perhaps the largest recent change came in the form of newly added safe-haven sovereign duration in France, South Korea, and the U.K. As interest rates in the developed world have drifted higher in recent months, the Fund is approaching the higher end of the yield range over the recent past. This coupled with the potential for a soft patch in near-term growth figures and a potential moderation in inflation pressures argued for a slight build in safe-haven duration in the Fund. |
| • | | International Sovereigns (Emerging Markets) — The Fund maintained a strategic exposure to select emerging market bonds that the subadvisor believes exhibit attractive levels of high real yield and notable valuation tailwinds. The subadvisor believes that China is close to the end of its efforts to drain the credit expansion from its system, and this paired with a relatively bullish intermediate term growth outlook for the U.S. economy may provide a supportive global growth picture that could drive demand for high real yielding economies in the emerging world as we head into the new year. |
| • | | Non-Agency Structured Credit — The Fund owned small positions in non-agency structured credit, which were generally held in the context of cash management to enhance yield. |
| • | | Currency — While the U.S. dollar is overvalued relative to its history, there are near term risks that could create uncertainty in currency markets as investors grapple with tapering from the U.S. Federal Reserve. As this Fund’s benchmark is 100% dollar in nature, the subadvisor built dollars to the higher end of their range to help mitigate benchmark relative risk in the event of a strong dollar move. |
What helped performance during the year?
| • | | By far the largest contributor to positive performance for the period came from U.S. corporate bond holdings. Much of this performance occurred at the end of the 2020 calendar year as investors shifted to a “risk-on” mentality given news of effective COVID-19 vaccines and hopes of a strong economic rebound out of the pandemic. |
| • | | Outside of corporate bonds, shorts of various developed market bonds, such as U.K. gilts and Canadian bonds, in early 2021 were tailwinds to the period’s performance. At the time, we viewed many developed market sovereigns as overvalued, and when their yields rose the Fund benefited. |
| • | | Lastly, as progress of a global economic recovery helped to fuel demand and improvements in risk sentiment stemming from progress on the vaccine front, emerging market bonds and currencies appreciated for the period. The former included government bonds from South Africa, Indonesia, and Mexico. Currencies were led by the Mexican peso and included the Czech koruna and the Brazilian real. These currencies held onto their gains despite the recent appreciation in the U.S. dollar. |
What hurt performance during the year?
| • | | While currencies were additive overall, there were a few which detracted from performance. One such currency was the Polish zloty. Compared to its peers in Central Europe, the Polish central bank has kept its dovish stance on rates, which caused the currency to decline. Another such currency was the Chilean peso. Surging inflation, as well as the increase in political uncertainty regarding upcoming elections, weighed heavily on the South American currency. |
| • | | Lastly, an additional regional detractor was Brazilian government bonds, where the country is also dealing with rising inflation and political unrest with their upcoming 2022 election. The rhetoric and outbursts by the Brazilian president, a rightwing firebrand, have negatively impacted many investor’s views regarding the country. |
The primary use of derivatives by the Fund is for its various currency exposures where it utilizes currency forwards. On occasion, the subadvisor will tap futures for additional exposures where they choose to not hold actual bonds. As an example, for the most recent period, at times the Fund held exposures to U.K. gilts, French OATs, German bunds, and U.S. Treasuries through bond futures.
5
1290 DIVERSIFIED BOND FUND (Unaudited)
| | | | |
| |
Fund Characteristics As of October 31, 2021 | |
Weighted Average Life (Years) | | | 12.06 | |
Weighted Average Coupon (%) | | | 2.87 | |
Weighted Average Effective Duration (Years)* | | | 4.97 | |
Weighted Average Rating** | | | A+ | |
| |
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests. ** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. | |
| | | | |
| | |
Sector Weightings
as of October 31, 2021 | | % of
Net Assets | |
U.S. Treasury Obligations | | | 42.9 | % |
Foreign Government Securities | | | 24.5 | |
Financials | | | 7.3 | |
Industrials | | | 4.6 | |
Commercial Mortgage-Backed Securities | | | 4.0 | |
Real Estate | | | 3.4 | |
Energy | | | 3.3 | |
Investment Company | | | 3.3 | |
Consumer Discretionary | | | 2.6 | |
Information Technology | | | 1.9 | |
Health Care | | | 1.0 | |
Communication Services | | | 1.0 | |
Asset-Backed Securities | | | 0.3 | |
Collateralized Mortgage Obligations | | | 0.3 | |
Cash and Other | | | (0.4 | ) |
| | | | | |
| | | | 100.0 | % |
| | | | | |
Holdings are subject to change without notice. | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning Account Value 5/1/21 | | | Ending Account Value 10/31/21 | | | Expenses Paid During Period* 5/1/21 - 10/31/21 | |
Class A | |
Actual | | | $1,000.00 | | | | $979.10 | | | | $3.74 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.42 | | | | 3.82 | |
Class I | |
Actual | | | 1,000.00 | | | | 981.10 | | | | 2.50 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.69 | | | | 2.55 | |
Class R | |
Actual | | | 1,000.00 | | | | 978.00 | | | | 4.99 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.16 | | | | 5.09 | |
| |
* Expenses are equal to the Portfolio’s A, I and R shares annualized expense ratio of 0.75%, 0.50% and 1.00%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
6
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
LONG-TERM DEBT SECURITIES: | |
Asset-Backed Securities (0.3%) | |
Aames Mortgage Investment Trust, | |
Series 2006-1 A4
0.649%, 4/25/36 (l) | | $ | 329,293 | | | $ | 327,942 | |
Park Place Securities, Inc. Asset-Backed
Pass-Through Certificates, | |
Series 2005-WHQ2 M2
0.779%, 5/25/35 (l) | | | 92,530 | | | | 92,594 | |
Popular ABS Mortgage Pass-Through Trust, | |
Series 2005-5 MV1
0.749%, 11/25/35 (l) | | | 260,139 | | | | 257,693 | |
TICP CLO XI Ltd., | | | | | | | | |
Series 2018-11A E
6.131%, 10/20/31 (l)§ | | | 1,310,000 | | | | 1,292,597 | |
Towd Point Mortgage Trust, | |
Series 2018-3 A2
3.875%, 5/25/58 (l)§ | | | 345,000 | | | | 365,162 | |
| | | | | | | | |
Total Asset-Backed Securities | | | | | | | 2,335,988 | |
| | | | | | | | |
Collateralized Mortgage Obligations (0.3%) | |
Connecticut Avenue Securities Trust, | |
Series 2018-R07 1M2
2.489%, 4/25/31 (l)§ | | | 203,933 | | | | 204,962 | |
FNMA, | | | | | | | | |
Series 2018-C06 1M2
2.089%, 3/25/31 (l) | | | 472,036 | | | | 475,723 | |
Residential Mortgage Loan Trust, | |
Series 2019-3 A1
2.633%, 9/25/59 (l)§ | | | 480,292 | | | | 482,205 | |
TDA CAM FTA, | | | | | | | | |
Series 9 B
0.000%, 4/28/50 (l)(m) | | EUR | 800,000 | | | | 808,941 | |
| | | | | | | | |
Total Collateralized Mortgage Obligations | | | | | | | 1,971,831 | |
| | | | | | | | |
Commercial Mortgage-Backed Securities (4.0%) | |
Credit Suisse Mortgage Capital Certificates, | |
Series 2019-ICE4 A
1.070%, 5/15/36 (l)§ | | $ | 730,000 | | | | 729,544 | |
FREMF Mortgage Trust, | | | | | | | | |
Series 2015-K48 B
3.641%, 8/25/48 (l)§ | | | 2,710,000 | | | | 2,883,884 | |
Series 2017-K61 C
3.686%, 12/25/49 (l)§ | | | 955,000 | | | | 992,144 | |
JPMDB Commercial Mortgage Securities Trust, | |
Series 2018-C8 C
4.742%, 6/15/51 (l) | | | 12,000,000 | | | | 12,766,919 | |
Wells Fargo Commercial Mortgage Trust, | |
Series 2019-C49 D
3.000%, 3/15/52§ | | | 11,154,000 | | | | 10,093,934 | |
| | | | | | | | |
Total Commercial Mortgage-Backed Securities | | | | | | | 27,466,425 | |
| | | | | | | | |
Convertible Bonds (1.5%) | |
Communication Services (1.0%) | | | | | |
Media (1.0%) | |
DISH Network Corp. | | | | | | | | |
3.375%, 8/15/26 | | | 6,430,000 | | | | 6,551,117 | |
| | | | | | | | |
Total Communication Services | | | | | | | 6,551,117 | |
| | | | | | | | |
Health Care (0.5%) | | | | | |
Health Care Equipment & Supplies (0.5%) | |
Haemonetics Corp. | | | | | | | | |
(Zero Coupon), 3/1/26§ | | | 4,030,000 | | | | 3,518,491 | |
| | | | | | | | |
Total Health Care | | | | | | | 3,518,491 | |
| | | | | | | | |
Total Convertible Bonds | | | | | | | 10,069,608 | |
| | | | | | | | |
Corporate Bonds (23.6%) | |
Consumer Discretionary (2.6%) | | | | | |
Automobiles (0.8%) | |
General Motors Co. | | | | | | | | |
6.800%, 10/1/27 | | | 1,450,000 | | | | 1,787,555 | |
6.250%, 10/2/43 | | | 2,620,000 | | | | 3,565,028 | |
| | | | | | | | |
| | | | | | | 5,352,583 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (1.8%) | |
Marriott International, Inc. | | | | | | | | |
Series GG
3.500%, 10/15/32 | | | 11,740,000 | | | | 12,378,764 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 17,731,347 | |
| | | | | | | | |
Energy (3.3%) | | | | | |
Oil, Gas & Consumable Fuels (3.3%) | |
Marathon Oil Corp. | | | | | | | | |
6.600%, 10/1/37 | | | 11,090,000 | | | | 14,854,830 | |
Occidental Petroleum Corp. | | | | | | | | |
4.200%, 3/15/48 | | | 1,080,000 | | | | 1,050,278 | |
Petroleos Mexicanos | | | | | | | | |
7.690%, 1/23/50 | | | 7,290,000 | | | | 6,961,950 | |
| | | | | | | | |
| | | | | | | 22,867,058 | |
| | | | | | | | |
Total Energy | | | | | | | 22,867,058 | |
| | | | | | | | |
Financials (7.3%) | | | | | |
Banks (3.7%) | |
Bank of Nova Scotia (The) | | | | | | | | |
(SOFR + 0.55%),
0.598%, 9/15/23 (k) | | | 10,895,000 | | | | 10,946,418 | |
Commonwealth Bank of Australia | |
(SOFR + 0.40%),
0.447%, 7/7/25 (k)§ | | | 14,390,000 | | | | 14,413,555 | |
| | | | | | | | |
| | | | | | | 25,359,973 | |
| | | | | | | | |
Capital Markets (2.5%) | |
Ares Capital Corp. | |
4.250%, 3/1/25 | | | 1,070,000 | | | | 1,140,345 | |
Blue Owl Finance LLC | |
3.125%, 6/10/31§ | | | 4,565,000 | | | | 4,475,611 | |
FS KKR Capital Corp.
4.625%, 7/15/24 | | | 2,040,000 | | | | 2,178,941 | |
Golub Capital BDC, Inc.
2.500%, 8/24/26 | | | 4,475,000 | | | | 4,445,054 | |
Owl Rock Capital Corp.
4.250%, 1/15/26 | | | 2,580,000 | | | | 2,739,535 | |
2.625%, 1/15/27 | | | 2,160,000 | | | | 2,137,121 | |
| | | | | | | | |
| | | | | | | 17,116,607 | |
| | | | | | | | |
Consumer Finance (1.1%) | |
General Motors Financial Co., Inc. | | | | | | | | |
(SOFR + 1.20%),
1.249%, 11/17/23 (k) | | | 7,635,000 | | | | 7,733,797 | |
| | | | | | | | |
Total Financials | | | | | | | 50,210,377 | |
| | | | | | | | |
See Notes to Financial Statements.
7
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Health Care (0.5%) | | | | | |
Pharmaceuticals (0.5%) | |
Bausch Health Cos., Inc.
5.000%, 1/30/28§ | | $ | 3,380,000 | | | $ | 3,122,106 | |
| | | | | | | | |
Total Health Care | | | | | | | 3,122,106 | |
| | | | | | | | |
Industrials (4.6%) | | | | | |
Aerospace & Defense (3.7%) | |
Boeing Co. (The)
3.750%, 2/1/50 | | | 13,645,000 | | | | 14,296,655 | |
5.805%, 5/1/50 | | | 2,460,000 | | | | 3,370,204 | |
3.950%, 8/1/59 | | | 1,515,000 | | | | 1,597,101 | |
Embraer Netherlands Finance BV | |
6.950%, 1/17/28§ | | | 5,575,000 | | | | 6,177,100 | |
| | | | | | | | |
| | | | | | | 25,441,060 | |
| | | | | | | | |
Airlines (0.9%) | |
Delta Air Lines, Inc.
4.750%, 10/20/28§ | | | 5,150,000 | | | | 5,710,063 | |
| | | | | | | | |
Total Industrials | | | | | | | 31,151,123 | |
| | | | | | | | |
Information Technology (1.9%) | | | | | |
Semiconductors & Semiconductor Equipment (0.3%) | |
NXP BV
3.400%, 5/1/30§ | | | 2,115,000 | | | | 2,260,142 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (1.6%) | |
Dell International LLC
7.125%, 6/15/24§ | | | 485,000 | | | | 491,863 | |
6.020%, 6/15/26 | | | 8,510,000 | | | | 10,003,661 | |
| | | | | | | | |
| | | | | | | 10,495,524 | |
| | | | | | | | |
Total Information Technology | | | | | | | 12,755,666 | |
| | | | | | | | |
Real Estate (3.4%) | | | | | |
Real Estate Management & Development (3.4%) | |
Country Garden Holdings Co. Ltd. | |
4.800%, 8/6/30 (m) | | | 10,630,000 | | | | 10,071,925 | |
Shimao Group Holdings Ltd. | |
4.600%, 7/13/30 (m) | | | 7,320,000 | | | | 6,295,200 | |
Vanke Real Estate Hong Kong Co. Ltd. | |
3.975%, 11/9/27 (m) | | | 3,640,000 | | | | 3,786,283 | |
3.500%, 11/12/29 (m) | | | 3,071,000 | | | | 3,061,019 | |
| | | | | | | | |
| | | | | | | 23,214,427 | |
| | | | | | | | |
Total Real Estate | | | | | | | 23,214,427 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 161,052,104 | |
| | | | | | | | |
Foreign Government Securities (24.5%) | |
Bonos de la Tesoreria | | | | | | | | |
6.150%, 8/12/32 | | PEN | 136,210,000 | | | | 34,480,375 | |
5.400%, 8/12/34 | | | 70,800,000 | | | | 16,147,222 | |
Mex Bonos Desarr Fix Rt | |
Series M
8.000%, 11/7/47 | | MXN | 1,419,200,000 | | | | 69,105,693 | |
Republic of Korea | | | | | | | | |
Series 5103
1.875%, 3/10/51 | | KRW | 20,710,000,000 | | | | 15,401,601 | |
Republic of Poland | | | | | | | | |
Series 1023
4.000%, 10/25/23 | | PLN | 100,145,000 | | | | 26,080,146 | |
Republic of Turkey | | | | | | | | |
11.700%, 11/13/30 | | TRY | 87,390,000 | | | | 6,240,195 | |
| | | | | | | | |
Total Foreign Government Securities | | | | | | | 167,455,232 | |
| | | | | | | | |
U.S. Treasury Obligations (41.6%) | |
U.S. Treasury Notes | | | | | | | | |
(US Treasury 3 Month Bill Money Market Yield + 0.05%), 0.104%, 1/31/23 (k) | | $ | 221,480,000 | | | | 221,549,700 | |
(US Treasury 3 Month Bill Money Market Yield + 0.03%), 0.084%, 7/31/23 (k) | | | 62,745,000 | | | | 62,741,637 | |
| | | | | | | | |
Total U.S. Treasury Obligations | | | | | | | 284,291,337 | |
| | | | | | | | |
Total Long-Term Debt Securities (95.8%)
(Cost $660,303,107) | | | | | | | 654,642,525 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Company (3.3%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 22,829,759 | | | | 22,841,173 | |
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
U.S. Treasury Obligation (1.3%) | | | | | |
U.S. Treasury Bills
0.07%, 3/24/22 (p) | | $ | 8,500,000 | | | | 8,497,707 | |
| | | | | | | | |
Total Short-Term Investments (4.6%)
(Cost $31,339,418) | | | | | | | 31,338,880 | |
| | | | | | | | |
Total Investments in Securities (100.4%)
(Cost $691,642,525) | | | | | | | 685,981,405 | |
Other Assets Less Liabilities (-0.4%) | | | | | | | (2,543,175 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 683,438,230 | |
| | | | | | | | |
| § | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At October 31, 2021, the market value of these securities amounted to $57,213,363 or 8.4% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
| (k) | Variable or floating rate security, linked to the referenced benchmark. The interest rate shown was the current rate as of October 31, 2021. |
| (l) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of October 31, 2021. |
| (m) | Regulation S is an exemption for securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. Resale restrictions may apply for purposes of the Securities Act of 1933. At October 31, 2021, the market value of these securities amounted to $24,023,368 or 3.5% of net assets. |
See Notes to Financial Statements.
8
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
Glossary:
| | CLICP | — Chile Indice de Camara Promedio Interbank Overnight Index |
| | CLO | — Collateralized Loan Obligation |
| | EUR | — European Currency Unit |
| | FNMA | — Federal National Mortgage Association |
| | OAT | — Obligations Assimilables du Trésor |
| | SOFR | — Secured Overnight Financing Rate |
| | USCPI | — United States Consumer Price Index |
| | USD | — United States Dollar |
| | | | |
| | |
Country Diversification As a Percentage of Total Net Assets | | | |
Australia | | | 2.1 | % |
Brazil | | | 0.9 | |
Canada | | | 1.6 | |
Cayman Islands | | | 0.2 | |
China | | | 3.7 | |
Mexico | | | 11.2 | |
Peru | | | 7.4 | |
Poland | | | 3.8 | |
South Korea | | | 2.3 | |
Spain | | | 0.1 | |
Turkey | | | 0.9 | |
United States | | | 66.2 | |
Cash and Other | | | (0.4 | ) |
| | | | | |
| | | | 100.0 | % |
| | | | | |
Futures contracts outstanding as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Description | | Number of
Contracts | | | Expiration
Date | | | Trading
Currency | | | Notional
Amount ($) | | | Value and
Unrealized
Appreciation
(Depreciation) ($) | |
Long Contracts | |
Euro-OAT | | | 199 | | | | 12/2021 | | | | EUR | | | | 37,727,216 | | | | (252,310 | ) |
Long Gilt | | | 532 | | | | 12/2021 | | | | GBP | | | | 90,950,330 | | | | 395,333 | |
U.S. Treasury 10 Year Note | | | 413 | | | | 12/2021 | | | | USD | | | | 53,980,390 | | | | (1,210,848 | ) |
U.S. Treasury Ultra Bond | | | 94 | | | | 12/2021 | | | | USD | | | | 18,462,188 | | | | 16,222 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (1,051,603 | ) |
| | | | | | | | | | | | | | | | | | | | |
Forward Foreign Currency Contracts outstanding as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement
Date | | | Unrealized
Appreciation
(Depreciation) ($) | |
KRW | | | 66,910,000,000 | | | USD | | | 56,512,803 | | | Citibank NA** | | | 11/1/2021 | | | | 746,192 | |
USD | | | 56,688,914 | | | KRW | | | 66,080,000,000 | | | Citibank NA** | | | 11/1/2021 | | | | 140,200 | |
NOK | | | 302,100,000 | | | USD | | | 34,137,522 | | | Citibank NA | | | 11/2/2021 | | | | 1,622,845 | |
NOK | | | 237,600,000 | | | USD | | | 27,215,404 | | | HSBC Bank plc | | | 11/2/2021 | | | | 909,929 | |
NZD | | | 950,000 | | | USD | | | 679,868 | | | HSBC Bank plc | | | 11/8/2021 | | | | 853 | |
NZD | | | 39,500,000 | | | USD | | | 28,251,822 | | | Morgan Stanley | | | 11/8/2021 | | | | 51,847 | |
RUB | | | 2,023,000,000 | | | USD | | | 26,775,906 | | | Citibank NA** | | | 11/15/2021 | | | | 1,686,201 | |
CAD | | | 8,800,000 | | | USD | | | 6,989,530 | | | Citibank NA | | | 11/16/2021 | | | | 120,938 | |
CAD | | | 34,780,000 | | | USD | | | 27,562,487 | | | HSBC Bank plc | | | 11/16/2021 | | | | 540,023 | |
CAD | | | 990,000 | | | USD | | | 781,763 | | | JPMorgan Chase Bank | | | 11/16/2021 | | | | 18,165 | |
USD | | | 36,025,885 | | | CAD | | | 44,570,000 | | | Citibank NA | | | 11/16/2021 | | | | 12,979 | |
USD | | | 16,453,124 | | | ZAR | | | 244,500,000 | | | HSBC Bank plc | | | 11/17/2021 | | | | 474,742 | |
USD | | | 20,640,280 | | | ZAR | | | 309,200,000 | | | Morgan Stanley | | | 11/17/2021 | | | | 433,672 | |
ZAR | | | 214,400,000 | | | USD | | | 14,008,769 | | | HSBC Bank plc | | | 11/17/2021 | | | | 2,541 | |
See Notes to Financial Statements.
9
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement
Date | | | Unrealized
Appreciation
(Depreciation) ($) | |
USD | | | 72,114,929 | | | MXN | | | 1,466,600,000 | | | Citibank NA | | | 11/22/2021 | | | | 1,100,055 | |
USD | | | 3,208,504 | | | MXN | | | 64,800,000 | | | Goldman Sachs Bank USA | | | 11/22/2021 | | | | 70,795 | |
USD | | | 34,362,222 | | | GBP | | | 25,040,000 | | | Citibank NA | | | 11/23/2021 | | | | 93,241 | |
AUD | | | 47,280,000 | | | USD | | | 34,543,477 | | | Morgan Stanley | | | 11/30/2021 | | | | 1,026,805 | |
THB | | | 51,400,000 | | | USD | | | 1,524,544 | | | HSBC Bank plc | | | 12/1/2021 | | | | 24,037 | |
SEK | | | 298,800,000 | | | USD | | | 34,453,733 | | | HSBC Bank plc | | | 12/6/2021 | | | | 351,196 | |
USD | | | 1,535,800 | | | CLP | | | 1,250,000,000 | | | HSBC Bank plc** | | | 12/7/2021 | | | | 5,522 | |
THB | | | 99,100,000 | | | USD | | | 2,957,061 | | | HSBC Bank plc | | | 12/9/2021 | | | | 28,561 | |
CHF | | | 18,360,000 | | | USD | | | 20,068,864 | | | Goldman Sachs Bank USA | | | 12/13/2021 | | | | 8,135 | |
CHF | | | 32,700,000 | | | USD | | | 35,683,788 | | | Morgan Stanley | | | 12/13/2021 | | | | 74,265 | |
THB | | | 494,900,000 | | | USD | | | 14,771,326 | | | HSBC Bank plc | | | 1/18/2022 | | | | 136,580 | |
USD | | | 90,152,474 | | | EUR | | | 77,330,000 | | | Citibank NA | | | 1/26/2022 | | | | 561,609 | |
USD | | | 681,128 | | | PLN | | | 2,720,000 | | | Morgan Stanley | | | 1/27/2022 | | | | 819 | |
USD | | | 42,027,994 | | | SGD | | | 56,510,000 | | | Morgan Stanley | | | 2/10/2022 | | | | 139,464 | |
USD | | | 922,604 | | | KRW | | | 1,080,000,000 | | | Citibank NA** | | | 2/11/2022 | | | | 295 | |
| | | | | | | | | | | | | | | | | | | | |
Total unrealized appreciation | | | | | | | 10,382,506 | |
| | | | | | | | |
USD | | | 700,209 | | | KRW | | | 830,000,000 | | | Citibank NA** | | | 11/1/2021 | | | | (10,073 | ) |
USD | | | 26,671,112 | | | NOK | | | 237,600,000 | | | HSBC Bank plc | | | 11/2/2021 | | | | (1,454,221 | ) |
USD | | | 34,739,671 | | | NOK | | | 302,100,000 | | | JPMorgan Chase Bank | | | 11/2/2021 | | | | (1,020,696 | ) |
SGD | | | 20,460,000 | | | USD | | | 15,211,438 | | | Barclays Bank plc | | | 11/3/2021 | | | | (39,092 | ) |
SGD | | | 56,340,000 | | | USD | | | 41,922,762 | | | Morgan Stanley | | | 11/3/2021 | | | | (143,193 | ) |
USD | | | 21,218,159 | | | SGD | | | 28,700,000 | | | Citibank NA | | | 11/3/2021 | | | | (64,653 | ) |
USD | | | 35,304,307 | | | SGD | | | 48,100,000 | | | Morgan Stanley | | | 11/3/2021 | | | | (364,797 | ) |
THB | | | 66,400,000 | | | USD | | | 2,006,649 | | | HSBC Bank plc | | | 11/8/2021 | | | | (5,702 | ) |
USD | | | 21,365,048 | | | NZD | | | 31,090,000 | | | Goldman Sachs Bank USA | | | 11/8/2021 | | | | (912,447 | ) |
USD | | | 28,669,603 | | | NZD | | | 40,100,000 | | | HSBC Bank plc | | | 11/8/2021 | | | | (63,994 | ) |
USD | | | 13,862,100 | | | NZD | | | 20,090,000 | | | Morgan Stanley | | | 11/8/2021 | | | | (533,361 | ) |
USD | | | 689,136 | | | THB | | | 22,900,000 | | | HSBC Bank plc | | | 11/8/2021 | | | | (949 | ) |
USD | | | 26,860,163 | | | RUB | | | 2,023,000,000 | | | Citibank NA** | | | 11/15/2021 | | | | (1,601,944 | ) |
ZAR | | | 224,800,000 | | | USD | | | 15,436,726 | | | Goldman Sachs Bank USA | | | 11/17/2021 | | | | (745,764 | ) |
ZAR | | | 104,500,000 | | | USD | | | 6,872,830 | | | HSBC Bank plc | | | 11/17/2021 | | | | (43,623 | ) |
ZAR | | | 10,000,000 | | | USD | | | 667,642 | | | Morgan Stanley | | | 11/17/2021 | | | | (14,129 | ) |
MXN | | | 35,100,000 | | | USD | | | 1,700,366 | | | Goldman Sachs Bank USA | | | 11/22/2021 | | | | (774 | ) |
MXN | | | 26,500,000 | | | USD | | | 1,305,937 | | | HSBC Bank plc | | | 11/22/2021 | | | | (22,769 | ) |
GBP | | | 500,000 | | | USD | | | 691,111 | | | HSBC Bank plc | | | 11/23/2021 | | | | (6,826 | ) |
USD | | | 717,399 | | | GBP | | | 530,000 | | | Barclays Bank plc | | | 11/23/2021 | | | | (7,943 | ) |
USD | | | 20,127,589 | | | AUD | | | 27,740,000 | | | Citibank NA | | | 11/30/2021 | | | | (742,115 | ) |
USD | | | 14,133,868 | | | AUD | | | 19,540,000 | | | Morgan Stanley | | | 11/30/2021 | | | | (566,709 | ) |
USD | | | 34,648,701 | | | SEK | | | 298,800,000 | | | HSBC Bank plc | | | 12/6/2021 | | | | (156,229 | ) |
CLP | | | 6,280,000,000 | | | USD | | | 7,981,503 | | | HSBC Bank plc** | | | 12/7/2021 | | | | (293,389 | ) |
USD | | | 90,512,541 | | | CHF | | | 83,000,000 | | | Goldman Sachs Bank USA | | | 12/13/2021 | | | | (249,490 | ) |
CLP | | | 48,960,000,000 | | | USD | | | 61,526,784 | | | HSBC Bank plc** | | | 1/14/2022 | | | | (1,863,247 | ) |
EUR | | | 590,000 | | | USD | | | 685,436 | | | HSBC Bank plc | | | 1/26/2022 | | | | (1,890 | ) |
PLN | | | 237,790,000 | | | USD | | | 60,090,012 | | | Citibank NA | | | 1/27/2022 | | | | (615,496 | ) |
KRW | | | 66,080,000,000 | | | USD | | | 56,567,593 | | | Citibank NA** | | | 2/11/2022 | | | | (135,934 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total unrealized depreciation | | | | | | | (11,681,449 | ) |
| | | | | | | | |
Net unrealized depreciation | | | | | | | (1,298,943 | ) |
| | | | | | | | |
| ** | Non-deliverable forward. |
See Notes to Financial Statements.
10
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
Centrally Cleared Credit default swap contracts outstanding — sell protection as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reference
Obligation/Index | | Financing
Rate (Paid) /
Received
by the
Fund (%) | | | Frequency of
Payments
Made/
Received | | | Maturity
Date | | | Implied
Credit
Spread (%) | | | Notional
Amount | | | Upfront
(Payments)
Receipts ($) | | | Unrealized
Appreciation
(Depreciation) ($) | | | Value ($) | |
Goodyear Tire & Rubber Co. (The) | | | 5.00 | | | | Quarterly | | | | 6/20/2022 | | | | 0.42 | | | USD | 1,010,000 | | | | 24,402 | | | | 11,360 | | | | 35,762 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Centrally Cleared Credit default swap contracts outstanding | | | | 24,402 | | | | 11,360 | | | | 35,762 | |
| | | | | | | | | | | | | |
OTC Inflation-linked swap contracts outstanding as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Reference Entity | | Payments
Made by Fund | | Payments
Received by
Fund | | Frequency of
Payments
Made/
Received | | Counterparty | | Maturity
Date | | | Notional
Amount | | | Unrealized
Appreciation
(Depreciation) ($) | |
1 month USCPI | | 2.40% and decrease in total return of index | | Increase in total return of index | | At termination | | JPMorgan Chase Bank | | | 5/24/2031 | | | USD | 65,250,000 | | | | (3,679,975 | ) |
1 month USCPI | | 2.56% and decrease in total return of index | | Increase in total return of index | | At termination | | JPMorgan Chase Bank | | | 5/24/2031 | | | | USD 53,400,000 | | | | (2,468,258 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (6,148,233 | ) |
| | | | | | | | | | | | | | | | | | | | |
OTC Interest rate swap contracts outstanding as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Reference
Entity | | Payments
Made by Fund | | Payments
Received by
Fund | | Frequency of
Payments
Made/
Received | | Counterparty | | Maturity
Date | | | Notional Amount | | | Unrealized
Appreciation
(Depreciation) ($) | |
1 day SOFR | | 1.17% and decrease in total return of index | | Increase in total return of index | | At termination | | JPMorgan Chase Bank | | | 5/24/2031 | | | USD | 75,600,000 | | | | 480,948 | |
1 day SOFR | | 1.37% and decrease in total return of index | | Increase in total return of index | | At termination | | JPMorgan Chase Bank | | | 5/24/2031 | | | USD | 61,250,000 | | | | (802,701 | ) |
1 day CLICP | | 5.57% and decrease in total return of index | | Increase in total return of index | | At termination | | JPMorgan Chase Bank** | | | 11/2/2031 | | | CLP | 11,050,000,000 | | | | (45,556 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (367,309 | ) |
| | | | | | | | | | | | | | | | | | | | |
| ** | Non-deliverable interest rate swap. |
See Notes to Financial Statements.
11
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Asset-Backed Securities | | $ | — | | | $ | 2,335,988 | | | $ | — | | | $ | 2,335,988 | |
Centrally Cleared Credit Default Swaps | | | — | | | | 11,360 | | | | — | | | | 11,360 | |
Collateralized Mortgage Obligations | | | — | | | | 1,971,831 | | | | — | | | | 1,971,831 | |
Commercial Mortgage-Backed Securities | | | — | | | | 27,466,425 | | | | — | | | | 27,466,425 | |
Convertible Bonds | | | | | | | | | | | | | | | | |
Communication Services | | | — | | | | 6,551,117 | | | | — | | | | 6,551,117 | |
Health Care | | | — | | | | 3,518,491 | | | | — | | | | 3,518,491 | |
Corporate Bonds | | | | | | | | | | | | | | | | |
Consumer Discretionary | | | — | | | | 17,731,347 | | | | — | | | | 17,731,347 | |
Energy | | | — | | | | 22,867,058 | | | | — | | | | 22,867,058 | |
Financials | | | — | | | | 50,210,377 | | | | — | | | | 50,210,377 | |
Health Care | | | — | | | | 3,122,106 | | | | — | | | | 3,122,106 | |
Industrials | | | — | | | | 31,151,123 | | | | — | | | | 31,151,123 | |
Information Technology | | | — | | | | 12,755,666 | | | | — | | | | 12,755,666 | |
Real Estate | | | — | | | | 23,214,427 | | | | — | | | | 23,214,427 | |
Foreign Government Securities | | | — | | | | 167,455,232 | | | | — | | | | 167,455,232 | |
Forward Currency Contracts | | | — | | | | 10,382,506 | | | | — | | | | 10,382,506 | |
Futures | | | 411,555 | | | | — | | | | — | | | | 411,555 | |
OTC Interest Rate Swaps | | | — | | | | 480,948 | | | | — | | | | 480,948 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Company | | | 22,841,173 | | | | — | | | | — | | | | 22,841,173 | |
U.S. Treasury Obligations | | | — | | | | 8,497,707 | | | | — | | | | 8,497,707 | |
U.S. Treasury Obligation | | | — | | | | 284,291,337 | | | | — | | | | 284,291,337 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 23,252,728 | | | $ | 674,015,046 | | | $ | — | | | $ | 697,267,774 | |
| | | | | | | | | | | | | | | | |
|
Liabilities: | |
Forward Currency Contracts | | $ | — | | | $ | (11,681,449 | ) | | $ | — | | | $ | (11,681,449 | ) |
Futures | | | (1,463,158 | ) | | | — | | | | — | | | | (1,463,158 | ) |
OTC Inflation-linked Swaps | | | — | | | | (6,148,233 | ) | | | — | | | | (6,148,233 | ) |
OTC Interest Rate Swaps | | | — | | | | (848,257 | ) | | | — | | | | (848,257 | ) |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | (1,463,158 | ) | | $ | (18,677,939 | ) | | $ | — | | | $ | (20,141,097 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 21,789,570 | | | $ | 655,337,107 | | | $ | — | | | $ | 677,126,677 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
12
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
Fair Values of Derivative Instruments as of October 31, 2021:
| | | | | | |
| | | Statement of Assets and Liabilities | |
Derivatives Contracts^ | | Asset Derivatives | | Fair Value | |
Interest rate contracts | | Receivables, Net assets – Unrealized appreciation | | $ | 892,503 | * |
Foreign exchange contracts | | Receivables | | | 10,382,506 | |
Credit contracts | | Receivables | | | 11,360 | ** |
| | | | | | |
Total | | | | $ | 11,286,369 | |
| | | | | | |
| | |
| | | Liability Derivatives | | | |
Interest rate contracts | | Payables, Net assets – Unrealized depreciation | | $ | (8,459,648 | )* |
Foreign exchange contracts | | Payables | | | (11,681,449 | ) |
| | | | | | |
Total | | | | $ | (20,141,097 | ) |
| | | | | | |
| * | Includes cumulative appreciation/depreciation of futures contracts as reported in the Portfolio of Investments. Only variation margin is reported within the Statement of Assets & Liabilities. |
| ** | Includes cumulative appreciation/depreciation of centrally cleared swap contracts as reported in the Portfolio of Investments. Only variation margin is reported within the Statement of Assets & Liabilities. |
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2021:
| | | | | | | | | | | | | | | | |
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Futures | | | Forward
Foreign
Currency
Contracts | | | Swaps | | | Total | |
Interest rate contracts | | $ | 1,973,560 | | | $ | — | | | $ | — | | | $ | 1,973,560 | |
Foreign exchange contracts | | | — | | | | (3,574,847 | ) | | | — | | | | (3,574,847 | ) |
Credit contracts | | | | | | | | | | | (130,142 | ) | | | (130,142 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,973,560 | | | $ | (3,574,847 | ) | | $ | (130,142 | ) | | $ | (1,731,429 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Futures | | | Forward
Foreign
Currency
Contracts | | | Swaps | | | Total | |
Interest rate contracts | | $ | (1,456,203 | ) | | $ | — | | | $ | (6,515,542 | ) | | $ | (7,971,745 | ) |
Foreign exchange contracts | | | — | | | | 1,602,745 | | | | — | | | | 1,602,745 | |
Credit contracts | | | — | | | | — | | | | 29,546 | | | | 29,546 | |
| | | | | | | | | | | | | | | | |
Total | | $ | (1,456,203 | ) | | $ | 1,602,745 | | | $ | (6,485,996 | ) | | $ | (6,339,454 | ) |
| | | | | | | | | | | | | | | | |
| ^ | This Portfolio held forward foreign currency, futures and swaps contracts as a substitute for investing in conventional securities, hedging and in an attempt to enhance returns. |
The Fund held swap contracts with an average notional balance of approximately $101,173,000, forward foreign currency contracts with an
average settlement value of approximately $699,664,000 and futures contracts with an average notional balance of approximately $102,189,000
during the year ended October 31, 2021.
See Notes to Financial Statements.
13
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following table presents the Fund’s gross derivative assets and liabilities by counterparty net of amounts available for offset under netting arrangements and any related collateral received or pledged by the Fund as of October 31, 2021:
| | | | | | | | | | | | | | | | |
Counterparty | | Gross Amount of
Derivative Assets
Presented in the
Statement of Assets
and Liabilities (a) | | | Derivatives
Available for
Offset | | | Collateral
Received | | | Net Amount
Due from
Counterparty | |
Citibank NA | | $ | 6,084,555 | | | $ | (3,170,215 | ) | | $ | (860,000 | ) | | $ | 2,054,340 | |
Goldman Sachs Bank USA | | | 78,930 | | | | (78,930 | ) | | | — | | | | — | |
HSBC Bank plc | | | 2,473,984 | | | | (2,473,984 | ) | | | — | | | | — | |
JPMorgan Chase Bank | | | 499,113 | | | | (499,113 | ) | | | — | | | | — | |
Morgan Stanley | | | 1,726,872 | | | | (1,622,189 | ) | | | — | | | | 104,683 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 10,863,454 | | | $ | (7,844,431 | ) | | $ | (860,000 | ) | | $ | 2,159,023 | |
| | | | | | | | | | | | | | | | |
| | | | |
Counterparty | | Gross Amount of
Derivative Liabilities
Presented in the
Statement of Assets
and Liabilities (a) | | | Derivatives
Available for
Offset | | | Collateral
Pledged* | | | Net Amount
Due to
Counterparty | |
Barclays Bank plc | | $ | 47,035 | | | $ | — | | | $ | — | | | $ | 47,035 | |
Citibank NA | | | 3,170,215 | | | | (3,170,215 | ) | | | — | | | | — | |
Goldman Sachs Bank USA | | | 1,908,475 | | | | (78,930 | ) | | | — | | | | 1,829,545 | |
HSBC Bank plc | | | 3,912,839 | | | | (2,473,984 | ) | | | (1,438,855 | ) | | | — | |
JPMorgan Chase Bank | | | 8,017,186 | | | | (499,113 | ) | | | (7,518,073 | ) | | | — | |
Morgan Stanley | | | 1,622,189 | | | | (1,622,189 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 18,677,939 | | | $ | (7,844,431 | ) | | $ | (8,956,928 | ) | | $ | 1,876,580 | |
| | | | | | | | | | | | | | | | |
| (a) | For financial reporting purposes the Fund does not offset derivative assets and derivative liabilities subject to master netting arrangements in the Statement of Assets and Liabilities. |
| * | The table above does not include the additional collateral pledged to the counterparty. Total additional collateral pledged is $303,072. |
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 770,682,993 | |
Long-term U.S. government debt securities | | | 461,362,845 | |
| | | | |
| | $ | 1,232,045,838 | |
| | | | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 537,037,139 | |
Long-term U.S. government debt securities | | | 208,108,310 | |
| | | | |
| | $ | 745,145,449 | |
| | | | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 15,859,879 | |
Aggregate gross unrealized depreciation | | | (29,041,618 | ) |
| | | | |
Net unrealized depreciation | | $ | (13,181,739 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 690,332,818 | |
| | | | |
See Notes to Financial Statements.
14
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
|
ASSETS | |
Investments in Securities, at value (Cost $691,642,525) | | $ | 685,981,405 | |
Cash | | | 878,007 | |
Cash held as collateral for forward foreign currency contracts | | | 1,540,000 | |
Cash held as collateral at broker for swaps | | | 7,720,000 | |
Receivable for securities sold | | | 16,398,952 | |
Due from Custodian | | | 14,259,826 | |
Unrealized appreciation on forward foreign currency contracts | | | 10,382,506 | |
Dividends, interest and other receivables | | | 6,084,948 | |
Due from broker for futures variation margin | | | 3,522,806 | |
Receivable for Fund shares sold | | | 1,986,075 | |
Variation Margin on Centrally Cleared Swaps | | | 1,013,657 | |
Market value on OTC swap contracts | | | 480,948 | |
Prepaid registration and filing fees | | | 47,196 | |
Other assets | | | 4,054 | |
| | | | |
Total assets | | | 750,300,380 | |
| | | | |
LIABILITIES | |
Payable for securities purchased | | | 46,085,702 | |
Unrealized depreciation on forward foreign currency contracts | | | 11,681,449 | |
Market value on OTC swap contracts | | | 6,996,490 | |
Payable for return of cash collateral on forward foreign currency contracts | | | 860,000 | |
Payable for Fund shares redeemed | | | 842,265 | |
Administrative fees payable | | | 88,896 | |
Transfer agent fees payable | | | 66,580 | |
Investment advisory fees payable | | | 56,039 | |
Distribution fees payable – Class A | | | 1,809 | |
Trustees’ fees payable | | | 1,631 | |
Distribution fees payable – Class R | | | 539 | |
Accrued expenses | | | 180,750 | |
| | | | |
Total liabilities | | | 66,862,150 | |
| | | | |
NET ASSETS | | $ | 683,438,230 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 696,701,443 | |
Total distributable earnings (loss) | | | (13,263,213 | ) |
| | | | |
Net assets | | $ | 683,438,230 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $8,549,891 / 799,413 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 10.70 | |
Maximum sales charge (4.50% of offering price) | | | 0.50 | |
| | | | |
Maximum offering price per share | | $ | 11.20 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $673,624,569 / 62,834,067 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 10.72 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $1,263,770 / 118,746 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 10.64 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
|
INVESTMENT INCOME | |
Interest (net of $58,526 foreign withholding tax) | | $ | 15,767,825 | |
Dividends | | | 13,635 | |
| | | | |
Total income | | | 15,781,460 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 2,880,518 | |
Administrative fees | | | 720,130 | |
Transfer agent fees | | | 373,350 | |
Professional fees | | | 167,941 | |
Printing and mailing expenses | | | 140,244 | |
Custodian fees | | | 139,500 | |
Registration and filing fees | | | 69,307 | |
Trustees’ fees | | | 23,038 | |
Distribution fees – Class A | | | 22,590 | |
Distribution fees – Class R | | | 3,297 | |
Miscellaneous | | | 77,323 | |
| | | | |
Gross expenses | | | 4,617,238 | |
Less: Waiver from investment adviser | | | (2,190,751 | ) |
| | | | |
Net expenses | | | 2,426,487 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 13,354,973 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities (net of Indonesian tax of $71,964 on realized gain on investments) | | | 8,557,781 | |
Futures contracts | | | 1,973,560 | |
Forward foreign currency contracts | | | (3,574,847 | ) |
Foreign currency transactions | | | (235,845 | ) |
Swaps | | | (130,142 | ) |
| | | | |
Net realized gain (loss) | | | 6,590,507 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | |
Investments in securities | | | (9,646,334 | ) |
Futures contracts | | | (1,456,203 | ) |
Forward foreign currency contracts | | | 1,602,745 | |
Foreign currency translations | | | (83,483 | ) |
Swaps | | | (6,485,996 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) | | | (16,069,271 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (9,478,764 | ) |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 3,876,209 | |
| | | | |
See Notes to Financial Statements.
15
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 13,354,973 | | | $ | 4,752,881 | |
Net realized gain (loss) | | | 6,590,507 | | | | 1,710,991 | |
Net change in unrealized appreciation (depreciation) | | | (16,069,271 | ) | | | 1,379,996 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 3,876,209 | | | | 7,843,868 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (549,999 | ) | | | (285,275 | ) |
Class I | | | (22,879,382 | ) | | | (4,265,925 | ) |
Class R | | | (30,241 | ) | | | (6,818 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (23,459,622 | ) | | | (4,558,018 | ) |
| | | | | | | | |
Tax return of capital: | | | | | | | | |
Class A | | | (16,404 | ) | | | — | |
Class I | | | (829,457 | ) | | | — | |
Class R | | | (1,003 | ) | | | — | |
| | | | | | | | |
Total tax return of capital | | | (846,864 | ) | | | — | |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 354,825 and 632,166 shares, respectively ] | | | 3,937,868 | | | | 6,539,329 | |
Capital shares issued in reinvestment of dividends [ 50,304 and 28,380 shares, respectively ] | | | 561,835 | | | | 280,472 | |
Capital shares repurchased [ (335,811) and (302,477) shares, respectively ] | | | (3,685,094 | ) | | | (3,076,148 | ) |
| | | | | | | | |
Total Class A transactions | | | 814,609 | | | | 3,743,653 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 57,270,804 and 10,858,869 shares, respectively ] | | | 638,033,981 | | | | 113,708,337 | |
Capital shares issued in reinvestment of dividends [ 2,003,699 and 286,239 shares, respectively ] | | | 22,327,521 | | | | 2,834,997 | |
Capital shares repurchased [ (12,265,377) and (3,157,638) shares, respectively ] | | | (135,814,596 | ) | | | (31,454,948 | ) |
| | | | | | | | |
Total Class I transactions | | | 524,546,906 | | | | 85,088,386 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 115,920 and 15,969 shares, respectively ] | | | 1,282,414 | | | | 161,483 | |
Capital shares issued in reinvestment of dividends [ 2,380 and 209 shares, respectively ] | | | 26,328 | | | | 2,059 | |
Capital shares repurchased [ (27,612) and (2,149) shares, respectively ] | | | (304,577 | ) | | | (20,526 | ) |
| | | | | | | | |
Total Class R transactions | | | 1,004,165 | | | | 143,016 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 526,365,680 | | | | 88,975,055 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 505,935,403 | | | | 92,260,905 | |
NET ASSETS: | |
Beginning of year | | | 177,502,827 | | | | 85,241,922 | |
| | | | | | | | |
End of year | | $ | 683,438,230 | | | $ | 177,502,827 | |
| | | | | | | | |
See Notes to Financial Statements.
16
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class A | | Year Ended October 31, | |
| | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 10.68 | | | $ | 10.34 | | | $ | 9.52 | | | $ | 10.12 | | | $ | 9.89 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.29 | | | | 0.39 | | | | 0.41 | ** | | | 0.26 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | 0.44 | † | | | 0.43 | | | | 0.80 | | | | (0.40 | ) | | | 0.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.73 | | | | 0.82 | | | | 1.21 | | | | (0.14 | ) | | | 0.42 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.47 | ) | | | (0.15 | ) | | | (0.39 | ) | | | (0.43 | ) | | | (0.19 | ) |
Distributions from net realized gains | | | (0.22 | ) | | | (0.33 | ) | | | — | | | | — | | | | — | |
Return of capital | | | (0.02 | ) | | | — | | | | — | | | | (0.03 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.71 | ) | | | (0.48 | ) | | | (0.39 | ) | | | (0.46 | ) | | | (0.19 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.70 | | | $ | 10.68 | | | $ | 10.34 | | | $ | 9.52 | | | $ | 10.12 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.73 | % | | | 8.32 | % | | | 12.97 | % | | | (1.44 | )% | | | 4.25 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 8,550 | | | $ | 7,796 | | | $ | 3,848 | | | $ | 190 | | | $ | 111 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 1.05 | % | | | 1.30 | % |
Before waivers and reimbursements (f) | | | 1.22 | % | | | 1.42 | % | | | 1.55 | % | | | 1.85 | % | | | 1.76 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 2.62 | % | | | 3.76 | %* | | | 4.00 | %** | | | 2.63 | % | | | 1.93 | % |
Before waivers and reimbursements (f) | | | 2.15 | % | | | 3.09 | %* | | | 3.19 | %** | | | 1.83 | % | | | 1.48 | % |
Portfolio turnover rate^ | | | 165 | % | | | 200 | % | | | 194 | % | | | 139 | %*** | | | 117 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 10.71 | | | $ | 10.37 | | | $ | 9.53 | | | $ | 10.13 | | | $ | 9.89 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.31 | | | | 0.41 | | | | 0.42 | ** | | | 0.27 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.43 | † | | | 0.41 | | | | 0.84 | | | | (0.38 | ) | | | 0.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.74 | | | | 0.82 | | | | 1.26 | | | | (0.11 | ) | | | 0.45 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.49 | ) | | | (0.15 | ) | | | (0.42 | ) | | | (0.46 | ) | | | (0.21 | ) |
Distributions from net realized gains | | | (0.22 | ) | | | (0.33 | ) | | | — | | | | — | | | | — | |
Return of capital | | | (0.02 | ) | | | — | | | | — | | | | (0.03 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.73 | ) | | | (0.48 | ) | | | (0.42 | ) | | | (0.49 | ) | | | (0.21 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.72 | | | $ | 10.71 | | | $ | 10.37 | | | $ | 9.53 | | | $ | 10.13 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.85 | % | | | 8.34 | % | | | 13.43 | % | | | (1.19 | )% | | | 4.58 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 673,625 | | | $ | 169,409 | | | $ | 81,249 | | | $ | 30,590 | | | $ | 71,053 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.50 | % | | | 0.50 | % | | | 0.50 | % | | | 0.91 | % | | | 1.05 | % |
Before waivers and reimbursements (f) | | | 0.96 | % | | | 1.17 | % | | | 1.34 | % | | | 1.54 | % | | | 1.51 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 2.79 | % | | | 3.95 | %* | | | 4.12 | %** | | | 2.70 | % | | | 2.18 | % |
Before waivers and reimbursements (f) | | | 2.33 | % | | | 3.28 | %* | | | 3.28 | %** | | | 2.06 | % | | | 1.73 | % |
Portfolio turnover rate^ | | | 165 | % | | | 200 | % | | | 194 | % | | | 139 | %*** | | | 117 | % |
See Notes to Financial Statements.
17
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 10.63 | | | $ | 10.34 | | | $ | 9.51 | | | $ | 10.11 | | | $ | 9.88 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.25 | | | | 0.35 | * | | | 0.35 | ** | | | 0.23 | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | 0.45 | † | | | 0.41 | | | | 0.85 | | | | (0.39 | ) | | | 0.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.70 | | | | 0.76 | | | | 1.20 | | | | (0.16 | ) | | | 0.40 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.45 | ) | | | (0.14 | ) | | | (0.37 | ) | | | (0.41 | ) | | | (0.17 | ) |
Distributions from net realized gains | | | (0.22 | ) | | | (0.33 | ) | | | — | | | | — | | | | — | |
Return of capital | | | (0.02 | ) | | | — | | | | — | | | | (0.03 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.69 | ) | | | (0.47 | ) | | | (0.37 | ) | | | (0.44 | ) | | | (0.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.64 | | | $ | 10.63 | | | $ | 10.34 | | | $ | 9.51 | | | $ | 10.11 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.44 | % | | | 7.77 | % | | | 12.84 | % | | | (1.69 | )% | | | 4.04 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 1,264 | | | $ | 298 | | | $ | 145 | | | $ | 96 | | | $ | 101 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.32 | % | | | 1.55 | % |
Before waivers and reimbursements (f) | | | 1.47 | % | | | 1.67 | % | | | 1.88 | % | | | 2.09 | % | | | 2.01 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 2.24 | % | | | 3.43 | %* | | | 3.51 | %** | | | 2.34 | % | | | 1.68 | % |
Before waivers and reimbursements (f) | | | 1.77 | % | | | 2.75 | %* | | | 2.63 | %** | | | 1.57 | % | | | 1.23 | % |
Portfolio turnover rate^ | | | 165 | % | | | 200 | % | | | 194 | % | | | 139 | %*** | | | 117 | % |
| * | Includes accretion, interest and inflation adjustments on Argentine TIPS Bonds. Without this income, the per share income for each class would have been $0.08 lower and the ratios for each class would have been 0.73% lower. |
| ** | Includes accretion, interest and inflation adjustments on Argentine TIPS Bonds. Without this income, the per share income for each class would have been $0.07 lower and the ratios for each class would have been 0.65% lower. |
| *** | The portfolio turnover rate calculation includes purchases and sales made as a result of the replacement of the sub-adviser. Excluding such transactions, the portfolio turnover rate would have been 64%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| † | The amount shown for a share outstanding throughout the period does not accord with the aggregate net income and/or gain on investments for that period because of the timing of sales and repurchases of the Fund shares in relation to fluctuating market value of the investments in the Fund. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
See Notes to Financial Statements.
18
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
INVESTMENT SUB-ADVISER
PERFORMANCE RESULTS
| | | | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | |
| | | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | 18.12 | % | | | 9.30 | % | | | 9.17 | % |
| | | | with Sales Charge (a) | | | | 11.60 | | | | 8.07 | | | | 8.09 | |
Fund – Class I Shares* | | | | | | | 18.47 | | | | 9.56 | | | | 9.44 | |
Fund – Class R Shares* | | | | | | | 17.87 | | | | 9.02 | | | | 8.92 | |
60% S&P 500® Index/ 40% Bloomberg U.S. Aggregate Bond Index | | | | | | | 24.02 | | | | 12.67 | | | | 12.26 | |
S&P 500® Index | | | | | | | 42.91 | | | | 18.93 | | | | 18.10 | |
Bloomberg U.S. Aggregate Bond Index | | | | | | | (0.48 | ) | | | 3.10 | | | | 3.31 | |
| |
* Date of inception 3/7/16. (a) A 5.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 DoubleLine Dynamic Allocation Fund and the 60% S&P 500® Index/40% Bloomberg U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg U.S. Aggregate Bond Index from 3/7/16 to 10/31/21. The performance of each of the 60% S&P 500® Index/40% Bloomberg U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg U.S. Aggregate Bond Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the 60% S&P 500® Index/40% Bloomberg U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg U.S. Aggregate Bond Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratios including acquired fund fees for Class A, I and R shares were 1.66%, 1.41% and 1.91%, respectively. The net expense ratios for Class A, I and R shares were 1.20%, 0.95% and 1.45%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 18.47% for the year ended October 31, 2021. The Fund’s benchmarks, the 60% S&P 500® Index/40% Bloomberg U.S. Aggregate Bond Index, the S&P 500® Index and the Bloomberg U.S. Aggregate Bond Index returned 24.02%, 42.91% and (0.48)%, respectively over the same year.
Overview — DoubleLine Capital LP
In the 12-months ending October 31, 2021 capital markets surged and adapted to a new world dominated by central bank intervention and pandemic concerns. As pandemic pessimism waned, large capitalization U.S. equities rallied by 42.91% and 37.73% as measured by the S&P 500® Index and Dow Jones Industrial Average, respectively. The broad U.S. fixed income market declined -0.48% as measured by the Bloomberg U.S. Aggregate Bond Index during the period as interest rate volatility detracted from the Index return. The broad commodity market rallied 43.94% (Bloomberg Commodity Total Return Index) as inflationary pressures drove prices higher across the globe.
19
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
The Fund utilized equity index swaps on the Shiller Barclays CAPE US Sector Index (“the Index”). The use of these derivative instruments allowed the Fund to gain exposure to the Index, which added to the Fund’s performance.
Fund Highlights
What helped performance during the year?
| • | | The Fund’s fixed income allocation increased in value and outperformed the broad fixed income market, adding to performance. Lower interest rate exposure relative to the broad market helped achieve this outperformance. More diversified sector exposure also added to performance with non-agency mortgage backed securities, high yield corporate bonds, and bank loans all enhancing performance. |
| • | | The Fund’s smart beta equity allocation performed in line with the broad market, adding to performance. The sectors that contributed most to performance were technology, communication services and financials while healthcare was the sole sector that detracted from performance. |
| • | | The Fund’s active equity allocation increased in value, adding to performance. The active equity exposure had a value orientation which slightly underperformed the broad market’s growth driven strength. |
What hurt performance during the year?
| • | | A more conservative allocation mix between equities and fixed income reduced volatility but detracted from outright performance. |
| | | | |
| | |
Fund Characteristics As of October 31, 2021 | | | |
Weighted Average Life (Years) | | | 6.72 | |
Weighted Average Coupon (%) | | | 2.94 | |
Weighted Average Effective Duration (Years)* | | | 4.84 | |
Weighted Average Rating** | | | Baa1 | |
| |
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests. ** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. | |
| | | | |
| | |
Sector Weightings
as of October 31, 2021 | | % of
Net Assets | |
U.S. Treasury Obligations | | | 35.2 | % |
Collateralized Mortgage Obligations | | | 11.4 | |
Information Technology | | | 8.0 | |
Investment Companies | | | 5.9 | |
Financials | | | 5.7 | |
Health Care | | | 5.2 | |
Communication Services | | | 4.5 | |
Consumer Discretionary | | | 4.1 | |
Industrials | | | 3.3 | |
Mortgage-Backed Securities | | | 3.0 | |
Consumer Staples | | | 2.7 | |
Energy | | | 2.4 | |
Asset-Backed Securities | | | 1.8 | |
Materials | | | 1.3 | |
Real Estate | | | 0.9 | |
Utilities | | | 0.9 | |
Commercial Mortgage-Backed Security | | | 0.0 | # |
Cash and Other | | | 3.7 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
| | |
# Less than 0.05%. | | | | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
20
1290 DOUBLELINE DYNAMIC ALLOCATION FUND (Unaudited)
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class A | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,038.10 | | | | $5.96 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.35 | | | | 5.91 | |
Class I | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,038.80 | | | | 4.68 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.61 | | | | 4.64 | |
Class R | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,037.30 | | | | 7.24 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.09 | | | | 7.18 | |
| |
* Expenses are equal to the Portfolio’s A, I and R shares annualized expense ratio of 1.16%, 0.91% and 1.41%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
21
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
LONG-TERM DEBT SECURITIES: | | | | | | | | |
Asset-Backed Securities (1.8%) | | | | | | | | |
GSAA Home Equity Trust, | | | | | | | | |
Series 2007-9 A2A
6.500%, 8/25/47 | | $ | 326,542 | | | $ | 236,640 | |
Lehman ABS Mortgage Loan Trust, | | | | | | | | |
Series 2007-1 2A4
0.389%, 6/25/37 (l)§ | | | 428,150 | | | | 357,842 | |
Long Beach Mortgage Loan Trust, | | | | | | | | |
Series 2006-7 1A
0.244%, 8/25/36 (l) | | | 461,959 | | | | 284,047 | |
Morgan Stanley ABS Capital I, Inc. Trust, | | | | | |
Series 2007-HE2 A1
0.219%, 1/25/37 (l)§ | | | 939,230 | | | | 471,155 | |
| | | | | | | | |
Total Asset-Backed Securities | | | | | | | 1,349,684 | |
| | | | | | | | |
Collateralized Mortgage Obligations (11.4%) | |
Alternative Loan Trust, | | | | | | | | |
Series 2005-11CB 2A6
5.500%, 6/25/25 | | | 345,732 | | | | 329,494 | |
Series 2007-9T1 2A1
6.000%, 5/25/37 | | | 1,396,141 | | | | 923,344 | |
Banc of America Alternative Loan Trust, | | | | | |
Series 2006-5 CB14
6.000%, 6/25/46 (l) | | | 169,663 | | | | 166,777 | |
BRAVO Residential Funding Trust, | | | | | | | | |
Series 2020-RPL1 M1
3.250%, 5/26/59 (l)§ | | | 500,000 | | | | 520,348 | |
CHL Mortgage Pass-Through Trust, | | | | | | | | |
Series 2006-20 1A33
6.000%, 2/25/37 | | | 453,875 | | | | 318,082 | |
Series 2006-OA5 2A1
0.489%, 4/25/46 (l) | | | 581,996 | | | | 509,576 | |
FHLMC, | | | | | | | | |
Series 3998 AZ
4.000%, 2/15/42 | | | 1,290,196 | | | | 1,385,332 | |
FNMA, | | | | | | | | |
Series 2013-5 EZ
2.000%, 8/25/42 | | | 291,238 | | | | 289,339 | |
Series 2018-21 PO
(Zero Coupon), 4/25/48 PO | | | 117,799 | | | | 108,357 | |
Series 2018-44 PZ
3.500%, 6/25/48 | | | 1,464,880 | | | | 1,591,983 | |
Series 2021-48 NS
3.601%, 8/25/51 IO (l) | | | 143,282 | | | | 18,828 | |
GNMA, | | | | | | | | |
Series 2020-115 IG
2.500%, 8/20/50 IO | | | 143,348 | | | | 18,802 | |
Series 2021-140 IH
2.500%, 8/20/51 IO | | | 130,495 | | | | 18,982 | |
Series 2021-176 SD
2.650%, 9/20/51 IO (l) | | | 331,000 | | | | 17,813 | |
HarborView Mortgage Loan Trust, | | | | | | | | |
Series 2005-8 1A2A
0.740%, 9/19/35 (l) | | | 377,958 | | | | 315,219 | |
New Residential Mortgage Loan Trust, | | | | | | | | |
Series 2016-1A A1
3.750%, 3/25/56 (l)§ | | | 229,277 | | | | 243,263 | |
PMT Credit Risk Transfer Trust, | | | | | | | | |
Series 2019-2R A
2.838%, 5/27/23 (l)§ | | | 374,288 | | | | 370,662 | |
Series 2019-3R A
2.788%, 10/27/22 (l)§ | | | 225,205 | | | | 225,270 | |
RALI Trust, | | | | | | | | |
Series 2006-QO10 A1
0.409%, 1/25/37 (l) | | | 457,883 | | | | 441,318 | |
Series 2006-QS3 1A10
6.000%, 3/25/36 | | | 229,269 | | | | 226,096 | |
Series 2006-QS4 A10
6.000%, 4/25/36 | | | 362,996 | | | | 358,911 | |
Wells Fargo Mortgage Backed Securities Trust, | |
Series 2007-AR6 A2
2.594%, 10/25/37 (l) | | | 192,626 | | | | 189,020 | |
| | | | | | | | |
Total Collateralized Mortgage Obligations | | | | | | | 8,586,816 | |
| | | | | | | | |
Commercial Mortgage-Backed Security (0.0%) | |
GNMA, | | | | | | | | |
Series 2021-164 IO
0.968%, 10/16/63 IO (l) | | | 158,804 | | | | 13,888 | |
| | | | | | | | |
Total Commercial Mortgage-Backed Security | | | | | | | 13,888 | |
| | | | | | | | |
Corporate Bonds (12.9%) | |
Communication Services (1.1%) | | | | | |
Diversified Telecommunication Services (0.3%) | |
AT&T, Inc. | | | | | | | | |
3.500%, 9/15/53 | | | 18,000 | | | | 18,230 | |
3.550%, 9/15/55 | | | 80,000 | | | | 81,023 | |
CCO Holdings LLC | | | | | | | | |
4.250%, 1/15/34§ | | | 20,000 | | | | 19,350 | |
Frontier Communications Holdings LLC | | | | | |
5.875%, 10/15/27§ | | | 10,000 | | | | 10,500 | |
5.000%, 5/1/28§ | | | 20,000 | | | | 20,350 | |
6.000%, 1/15/30§ | | | 20,000 | | | | 20,020 | |
Lumen Technologies, Inc. | | | | | | | | |
5.125%, 12/15/26§ | | | 30,000 | | | | 30,640 | |
4.000%, 2/15/27§ | | | 25,000 | | | | 25,063 | |
Verizon Communications, Inc. | | | | | | | | |
(ICE LIBOR USD 3 Month + 1.10%), 1.225%, 5/15/25 (k) | | | 55,000 | | | | 56,213 | |
| | | | | | | | |
| | | | | | | 281,389 | |
| | | | | | | | |
Entertainment (0.1%) | |
Lions Gate Capital Holdings LLC | | | | | | | | |
5.500%, 4/15/29§ | | | 25,000 | | | | 25,500 | |
Live Nation Entertainment, Inc. | | | | | | | | |
6.500%, 5/15/27§ | | | 30,000 | | | | 32,812 | |
| | | | | | | | |
| | | | | | | 58,312 | |
| | | | | | | | |
Media (0.6%) | |
Cengage Learning, Inc. | | | | | | | | |
9.500%, 6/15/24§ | | | 25,000 | | | | 25,559 | |
Charter Communications Operating LLC | | | | | |
4.908%, 7/23/25 | | | 105,000 | | | | 116,336 | |
Clear Channel Outdoor Holdings, Inc. | |
7.500%, 6/1/29§ | | | 20,000 | | | | 20,425 | |
Comcast Corp. | | | | | | | | |
3.400%, 4/1/30 | | | 50,000 | | | | 54,532 | |
Diamond Sports Group LLC | | | | | | | | |
5.375%, 8/15/26§ | | | 15,000 | | | | 8,475 | |
DIRECTV Holdings LLC | | | | | | | | |
5.875%, 8/15/27§ | | | 20,000 | | | | 20,683 | |
See Notes to Financial Statements.
22
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
DISH DBS Corp. | | | | | | | | |
5.875%, 11/15/24 | | $ | 25,000 | | | $ | 26,594 | |
5.125%, 6/1/29 | | | 20,000 | | | | 19,190 | |
GCI LLC | | | | | | | | |
4.750%, 10/15/28§ | | | 30,000 | | | | 31,012 | |
iHeartCommunications, Inc. | | | | | | | | |
8.375%, 5/1/27 | | | 5,000 | | | | 5,325 | |
Nexstar Media, Inc. | | | | | | | | |
5.625%, 7/15/27§ | | | 20,000 | | | | 21,100 | |
Radiate Holdco LLC | | | | | | | | |
4.500%, 9/15/26§ | | | 20,000 | | | | 20,271 | |
Scripps Escrow, Inc. | | | | | | | | |
5.875%, 7/15/27§ | | | 30,000 | | | | 30,637 | |
Sirius XM Radio, Inc. | | | | | | | | |
4.125%, 7/1/30§ | | | 35,000 | | | | 34,713 | |
Univision Communications, Inc. | | | | | | | | |
4.500%, 5/1/29§ | | | 20,000 | | | | 20,159 | |
| | | | | | | | |
| | | | | | | 455,011 | |
| | | | | | | | |
Wireless Telecommunication Services (0.1%) | |
T-Mobile USA, Inc. | | | | | | | | |
2.250%, 2/15/26 | | | 55,000 | | | | 55,275 | |
3.375%, 4/15/29 | | | 10,000 | | | | 10,250 | |
3.375%, 4/15/29§ | | | 5,000 | | | | 5,125 | |
2.875%, 2/15/31 | | | 10,000 | | | | 9,925 | |
| | | | | | | | |
| | | | | | | 80,575 | |
| | | | | | | | |
Total Communication Services | | | | | | | 875,287 | |
| | | | | | | | |
Consumer Discretionary (1.6%) | | | | | |
Auto Components (0.2%) | |
American Axle & Manufacturing, Inc. | | | | | | | | |
5.000%, 10/1/29 | | | 40,000 | | | | 38,246 | |
Clarios Global LP | | | | | | | | |
6.250%, 5/15/26§ | | | 13,000 | | | | 13,552 | |
Goodyear Tire & Rubber Co. (The) | | | | | | | | |
5.250%, 7/15/31§ | | | 35,000 | | | | 37,362 | |
Icahn Enterprises LP | | | | | | | | |
5.250%, 5/15/27 | | | 25,000 | | | | 25,938 | |
| | | | | | | | |
| | | | | | | 115,098 | |
| | | | | | | | |
Automobiles (0.1%) | |
Ford Motor Co.
8.500%, 4/21/23 | | | 75,000 | | | | 81,885 | |
| | | | | | | | |
Diversified Consumer Services (0.0%) | |
Metis Merger Sub LLC
6.500%, 5/15/29§ | | | 25,000 | | | | 24,750 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (0.9%) | |
Boyd Gaming Corp.
4.750%, 6/15/31§ | | | 40,000 | | | | 41,051 | |
Boyne USA, Inc.
4.750%, 5/15/29§ | | | 60,000 | | | | 61,350 | |
Carnival Corp.
5.750%, 3/1/27§ | | | 30,000 | | | | 30,459 | |
Cedar Fair LP
5.250%, 7/15/29 | | | 25,000 | | | | 25,844 | |
Expedia Group, Inc.
5.000%, 2/15/26 | | | 50,000 | | | | 55,906 | |
3.250%, 2/15/30 | | | 60,000 | | | | 61,909 | |
Golden Nugget, Inc.
6.750%, 10/15/24§ | | | 45,000 | | | | 45,000 | |
Marriott International, Inc. | | | | | | | | |
Series R
3.125%, 6/15/26 | | | 55,000 | | | | 58,109 | |
McDonald’s Corp.
3.600%, 7/1/30 | | | 55,000 | | | | 60,843 | |
MGM Resorts International
6.750%, 5/1/25 | | | 45,000 | | | | 47,362 | |
Midwest Gaming Borrower LLC
4.875%, 5/1/29§ | | | 20,000 | | | | 20,178 | |
Premier Entertainment Sub LLC
5.625%, 9/1/29§ | | | 30,000 | | | | 30,450 | |
5.875%, 9/1/31§ | | | 30,000 | | | | 30,450 | |
Scientific Games International, Inc.
7.250%, 11/15/29§ | | | 20,000 | | | | 22,602 | |
Viking Cruises Ltd.
13.000%, 5/15/25§ | | | 10,000 | | | | 11,462 | |
5.875%, 9/15/27§ | | | 55,000 | | | | 53,075 | |
| | | | | | | | |
| | | | | | | 656,050 | |
| | | | | | | | |
Household Durables (0.1%) | |
Mattamy Group Corp.
4.625%, 3/1/30§ | | | 35,000 | | | | 35,436 | |
SWF Escrow Issuer Corp.
6.500%, 10/1/29§ | | | 30,000 | | | | 28,575 | |
| | | | | | | | |
| | | | | | | 64,011 | |
| | | | | | | | |
Multiline Retail (0.1%) | |
Dollar Tree, Inc.
4.000%, 5/15/25 | | | 105,000 | | | | 113,757 | |
| | | | | | | | |
Specialty Retail (0.2%) | |
Ambience Merger Sub, Inc.
7.125%, 7/15/29§ | | | 10,000 | | | | 9,636 | |
Sonic Automotive, Inc.
4.625%, 11/15/29§ | | | 45,000 | | | | 45,000 | |
SRS Distribution, Inc.
4.625%, 7/1/28§ | | | 30,000 | | | | 30,713 | |
Staples, Inc.
7.500%, 4/15/26§ | | | 15,000 | | | | 15,056 | |
Victoria’s Secret & Co.
4.625%, 7/15/29§ | | | 40,000 | | | | 40,176 | |
| | | | | | | | |
| | | | | | | 140,581 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 1,196,132 | |
| | | | | | | | |
Consumer Staples (1.0%) | | | | | |
Beverages (0.3%) | |
Anheuser-Busch Cos. LLC
4.900%, 2/1/46 | | | 50,000 | | | | 63,506 | |
Constellation Brands, Inc.
3.150%, 8/1/29 | | | 100,000 | | | | 105,866 | |
Primo Water Holdings, Inc.
4.375%, 4/30/29§ | | | 20,000 | | | | 19,778 | |
Triton Water Holdings, Inc.
6.250%, 4/1/29§ | | | 20,000 | | | | 19,900 | |
| | | | | | | | |
| | | | | | | 209,050 | |
| | | | | | | | |
Food & Staples Retailing (0.2%) | |
Performance Food Group, Inc. | | | | | | | | |
5.500%, 10/15/27§ | | | 35,000 | | | | 36,494 | |
4.250%, 8/1/29§ | | | 20,000 | | | | 19,950 | |
Sysco Corp.
5.950%, 4/1/30 | | | 44,000 | | | | 55,602 | |
See Notes to Financial Statements.
23
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
United Natural Foods, Inc.
6.750%, 10/15/28§ | | $ | 25,000 | | | $ | 27,063 | |
US Foods, Inc.
6.250%, 4/15/25§ | | | 5,000 | | | | 5,225 | |
| | | | | | | | |
| | | | | | | 144,334 | |
| | | | | | | | |
Food Products (0.3%) | |
Flowers Foods, Inc.
2.400%, 3/15/31 | | | 55,000 | | | | 54,293 | |
Kraft Heinz Foods Co. | | | | | | | | |
5.000%, 7/15/35 | | | 15,000 | | | | 18,450 | |
5.200%, 7/15/45 | | | 35,000 | | | | 44,275 | |
Post Holdings, Inc.
4.625%, 4/15/30§ | | | 30,000 | | | | 30,150 | |
Smithfield Foods, Inc.
4.250%, 2/1/27§ | | | 100,000 | | | | 108,483 | |
| | | | | | | | |
| | | | | | | 255,651 | |
| | | | | | | | |
Household Products (0.1%) | |
Energizer Holdings, Inc.
4.750%, 6/15/28§ | | | 35,000 | | | | 34,915 | |
Kronos Acquisition Holdings, Inc. | | | | | | | | |
5.000%, 12/31/26§ | | | 30,000 | | | | 29,700 | |
7.000%, 12/31/27§ | | | 20,000 | | | | 19,296 | |
| | | | | | | | |
| | | | | | | 83,911 | |
| | | | | | | | |
Personal Products (0.0%) | |
Coty, Inc.
5.000%, 4/15/26§ | | | 20,000 | | | | 20,500 | |
| | | | | | | | |
Tobacco (0.1%) | |
Altria Group, Inc.
4.450%, 5/6/50 | | | 50,000 | | | | 53,100 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 766,546 | |
| | | | | | | | |
Energy (1.7%) | | | | | |
Energy Equipment & Services (0.2%) | |
Patterson-UTI Energy, Inc.
3.950%, 2/1/28 | | | 60,000 | | | | 60,302 | |
Transocean Poseidon Ltd.
6.875%, 2/1/27§ | | | 35,000 | | | | 34,825 | |
Transocean, Inc.
11.500%, 1/30/27§ | | | 11,000 | | | | 11,330 | |
USA Compression Partners LP
6.875%, 9/1/27 | | | 50,000 | | | | 51,875 | |
Weatherford International Ltd.
6.500%, 9/15/28§ | | | 20,000 | | | | 21,150 | |
| | | | | | | | |
| | | | | | | 179,482 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (1.5%) | |
Antero Midstream Partners LP
5.750%, 3/1/27§ | | | 16,000 | | | | 16,520 | |
Apache Corp.
4.375%, 10/15/28 | | | 20,000 | | | | 21,422 | |
BP Capital Markets America, Inc.
2.939%, 6/4/51 | | | 60,000 | | | | 58,430 | |
Chesapeake Energy Corp.
5.875%, 2/1/29§ | | | 30,000 | | | | 31,800 | |
CNX Resources Corp.
6.000%, 1/15/29§ | | | 25,000 | | | | 26,375 | |
Energy Transfer LP | | | | | | | | |
4.750%, 1/15/26 | | | 45,000 | | | | 49,738 | |
4.200%, 4/15/27 | | | 5,000 | | | | 5,452 | |
EQM Midstream Partners LP
4.750%, 1/15/31§ | | | 40,000 | | | | 41,314 | |
EQT Corp.
7.500%, 2/1/30 (e) | | | 15,000 | | | | 19,166 | |
Hess Midstream Operations LP | | | | | | | | |
5.125%, 6/15/28§ | | | 35,000 | | | | 36,354 | |
4.250%, 2/15/30§ | | | 35,000 | | | | 34,869 | |
Hilcorp Energy I LP | | | | | | | | |
6.250%, 11/1/28§ | | | 30,000 | | | | 30,789 | |
5.750%, 2/1/29§ | | | 15,000 | | | | 15,263 | |
Kinder Morgan Energy Partners LP
6.950%, 1/15/38 | | | 40,000 | | | | 56,230 | |
Marathon Petroleum Corp.
5.125%, 12/15/26 | | | 55,000 | | | | 63,254 | |
MEG Energy Corp. | | | | | | | | |
7.125%, 2/1/27§ | | | 35,000 | | | | 36,663 | |
5.875%, 2/1/29§ | | | 5,000 | | | | 5,131 | |
NGL Energy Operating LLC
7.500%, 2/1/26§ | | | 40,000 | | | | 40,477 | |
NuStar Logistics LP
6.375%, 10/1/30 | | | 25,000 | | | | 27,344 | |
Occidental Petroleum Corp.
8.000%, 7/15/25 | | | 15,000 | | | | 17,681 | |
6.625%, 9/1/30 | | | 20,000 | | | | 24,423 | |
6.125%, 1/1/31 | | | 25,000 | | | | 29,875 | |
6.450%, 9/15/36 | | | 15,000 | | | | 19,106 | |
Ovintiv, Inc.
7.375%, 11/1/31 | | | 15,000 | | | | 20,025 | |
Parkland Corp.
4.500%, 10/1/29§ | | | 25,000 | | | | 25,156 | |
Peabody Energy Corp.
8.500%, 12/31/24 PIK§ | | | 8,083 | | | | 7,569 | |
Pioneer Natural Resources Co.
1.900%, 8/15/30 | | | 65,000 | | | | 61,766 | |
Sabine Pass Liquefaction LLC
5.000%, 3/15/27 | | | 55,000 | | | | 62,386 | |
Southwestern Energy Co.
5.375%, 2/1/29§ | | | 20,000 | | | | 21,100 | |
Sunoco LP | | | | | | | | |
6.000%, 4/15/27 | | | 15,000 | | | | 15,675 | |
4.500%, 5/15/29 | | | 10,000 | | | | 10,100 | |
Targa Resources Partners LP
5.500%, 3/1/30 | | | 30,000 | | | | 32,915 | |
TotalEnergies Capital International SA | |
3.386%, 6/29/60 | | | 55,000 | | | | 59,019 | |
Venture Global Calcasieu Pass LLC
4.125%, 8/15/31§ | | | 30,000 | | | | 30,973 | |
Western Midstream Operating LP
4.350%, 2/1/25 (e) | | | 20,000 | | | | 20,950 | |
Williams Cos., Inc. (The)
3.500%, 10/15/51 | | | 30,000 | | | | 30,658 | |
| | | | | | | | |
| | | | | | | 1,105,968 | |
| | | | | | | | |
Total Energy | | | | | | | 1,285,450 | |
| | | | | | | | |
Financials (2.3%) | | | | | |
Banks (0.7%) | |
Bank of America Corp. | | | | | | | | |
(SOFR + 1.21%), 2.572%, 10/20/32 (k) | | | 20,000 | | | | 20,035 | |
(US Treasury Yield Curve Rate T Note Constant Maturity 5 Year + 1.20%), 2.482%, 9/21/36 (k) | | | 60,000 | | | | 58,384 | |
See Notes to Financial Statements.
24
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Bank of Montreal | | | | | | | | |
(USD Swap Semi 5 Year + 1.43%), 3.803%, 12/15/32 (k) | | $ | 60,000 | | | $ | 64,800 | |
Bank of Nova Scotia (The) | | | | | | | | |
1.625%, 5/1/23 | | | 65,000 | | | | 66,036 | |
3.400%, 2/11/24 | | | 35,000 | | | | 36,992 | |
JPMorgan Chase & Co. | | | | | | | | |
(SOFR + 1.25%), 2.580%, 4/22/32 (k) | | | 70,000 | | | | 70,476 | |
Mitsubishi UFJ Financial Group, Inc. | | | | | | | | |
(ICE LIBOR USD 3 Month + 0.74%), 0.860%, 3/2/23 (k) | | | 75,000 | | | | 75,546 | |
Santander Holdings USA, Inc.
3.400%, 1/18/23 | | | 100,000 | | | | 102,889 | |
| | | | | | | | |
| | | | | | | 495,158 | |
| | | | | | | | |
Capital Markets (0.4%) | |
Ares Capital Corp.
2.150%, 7/15/26 | | | 55,000 | | | | 54,476 | |
Goldman Sachs Group, Inc. (The) | | | | | | | | |
(SOFR + 0.82%), 0.869%, 9/10/27 (k) | | | 115,000 | | | | 114,599 | |
Macquarie Group Ltd. | | | | | | | | |
(SOFR + 0.91%), 1.629%, 9/23/27 (k)§ | | | 65,000 | | | | 63,717 | |
Morgan Stanley | | | | | | | | |
(SOFR + 1.36%), 2.484%, 9/16/36 (k) | | | 100,000 | | | | 97,030 | |
| | | | | | | | |
| | | | | | | 329,822 | |
| | | | | | | | |
Consumer Finance (0.7%) | |
American Express Co.
3.400%, 2/22/24 | | | 85,000 | | | | 89,618 | |
Avolon Holdings Funding Ltd.
3.250%, 2/15/27§ | | | 95,000 | | | | 97,459 | |
Discover Financial Services
4.100%, 2/9/27 | | | 75,000 | | | | 82,279 | |
General Motors Financial Co., Inc.
2.400%, 10/15/28 | | | 55,000 | | | | 54,683 | |
Navient Corp.
5.000%, 3/15/27 | | | 15,000 | | | | 15,263 | |
OneMain Finance Corp.
6.625%, 1/15/28 | | | 30,000 | | | | 33,770 | |
Synchrony Financial
2.875%, 10/28/31 | | | 120,000 | | | | 119,480 | |
| | | | | | | | |
| | | | | | | 492,552 | |
| | | | | | | | |
Insurance (0.4%) | |
Acrisure LLC
4.250%, 2/15/29§ | | | 15,000 | | | | 14,438 | |
Alliant Holdings Intermediate LLC
6.750%, 10/15/27§ | | | 20,000 | | | | 20,650 | |
AmWINS Group, Inc.
4.875%, 6/30/29§ | | | 15,000 | | | | 14,974 | |
Athene Global Funding | | | | | | | | |
(SOFR + 0.56%), 0.609%, 8/19/24 (k)§ | | | 110,000 | | | | 109,845 | |
GTCR AP Finance, Inc.
8.000%, 5/15/27§ | | | 30,000 | | | | 31,425 | |
NFP Corp.
6.875%, 8/15/28§ | | | 20,000 | | | | 20,275 | |
Prudential Financial, Inc.
3.905%, 12/7/47 | | | 55,000 | | | | 64,608 | |
Willis North America, Inc.
4.500%, 9/15/28 | | | 50,000 | | | | 56,592 | |
| | | | | | | | |
| | | | | | | 332,807 | |
| | | | | | | | |
Thrifts & Mortgage Finance (0.1%) | |
Nationstar Mortgage Holdings, Inc.
5.500%, 8/15/28§ | | | 25,000 | | | | 25,562 | |
PennyMac Financial Services, Inc.
4.250%, 2/15/29§ | | | 45,000 | | | | 42,525 | |
| | | | | | | | |
| | | | | | | 68,087 | |
| | | | | | | | |
Total Financials | | | | | | | 1,718,426 | |
| | | | | | | | |
Health Care (1.5%) | | | | | |
Biotechnology (0.1%) | |
AbbVie, Inc.
4.700%, 5/14/45 | | | 90,000 | | | | 112,372 | |
| | | | | | | | |
Health Care Equipment & Supplies (0.1%) | |
Mozart Debt Merger Sub, Inc.
5.250%, 10/1/29§ | | | 30,000 | | | | 30,450 | |
Ortho-Clinical Diagnostics, Inc.
7.250%, 2/1/28§ | | | 25,000 | | | | 26,562 | |
| | | | | | | | |
| | | | | | | 57,012 | |
| | | | | | | | |
Health Care Providers & Services (1.0%) | |
Anthem, Inc.
2.375%, 1/15/25 | | | 60,000 | | | | 62,242 | |
Centene Corp.
3.000%, 10/15/30 | | | 20,000 | | | | 20,265 | |
2.500%, 3/1/31 | | | 85,000 | | | | 82,556 | |
Cigna Corp.
4.900%, 12/15/48 | | | 90,000 | | | | 116,465 | |
Community Health Systems, Inc.
6.000%, 1/15/29§ | | | 30,000 | | | | 31,650 | |
6.875%, 4/15/29§ | | | 30,000 | | | | 30,787 | |
CVS Health Corp.
5.050%, 3/25/48 | | | 65,000 | | | | 85,147 | |
HCA, Inc.
4.125%, 6/15/29 | | | 55,000 | | | | 60,751 | |
Legacy LifePoint Health LLC
6.750%, 4/15/25§ | | | 10,000 | | | | 10,500 | |
4.375%, 2/15/27§ | | | 25,000 | | | | 24,750 | |
Option Care Health, Inc.
4.375%, 10/31/29§ | | | 35,000 | | | | 35,088 | |
Radiology Partners, Inc.
9.250%, 2/1/28§ | | | 25,000 | | | | 26,406 | |
RP Escrow Issuer LLC
5.250%, 12/15/25§ | | | 30,000 | | | | 29,925 | |
Select Medical Corp.
6.250%, 8/15/26§ | | | 55,000 | | | | 57,391 | |
Tenet Healthcare Corp.
6.125%, 10/1/28§ | | | 40,000 | | | | 41,898 | |
| | | | | | | | |
| | | | | | | 715,821 | |
| | | | | | | | |
Life Sciences Tools & Services (0.2%) | |
Thermo Fisher Scientific, Inc.
1.215%, 10/18/24 | | | 115,000 | | | | 114,773 | |
| | | | | | | | |
See Notes to Financial Statements.
25
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Pharmaceuticals (0.1%) | |
Bausch Health Cos., Inc.
6.250%, 2/15/29§ | | $ | 35,000 | | | $ | 33,906 | |
Endo Luxembourg Finance Co. I SARL | |
6.125%, 4/1/29§ | | | 20,000 | | | | 19,631 | |
Royalty Pharma plc
3.300%, 9/2/40 | | | 55,000 | | | | 54,670 | |
| | | | | | | | |
| | | | | | | 108,207 | |
| | | | | | | | |
Total Health Care | | | | | | | 1,108,185 | |
| | | | | | | | |
Industrials (1.2%) | | | | | |
Aerospace & Defense (0.2%) | |
Boeing Co. (The)
2.950%, 2/1/30 | | | 55,000 | | | | 55,644 | |
TransDigm, Inc.
8.000%, 12/15/25§ | | | 5,000 | | | | 5,319 | |
6.250%, 3/15/26§ | | | 55,000 | | | | 57,475 | |
5.500%, 11/15/27 | | | 30,000 | | | | 30,712 | |
Triumph Group, Inc.
7.750%, 8/15/25 | | | 15,000 | | | | 15,251 | |
| | | | | | | | |
| | | | | | | 164,401 | |
| | | | | | | | |
Airlines (0.1%) | |
American Airlines, Inc.
5.750%, 4/20/29§ | | | 40,000 | | | | 42,950 | |
United Airlines, Inc.
4.625%, 4/15/29§ | | | 20,000 | | | | 20,570 | |
| | | | | | | | |
| | | | | | | 63,520 | |
| | | | | | | | |
Building Products (0.1%) | |
Griffon Corp.
5.750%, 3/1/28 | | | 50,000 | | | | 52,125 | |
Owens Corning
4.400%, 1/30/48 | | | 50,000 | | | | 59,198 | |
| | | | | | | | |
| | | | | | | 111,323 | |
| | | | | | | | |
Commercial Services & Supplies (0.2%) | |
Allied Universal Holdco LLC
6.625%, 7/15/26§ | | | 20,000 | | | | 20,993 | |
9.750%, 7/15/27§ | | | 40,000 | | | | 43,100 | |
Garda World Security Corp.
6.000%, 6/1/29§ | | | 35,000 | | | | 34,212 | |
Madison IAQ LLC
4.125%, 6/30/28§ | | | 25,000 | | | | 24,777 | |
5.875%, 6/30/29§ | | | 20,000 | | | | 19,800 | |
WASH Multifamily Acquisition, Inc.
5.750%, 4/15/26§ | | | 30,000 | | | | 30,937 | |
| | | | | | | | |
| | | | | | | 173,819 | |
| | | | | | | | |
Construction & Engineering (0.2%) | |
Pike Corp.
5.500%, 9/1/28§ | | | 25,000 | | | | 25,375 | |
Quanta Services, Inc.
2.350%, 1/15/32 | | | 120,000 | | | | 117,475 | |
| | | | | | | | |
| | | | | | | 142,850 | |
| | | | | | | | |
Road & Rail (0.3%) | |
CSX Corp.
3.800%, 11/1/46 | | | 55,000 | | | | 63,009 | |
First Student Bidco, Inc.
4.000%, 7/31/29§ | | | 25,000 | | | | 24,508 | |
NESCO Holdings II, Inc.
5.500%, 4/15/29§ | | | 5,000 | | | | 5,106 | |
Penske Truck Leasing Co. LP
4.200%, 4/1/27§ | | | 55,000 | | | | 61,238 | |
Uber Technologies, Inc.
7.500%, 9/15/27§ | | | 25,000 | | | | 27,291 | |
4.500%, 8/15/29§ | | | 20,000 | | | | 20,098 | |
| | | | | | | | |
| | | | | | | 201,250 | |
| | | | | | | | |
Trading Companies & Distributors (0.1%) | |
Air Lease Corp.
1.875%, 8/17/26 | | | 55,000 | | | | 54,275 | |
| | | | | | | | |
Total Industrials | | | | | | | 911,438 | |
| | | | | | | | |
Information Technology (0.5%) | | | | | |
Communications Equipment (0.0%) | |
Avaya, Inc.
6.125%, 9/15/28§ | | | 20,000 | | | | 20,756 | |
CommScope, Inc.
4.750%, 9/1/29§ | | | 25,000 | | | | 24,530 | |
| | | | | | | | |
| | | | | | | 45,286 | |
| | | | | | | | |
IT Services (0.2%) | |
Endure Digital, Inc.
6.000%, 2/15/29§ | | | 30,000 | | | | 27,638 | |
Western Union Co. (The)
2.750%, 3/15/31 | | | 115,000 | | | | 114,856 | |
| | | | | | | | |
| | | | | | | 142,494 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (0.1%) | |
NXP BV
3.875%, 6/18/26§ | | | 105,000 | | | | 114,437 | |
| | | | | | | | |
Software (0.1%) | |
Oracle Corp.
3.600%, 4/1/50 | | | 55,000 | | | | 56,485 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (0.1%) | |
NetApp, Inc.
1.875%, 6/22/25 | | | 55,000 | | | | 55,797 | |
| | | | | | | | |
Total Information Technology | | | | | | | 414,499 | |
| | | | | | | | |
Materials (0.6%) | | | | | |
Chemicals (0.2%) | |
CVR Partners LP
6.125%, 6/15/28§ | | | 15,000 | | | | 15,525 | |
EverArc Escrow SARL
5.000%, 10/30/29§ | | | 35,000 | | | | 35,000 | |
Nutrien Ltd.
4.200%, 4/1/29 | | | 50,000 | | | | 56,744 | |
SCIH Salt Holdings, Inc.
6.625%, 5/1/29§ | | | 5,000 | | | | 4,700 | |
WR Grace Holdings LLC
5.625%, 8/15/29§ | | | 25,000 | | | | 25,219 | |
| | | | | | | | |
| | | | | | | 137,188 | |
| | | | | | | | |
Containers & Packaging (0.2%) | |
Packaging Corp. of America
3.000%, 12/15/29 | | | 60,000 | | | | 62,810 | |
WRKCo, Inc.
3.750%, 3/15/25 | | | 55,000 | | | | 58,811 | |
| | | | | | | | |
| | | | | | | 121,621 | |
| | | | | | | | |
See Notes to Financial Statements.
26
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Metals & Mining (0.2%) | |
Arconic Corp.
6.125%, 2/15/28§ | | $ | 40,000 | | | $ | 42,223 | |
Glencore Funding LLC
1.625%, 4/27/26§ | | | 35,000 | | | | 34,566 | |
3.375%, 9/23/51§ | | | 25,000 | | | | 24,121 | |
SunCoke Energy, Inc.
4.875%, 6/30/29§ | | | 25,000 | | | | 24,812 | |
| | | | | | | | |
| | | | | | | 125,722 | |
| | | | | | | | |
Paper & Forest Products (0.0%) | |
Glatfelter Corp.
4.750%, 11/15/29§ | | | 45,000 | | | | 45,619 | |
| | | | | | | | |
Total Materials | | | | | | | 430,150 | |
| | | | | | | | |
Real Estate (0.5%) | | | | | |
Equity Real Estate Investment Trusts (REITs) (0.4%) | |
Alexandria Real Estate Equities, Inc. (REIT) | |
3.000%, 5/18/51 | | | 60,000 | | | | 59,766 | |
American Tower Corp. (REIT)
3.950%, 3/15/29 | | | 55,000 | | | | 60,941 | |
Crown Castle International Corp. (REIT)
3.650%, 9/1/27 | | | 55,000 | | | | 59,573 | |
3.300%, 7/1/30 | | | 30,000 | | | | 31,692 | |
Iron Mountain, Inc. (REIT)
4.500%, 2/15/31§ | | | 15,000 | | | | 15,150 | |
Park Intermediate Holdings LLC (REIT)
4.875%, 5/15/29§ | | | 25,000 | | | | 25,312 | |
Uniti Group LP (REIT)
6.500%, 2/15/29§ | | | 20,000 | | | | 20,169 | |
Welltower, Inc. (REIT)
2.050%, 1/15/29 | | | 65,000 | | | | 63,790 | |
| | | | | | | | |
| | | | | | | 336,393 | |
| | | | | | | | |
Real Estate Management & Development (0.1%) | |
Realogy Group LLC
7.625%, 6/15/25§ | | | 15,000 | | | | 16,027 | |
5.750%, 1/15/29§ | | | 20,000 | | | | 20,650 | |
| | | | | | | | |
| | | | | | | 36,677 | |
| | | | | | | | |
Total Real Estate | | | | | | | 373,070 | |
| | | | | | | | |
Utilities (0.9%) | | | | | |
Electric Utilities (0.5%) | |
Monongahela Power Co.
5.400%, 12/15/43§ | | | 65,000 | | | | 84,973 | |
NextEra Energy Capital Holdings, Inc.
2.250%, 6/1/30 | | | 60,000 | | | | 60,020 | |
NRG Energy, Inc.
3.625%, 2/15/31§ | | | 45,000 | | | | 43,763 | |
Pacific Gas and Electric Co.
1.367%, 3/10/23 | | | 55,000 | | | | 54,828 | |
2.500%, 2/1/31 | | | 65,000 | | | | 62,060 | |
PG&E Corp.
5.000%, 7/1/28 | | | 45,000 | | | | 46,800 | |
Southern Co. (The) | | | | | | | | |
Series 21-A
(US Treasury Yield Curve Rate T Note Constant Maturity 5 Year + 2.92%), 3.750%, 9/15/51 (k) | | | 55,000 | | | | 55,862 | |
| | | | | | | | |
| | | | | | | 408,306 | |
| | | | | | | | |
Gas Utilities (0.2%) | |
Brooklyn Union Gas Co. (The)
4.487%, 3/4/49§ | | | 55,000 | | | | 65,036 | |
Ferrellgas LP
5.375%, 4/1/26§ | | | 15,000 | | | | 14,606 | |
Suburban Propane Partners LP
5.000%, 6/1/31§ | | | 30,000 | | | | 30,600 | |
Superior Plus LP
4.500%, 3/15/29§ | | | 35,000 | | | | 35,525 | |
| | | | | | | | |
| | | | | | | 145,767 | |
| | | | | | | | |
Independent Power and Renewable Electricity Producers (0.1%) | |
Calpine Corp.
5.125%, 3/15/28§ | | | 25,000 | | | | 25,000 | |
4.625%, 2/1/29§ | | | 15,000 | | | | 14,550 | |
| | | | | | | | |
| | | | | | | 39,550 | |
| | | | | | | | |
Water Utilities (0.1%) | |
Essential Utilities, Inc.
2.704%, 4/15/30 | | | 60,000 | | | | 61,690 | |
| | | | | | | | |
Total Utilities | | | | | | | 655,313 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 9,734,496 | |
| | | | | | | | |
Mortgage-Backed Securities (3.0%) | |
FHLMC UMBS
2.000%, 9/1/51 | | | 272,833 | | | | 275,400 | |
2.000%, 11/1/51 | | | 450,000 | | | | 453,389 | |
FNMA UMBS
3.000%, 10/1/46 | | | 492,929 | | | | 518,683 | |
4.000%, 5/1/49 | | | 308,225 | | | | 331,572 | |
2.000%, 11/1/50 | | | 387,157 | | | | 388,627 | |
GNMA
2.500%, 10/20/51 | | | 275,000 | | | | 285,012 | |
| | | | | | | | |
Total Mortgage-Backed Securities | | | | | | | 2,252,683 | |
| | | | | | | | |
U.S. Treasury Obligations (9.5%) | |
U.S. Treasury Bonds
4.500%, 5/15/38 | | | 130,000 | | | | 181,325 | |
2.250%, 5/15/41 | | | 410,000 | | | | 427,578 | |
2.750%, 11/15/47 | | | 210,000 | | | | 244,033 | |
1.250%, 5/15/50 | | | 790,000 | | | | 667,553 | |
2.000%, 8/15/51 | | | 330,000 | | | | 334,795 | |
U.S. Treasury Notes
0.125%, 10/31/22 | | | 670,000 | | | | 669,811 | |
0.125%, 12/31/22 | | | 470,000 | | | | 469,405 | |
0.250%, 9/30/23 | | | 770,000 | | | | 766,914 | |
0.125%, 10/15/23 | | | 520,000 | | | | 516,275 | |
0.125%, 1/15/24 | | | 340,000 | | | | 336,672 | |
0.625%, 10/15/24 | | | 380,000 | | | | 378,575 | |
1.500%, 11/30/24 | | | 350,000 | | | | 357,548 | |
0.375%, 11/30/25 | | | 320,000 | | | | 311,212 | |
0.875%, 9/30/26 | | | 460,000 | | | | 453,398 | |
0.500%, 6/30/27 | | | 380,000 | | | | 363,512 | |
1.250%, 9/30/28 | | | 570,000 | | | | 562,391 | |
1.250%, 8/15/31 | | | 80,000 | | | | 77,813 | |
| | | | | | | | |
Total U.S. Treasury Obligations | | | | | | | 7,118,810 | |
| | | | | | | | |
Total Long-Term Debt Securities (38.6%)
(Cost $28,910,859) | | | | | | | 29,056,377 | |
| | | | | | | | |
See Notes to Financial Statements.
27
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
COMMON STOCKS: | | | | | | | | |
Communication Services (3.4%) | | | | | | | | |
Interactive Media & Services (2.8%) | |
Alphabet, Inc., Class A* | | | 428 | | | $ | 1,267,274 | |
Meta Platforms, Inc., Class A* | | | 2,669 | | | | 863,608 | |
| | | | | | | | |
| | | | | | | 2,130,882 | |
| | | | | | | | |
Media (0.6%) | |
Comcast Corp., Class A | | | 8,858 | | | | 455,567 | |
| | | | | | | | |
Total Communication Services | | | | | | | 2,586,449 | |
| | | | | | | | |
Consumer Discretionary (2.5%) | |
Internet & Direct Marketing Retail (1.3%) | |
Amazon.com, Inc.* | | | 288 | | | | 971,260 | |
| | | | | | | | |
Multiline Retail (0.5%) | |
Dollar General Corp. | | | 1,553 | | | | 344,020 | |
| | | | | | | | |
Specialty Retail (0.7%) | |
Ross Stores, Inc. | | | 2,496 | | | | 282,547 | |
Ulta Beauty, Inc.* | | | 751 | | | | 275,888 | |
| | | | | | | | |
| | | | | | | 558,435 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 1,873,715 | |
| | | | | | | | |
Consumer Staples (1.7%) | |
Beverages (0.5%) | |
Constellation Brands, Inc., Class A | | | 1,892 | | | | 410,205 | |
| | | | | | | | |
Food & Staples Retailing (0.2%) | |
Sysco Corp. | | | 1,607 | | | | 123,578 | |
| | | | | | | | |
Household Products (0.6%) | |
Procter & Gamble Co. (The) | | | 3,276 | | | | 468,435 | |
| | | | | | | | |
Tobacco (0.4%) | |
Philip Morris International, Inc. | | | 3,193 | | | | 301,866 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 1,304,084 | |
| | | | | | | | |
Energy (0.7%) | |
Oil, Gas & Consumable Fuels (0.7%) | |
Exxon Mobil Corp. | | | 4,987 | | | | 321,512 | |
Pioneer Natural Resources Co. | | | 1,144 | | | | 213,905 | |
| | | | | | | | |
| | | | | | | 535,417 | |
| | | | | | | | |
Total Energy | | | | | | | 535,417 | |
| | | | | | | | |
Financials (3.4%) | |
Banks (1.3%) | |
Citigroup, Inc. | | | 7,723 | | | | 534,123 | |
Truist Financial Corp. | | | 6,437 | | | | 408,556 | |
| | | | | | | | |
| | | | | | | 942,679 | |
| | | | | | | | |
Capital Markets (1.0%) | |
Charles Schwab Corp. (The) | | | 5,012 | | | | 411,134 | |
Intercontinental Exchange, Inc. | | | 2,302 | | | | 318,735 | |
| | | | | | | | |
| | | | | | | 729,869 | |
| | | | | | | | |
Consumer Finance (0.5%) | |
American Express Co. | | | 2,328 | | | | 404,560 | |
| | | | | | | | |
Insurance (0.6%) | |
Aflac, Inc. | | | 4,744 | | | | 254,610 | |
Markel Corp.* | | | 160 | | | | 210,101 | |
| | | | | | | | |
| | | | | | | 464,711 | |
| | | | | | | | |
Total Financials | | | | | | | 2,541,819 | |
| | | | | | | | |
Health Care (3.7%) | |
Biotechnology (0.3%) | |
BioMarin Pharmaceutical, Inc.* | | | 1,819 | | | | 144,119 | |
Vertex Pharmaceuticals, Inc.* | | | 442 | | | | 81,739 | |
| | | | | | | | |
| | | | | | | 225,858 | |
| | | | | | | | |
Health Care Equipment & Supplies (1.1%) | |
Alcon, Inc. | | | 3,621 | | | | 301,847 | |
Boston Scientific Corp.* | | | 12,104 | | | | 522,045 | |
| | | | | | | | |
| | | | | | | 823,892 | |
| | | | | | | | |
Health Care Providers & Services (1.3%) | |
Anthem, Inc. | | | 887 | | | | 385,960 | |
UnitedHealth Group, Inc. | | | 1,208 | | | | 556,248 | |
| | | | | | | | |
| | | | | | | 942,208 | |
| | | | | | | | |
Pharmaceuticals (1.0%) | |
AstraZeneca plc (ADR) | | | 7,390 | | | | 460,988 | |
Roche Holding AG (ADR) | | | 2,073 | | | | 100,188 | |
Zoetis, Inc. | | | 897 | | | | 193,932 | |
| | | | | | | | |
| | | | | | | 755,108 | |
| | | | | | | | |
Total Health Care | | | | | | | 2,747,066 | |
| | | | | | | | |
Industrials (2.1%) | |
Aerospace & Defense (0.5%) | |
Boeing Co. (The)* | | | 1,747 | | | | 361,681 | |
| | | | | | | | |
Electrical Equipment (0.8%) | |
AMETEK, Inc. | | | 1,833 | | | | 242,689 | |
nVent Electric plc | | | 9,965 | | | | 353,259 | |
| | | | | | | | |
| | | | | | | 595,948 | |
| | | | | | | | |
Industrial Conglomerates (0.4%) | |
Honeywell International, Inc. | | | 1,454 | | | | 317,874 | |
| | | | | | | | |
Machinery (0.4%) | |
Fortive Corp. | | | 4,067 | | | | 307,913 | |
| | | | | | | | |
Total Industrials | | | | | | | 1,583,416 | |
| | | | | | | | |
Information Technology (7.5%) | |
Communications Equipment (0.5%) | |
Motorola Solutions, Inc. | | | 1,553 | | | | 386,060 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.3%) | |
Corning, Inc. | | | 7,345 | | | | 261,262 | |
| | | | | | | | |
IT Services (1.7%) | |
Fidelity National Information Services, Inc. | | | 2,787 | | | | 308,633 | |
PayPal Holdings, Inc.* | | | 1,915 | | | | 445,410 | |
Visa, Inc., Class A | | | 2,329 | | | | 493,212 | |
| | | | | | | | |
| | | | | | | 1,247,255 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (0.8%) | |
Analog Devices, Inc. | | | 1,607 | | | | 278,798 | |
Lam Research Corp. | | | 512 | | | | 288,548 | |
| | | | | | | | |
| | | | | | | 567,346 | |
| | | | | | | | |
Software (3.1%) | |
Adobe, Inc.* | | | 663 | | | | 431,189 | |
Microsoft Corp. | | | 5,031 | | | | 1,668,380 | |
Splunk, Inc.* | | | 1,489 | | | | 245,417 | |
| | | | | | | | |
| | | | | | | 2,344,986 | |
| | | | | | | | |
See Notes to Financial Statements.
28
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Technology Hardware, Storage & Peripherals (1.1%) | |
Apple, Inc. | | | 5,620 | | | $ | 841,876 | |
| | | | | | | | |
Total Information Technology | | | | | | | 5,648,785 | |
| | | | | | | | |
Materials (0.7%) | |
Chemicals (0.7%) | |
DuPont de Nemours, Inc. | | | 3,617 | | | | 251,743 | |
International Flavors & Fragrances, Inc. | | | 1,570 | | | | 231,497 | |
| | | | | | | | |
| | | | | | | 483,240 | |
| | | | | | | | |
Total Materials | | | | | | | 483,240 | |
| | | | | | | | |
Real Estate (0.4%) | |
Equity Real Estate Investment Trusts (REITs) (0.4%) | |
American Tower Corp. (REIT) | | | 1,178 | | | | 332,161 | |
| | | | | | | | |
Total Real Estate | | | | | | | 332,161 | |
| | | | | | | | |
Total Common Stocks(26.1%)
(Cost $12,589,018) | | | | | | | 19,636,152 | |
| | | | | | | | |
INVESTMENT COMPANIES: | |
Fixed Income (5.8%) | |
DoubleLine Floating Rate Fund , Class I‡ | | | 245,039 | | | | 2,340,120 | |
DoubleLine Global Bond Fund , Class I‡ | | | 207,851 | | | | 2,076,431 | |
| | | | | | | | |
Total Investment Companies (5.8%)
(Cost $4,460,071) | | | | | | | 4,416,551 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Company (0.1%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 54,092 | | | | 54,119 | |
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
U.S. Treasury Obligations (25.7%) | | | | | |
U.S. Treasury Bills
0.07%, 12/2/21 (p) | | $ | 1,500,000 | | | | 1,499,911 | |
0.09%, 12/30/21 (p) | | | 5,000,000 | | | | 4,999,259 | |
0.06%, 2/24/22 (p) | | | 4,000,000 | | | | 3,999,266 | |
0.06%, 4/21/22 (p) | | | 2,000,000 | | | | 1,999,412 | |
0.08%, 6/16/22 (p) | | | 3,500,000 | | | | 3,498,270 | |
0.13%, 9/8/22 (p) | | | 3,400,000 | | | | 3,396,295 | |
| | | | | | | | |
Total U.S. Treasury Obligations | | | | | | | 19,392,413 | |
| | | | | | | | |
Total Short-Term Investments (25.8%)
(Cost $19,448,202) | | | | | | | 19,446,532 | |
| | | | | | | | |
Total Investments in Securities (96.3%)
(Cost $65,408,150) | | | | | | | 72,555,612 | |
Other Assets Less Liabilities (3.7%) | | | | | | | 2,754,463 | |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 75,310,075 | |
| | | | | | | | |
| ‡ | All, or a portion, of the security is an affiliated company as defined under the Investment Company Act of 1940. |
| § | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At October 31, 2021, the market value of these securities amounted to $6,230,449 or 8.3% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
| (e) | Step Bond - Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2021. Maturity date disclosed is the ultimate maturity date. |
| (k) | Variable or floating rate security, linked to the referenced benchmark. The interest rate shown was the current rate as of October 31, 2021. |
| (l) | Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. The interest rate shown was the current rate as of October 31, 2021. |
Glossary:
| | ADR | — American Depositary Receipt |
| | CAPE | — Cyclically Adjusted Price Earnings |
| | FHLMC | — Federal Home Loan Mortgage Corp. |
| | FNMA | — Federal National Mortgage Association |
| | GNMA | — Government National Mortgage Association |
| | ICE | — Intercontinental Exchange |
| | LIBOR | — London Interbank Offered Rate |
| | PIK | — Payment-in Kind Security |
| | SOFR | — Secured Overnight Financing Rate |
| | UMBS | — Uniform Mortgage-Backed Securities |
| | USD | — United States Dollar |
See Notes to Financial Statements.
29
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments in companies which were affiliates for the year ended October 31, 2021, were as follows: | |
Security Description | | Shares at
October 31,
2021 | | | Market
Value
October 31,
2020 ($) | | | Purchases
at Cost
($) | | | Proceeds
from
Sales ($) | | | Net
Realized
Gain
(Loss)
($) | | | Change
in Unrealized
Appreciation/
(Depreciation)
($) | | | Market Value
October 31,
2021 ($) | | | Dividend/
Interest
Income
($) | | | Capital Gain
Distributions
($) | |
INVESTMENT COMPANIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
DoubleLine Floating Rate Fund, Class I | | | 245,039 | | | | 1,873,892 | | | | 399,999 | | | | — | | | | — | | | | 66,229 | | | | 2,340,120 | | | | 66,588 | | | | — | |
DoubleLine Global Bond Fund, Class I | | | 207,851 | | | | 2,619,197 | | | | — | | | | (400,000 | ) | | | 23,372 | | | | (166,138 | ) | | | 2,076,431 | | | | 6,010 | | | | 41,983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | 4,493,089 | | | | 399,999 | | | | (400,000 | ) | | | 23,372 | | | | (99,909 | ) | | | 4,416,551 | | | | 72,598 | | | | 41,983 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
OTC Total return swap contracts outstanding as of October 31, 2021 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Reference Entity | | Payments Made
by Fund | | Payments Received by Fund | | Frequency of
Payments
Made/Received | | Counterparty | | Maturity
Date | | | Notional
Amount | | | Value and
Unrealized
Appreciation
(Depreciation)
($) | |
Shiller Barclays CAPE US Sector II ER USD Index | | 0.40% and decrease in total return of index | | Increase in total return of index | | At termination | | Barclays Bank plc | | | 11/16/2021 | | | | USD 20,200,000 | | | | 677,542 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 677,542 | |
| | | | | | | | | | | | | | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Asset-Backed Securities | | $ | — | | | $ | 1,349,684 | | | $ | — | | | $ | 1,349,684 | |
Collateralized Mortgage Obligations | | | — | | | | 8,586,816 | | | | — | | | | 8,586,816 | |
Commercial Mortgage-Backed Security | | | — | | | | 13,888 | | | | — | | | | 13,888 | |
Common Stocks | | | | | | | | | | | | | | | | |
Communication Services | | | 2,586,449 | | | | — | | | | — | | | | 2,586,449 | |
Consumer Discretionary | | | 1,873,715 | | | | — | | | | — | | | | 1,873,715 | |
Consumer Staples | | | 1,304,084 | | | | — | | | | — | | | | 1,304,084 | |
Energy | | | 535,417 | | | | — | | | | — | | | | 535,417 | |
Financials | | | 2,541,819 | | | | — | | | | — | | | | 2,541,819 | |
Health Care | | | 2,747,066 | | | | — | | | | — | | | | 2,747,066 | |
Industrials | | | 1,583,416 | | | | — | | | | — | | | | 1,583,416 | |
Information Technology | | | 5,648,785 | | | | — | | | | — | | | | 5,648,785 | |
Materials | | | 483,240 | | | | — | | | | — | | | | 483,240 | |
Real Estate | | | 332,161 | | | | — | | | | — | | | | 332,161 | |
See Notes to Financial Statements.
30
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Corporate Bonds | | | | | | | | | | | | | | | | |
Communication Services | | $ | — | | | $ | 875,287 | | | $ | — | | | $ | 875,287 | |
Consumer Discretionary | | | — | | | | 1,196,132 | | | | — | | | | 1,196,132 | |
Consumer Staples | | | — | | | | 766,546 | | | | — | | | | 766,546 | |
Energy | | | — | | | | 1,285,450 | | | | — | | | | 1,285,450 | |
Financials | | | — | | | | 1,718,426 | | | | — | | | | 1,718,426 | |
Health Care | | | — | | | | 1,108,185 | | | | — | | | | 1,108,185 | |
Industrials | | | — | | | | 911,438 | | | | — | | | | 911,438 | |
Information Technology | | | — | | | | 414,499 | | | | — | | | | 414,499 | |
Materials | | | — | | | | 430,150 | | | | — | | | | 430,150 | |
Real Estate | | | — | | | | 373,070 | | | | — | | | | 373,070 | |
Utilities | | | — | | | | 655,313 | | | | — | | | | 655,313 | |
Investment Companies | | | 4,416,551 | | | | — | | | | — | | | | 4,416,551 | |
Mortgage-Backed Securities | | | — | | | | 2,252,683 | | | | — | | | | 2,252,683 | |
Short-Term Investments | | | | | | | | |
Investment Company | | | 54,119 | | | | — | | | | — | | | | 54,119 | |
U.S. Treasury Obligations | | | — | | | | 19,392,413 | | | | — | | | | 19,392,413 | |
Total Return Swaps | | | — | | | | 677,542 | | | | — | | | | 677,542 | |
U.S. Treasury Obligations | | | — | | | | 7,118,810 | | | | — | | | | 7,118,810 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 24,106,822 | | | $ | 49,126,332 | | | $ | — | | | $ | 73,233,154 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 24,106,822 | | | $ | 49,126,332 | | | $ | — | | | $ | 73,233,154 | |
| | | | | | | | | | | | | | | | |
Fair Values of Derivative Instruments as of October 31, 2021:
| | | | | | |
| | | Statement of Assets and Liabilities | |
Derivatives Contracts^ | | Asset Derivatives | | Fair Value | |
Equity contracts | | Receivables, Net assets – Unrealized appreciation | | $ | 677,542 | |
| | | | | | |
Total | | | | $ | 677,542 | |
| | | | | | |
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2021:
| | | | | | | | |
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Swaps | | | Total | |
Equity contracts | | $ | 4,073,023 | | | $ | 4,073,023 | |
| | | | | | | | |
Total | | $ | 4,073,023 | | | $ | 4,073,023 | |
| | | | | | | | |
| | | | | | | | |
| Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Swaps | | | Total | |
Equity contracts | | $ | 1,231,703 | | | $ | 1,231,703 | |
| | | | | | | | |
Total | | $ | 1,231,703 | | | $ | 1,231,703 | |
| | | | | | | | |
^ The Fund held swaps contracts as a substitute for investing in conventional securities.
The Fund held swap contracts with an average notional value of approximately $16,992,000 during the year ended October 31, 2021.
See Notes to Financial Statements.
31
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following table presents the Fund’s gross derivative assets and liabilities by counterparty net of amounts available for offset under netting arrangements and any related collateral received or pledged by the Fund as of October 31, 2021:
| | | | | | | | | | | | | | | | |
Counterparty | | Gross Amount of
Derivative Assets
Presented in the
Statement of Assets
and Liabilities (a) | | | Derivatives
Available
for Offset | | | Collateral
Pledged | | | Net Amount
Due from
Counterparty | |
Barclays Bank plc | | $ | 677,542 | | | $ | — | | | $ | (534,000 | ) | | $ | 143,542 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 677,542 | | | $ | — | | | $ | (534,000 | ) | | $ | 143,542 | |
| | | | | | | | | | | | | | | | |
| (a) | For financial reporting purposes the Fund does not offset derivative assets and derivative liabilities subject to master netting arrangements in the Statement of Assets and Liabilities. |
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 17,807,486 | |
Long-term U.S. government debt securities | | | 36,674,386 | |
| | | | |
| | $ | 54,481,872 | |
| | | | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 24,007,558 | |
Long-term U.S. government debt securities | | | 36,022,110 | |
| | | | |
| | $ | 60,029,668 | |
| | | | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 7,746,000 | |
Aggregate gross unrealized depreciation | | | (440,450 | ) |
| | | | |
Net unrealized appreciation | | $ | 7,305,550 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 65,927,604 | |
| | | | |
See Notes to Financial Statements.
32
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value: | | | | |
Affiliated Issuers (Cost $4,460,071) | | $ | 4,416,551 | |
Unaffiliated Issuers (Cost $60,948,079) | | | 68,139,061 | |
Cash | | | 2,803,406 | |
Market value on OTC swap contracts | | | 677,542 | |
Receivable for securities sold | | | 324,537 | |
Dividends, interest and other receivables | | | 162,052 | |
Receivable for Fund shares sold | | | 18,047 | |
Prepaid registration and filing fees | | | 10,790 | |
Receivable from Adviser | | | 269 | |
Other assets | | | 509 | |
| | | | |
Total assets | | | 76,552,764 | |
| | | | |
LIABILITIES | |
Payable for securities purchased | | | 1,100,391 | |
Investment advisory fees payable | | | 39,168 | |
Administrative fees payable | | | 9,471 | |
Payable for Fund shares redeemed | | | 9,000 | |
Transfer agent fees payable | | | 4,497 | |
Distribution fees payable – Class A | | | 1,068 | |
Trustees’ fees payable | | | 85 | |
Distribution fees payable – Class R | | | 84 | |
Accrued expenses | | | 78,925 | |
| | | | |
Total liabilities | | | 1,242,689 | |
| | | | |
NET ASSETS | | $ | 75,310,075 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 61,107,538 | |
Total distributable earnings (loss) | | | 14,202,537 | |
| | | | |
Net assets | | $ | 75,310,075 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $5,103,510 / 406,842 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.54 | |
Maximum sales charge (5.50% of offering price) | | | 0.73 | |
| | | | |
Maximum offering price per share | | $ | 13.27 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $70,007,271 / 5,567,333 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.57 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $199,294 / 15,925 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.51 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Interest | | $ | 950,962 | |
Dividends ($72,598 of dividend income received from affiliates) (net of $1,880 foreign withholding tax) | | | 295,465 | |
| | | | |
Total income | | | 1,246,427 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 531,211 | |
Administrative fees | | | 106,243 | |
Professional fees | | | 83,371 | |
Transfer agent fees | | | 41,450 | |
Registration and filing fees | | | 40,417 | |
Printing and mailing expenses | | | 32,483 | |
Custodian fees | | | 17,700 | |
Distribution fees – Class A | | | 10,770 | |
Trustees’ fees | | | 3,399 | |
Distribution fees – Class R | | | 966 | |
Miscellaneous | | | 17,103 | |
| | | | |
Gross expenses | | | 885,113 | |
Less: Waiver from investment adviser | | | (229,280 | ) |
| | | | |
Net expenses | | | 655,833 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 590,594 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities ($23,372 realized gain (loss) from affiliates) | | | 2,489,340 | |
Net distributions of realized gain received from underlying funds (All realized gains received from affiliates) | | | 41,983 | |
Swaps | | | 4,073,023 | |
| | | | |
Net realized gain (loss) | | | 6,604,346 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | | | | |
Investments in securities ($(99,909) of change in unrealized appreciation (depreciation) from affiliates) | | | 3,318,165 | |
Swaps | | | 1,231,703 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 4,549,868 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 11,154,214 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 11,744,808 | |
| | | | |
See Notes to Financial Statements.
33
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 590,594 | | | $ | 835,872 | |
Net realized gain (loss) | | | 6,604,346 | | | | 3,987,446 | |
Net change in unrealized appreciation (depreciation) | | | 4,549,868 | | | | (88,878 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 11,744,808 | | | | 4,734,440 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (281,348 | ) | | | (113,973 | ) |
Class I | | | (5,105,769 | ) | | | (3,268,817 | ) |
Class R | | | (13,831 | ) | | | (8,405 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (5,400,948 | ) | | | (3,391,195 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 107,837 and 315,066 shares, respectively ] | | | 1,302,853 | | | | 3,448,824 | |
Capital shares issued in reinvestment of dividends [ 24,050 and 9,946 shares, respectively ] | | | 272,242 | | | | 108,112 | |
Capital shares repurchased [ (31,925) and (203,489) shares, respectively ] | | | (379,180 | ) | | | (2,244,959 | ) |
| | | | | | | | |
Total Class A transactions | | | 1,195,915 | | | | 1,311,977 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 208,108 and 164,950 shares, respectively ] | | | 2,512,727 | | | | 1,862,167 | |
Capital shares issued in reinvestment of dividends [ 38,122 and 19,730 shares, respectively ] | | | 431,541 | | | | 214,461 | |
Capital shares repurchased [ (99,305) and (95,972) shares, respectively ] | | | (1,178,853 | ) | | | (983,589 | ) |
| | | | | | | | |
Total Class I transactions | | | 1,765,415 | | | | 1,093,039 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 310 and 382 shares, respectively ] | | | 3,724 | | | | 4,171 | |
Capital shares issued in reinvestment of dividends [ 442 and 258 shares, respectively ] | | | 5,005 | | | | 2,814 | |
Capital shares repurchased [ (472) and (21) shares, respectively ] | | | (5,867 | ) | | | (233 | ) |
| | | | | | | | |
Total Class R transactions | | | 2,862 | | | | 6,752 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 2,964,192 | | | | 2,411,768 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 9,308,052 | | | | 3,755,013 | |
NET ASSETS: | |
Beginning of year | | | 66,002,023 | | | | 62,247,010 | |
| | | | | | | | |
End of year | | $ | 75,310,075 | | | $ | 66,002,023 | |
| | | | | | | | |
See Notes to Financial Statements.
34
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.47 | | | $ | 11.23 | | | $ | 10.61 | | | $ | 11.25 | | | $ | 10.53 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.07 | | | | 0.12 | | | | 0.18 | | | | 0.15 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 1.91 | | | | 0.70 | | | | 0.91 | | | | (0.01 | ) | | | 0.87 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.98 | | | | 0.82 | | | | 1.09 | | | | 0.14 | | | | 0.98 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.12 | ) | | | (0.18 | ) | | | (0.17 | ) | | | (0.13 | ) | | | (0.09 | ) |
Distributions from net realized gains | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) | | | (0.65 | ) | | | (0.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.91 | ) | | | (0.58 | ) | | | (0.47 | ) | | | (0.78 | ) | | | (0.26 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.54 | | | $ | 11.47 | | | $ | 11.23 | | | $ | 10.61 | | | $ | 11.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 18.12 | % | | | 7.64 | % | | | 10.73 | % | | | 1.19 | % | | | 9.46 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 5,104 | | | $ | 3,520 | | | $ | 2,081 | | | $ | 2,440 | | | $ | 1,271 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.16 | %(j) | | | 1.16 | %(j) | | | 1.15 | %(j) | | | 1.20 | %(m) | | | 1.21 | % |
Before waivers (f) | | | 1.48 | % | | | 1.61 | % | | | 1.67 | % | | | 1.66 | % | | | 1.75 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f)(x) | | | 0.59 | % | | | 1.05 | % | | | 1.70 | % | | | 1.39 | % | | | 1.02 | % |
Before waivers (f)(x) | | | 0.28 | % | | | 0.60 | % | | | 1.19 | % | | | 0.93 | % | | | 0.48 | % |
Portfolio turnover rate^ | | | 106 | % | | | 131 | % | | | 63 | % | | | 79 | % | | | 86 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.49 | | | $ | 11.25 | | | $ | 10.63 | | | $ | 11.27 | | | $ | 10.55 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.10 | | | | 0.15 | | | | 0.21 | | | | 0.18 | | | | 0.14 | |
Net realized and unrealized gain (loss) | | | 1.92 | | | | 0.70 | | | | 0.91 | | | | (0.01 | ) | | | 0.86 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 2.02 | | | | 0.85 | | | | 1.12 | | | | 0.17 | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.15 | ) | | | (0.21 | ) | | | (0.20 | ) | | | (0.16 | ) | | | (0.11 | ) |
Distributions from net realized gains | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) | | | (0.65 | ) | | | (0.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.94 | ) | | | (0.61 | ) | | | (0.50 | ) | | | (0.81 | ) | | | (0.28 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.57 | | | $ | 11.49 | | | $ | 11.25 | | | $ | 10.63 | | | $ | 11.27 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 18.47 | % | | | 7.89 | % | | | 11.00 | % | | | 1.44 | % | | | 9.68 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 70,007 | | | $ | 62,303 | | | $ | 59,997 | | | $ | 57,126 | | | $ | 59,101 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.91 | %(j) | | | 0.91 | %(j) | | | 0.90 | %(j) | | | 0.95 | %(m) | | | 0.96 | % |
Before waivers (f) | | | 1.23 | % | | | 1.36 | % | | | 1.42 | % | | | 1.41 | % | | | 1.50 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f)(x) | | | 0.85 | % | | | 1.35 | % | | | 1.95 | % | | | 1.62 | % | | | 1.27 | % |
Before waivers (f)(x) | | | 0.53 | % | | | 0.89 | % | | | 1.43 | % | | | 1.16 | % | | | 0.72 | % |
Portfolio turnover rate^ | | | 106 | % | | | 131 | % | | | 63 | % | | | 79 | % | | | 86 | % |
See Notes to Financial Statements.
35
1290 FUNDS
1290 DOUBLELINE DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.44 | | | $ | 11.21 | | | $ | 10.59 | | | $ | 11.23 | | | $ | 10.52 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.04 | | | | 0.09 | | | | 0.15 | | | | 0.12 | | | | 0.08 | |
Net realized and unrealized gain (loss) | | | 1.92 | | | | 0.70 | | | | 0.91 | | | | (0.01 | ) | | | 0.87 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.96 | | | | 0.79 | | | | 1.06 | | | | 0.11 | | | | 0.95 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.10 | ) | | | (0.16 | ) | | | (0.14 | ) | | | (0.10 | ) | | | (0.07 | ) |
Distributions from net realized gains | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) | | | (0.65 | ) | | | (0.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.89 | ) | | | (0.56 | ) | | | (0.44 | ) | | | (0.75 | ) | | | (0.24 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.51 | | | $ | 11.44 | | | $ | 11.21 | | | $ | 10.59 | | | $ | 11.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 17.87 | % | | | 7.30 | % | | | 10.46 | % | | | 0.93 | % | | | 9.15 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 199 | | | $ | 179 | | | $ | 168 | | | $ | 156 | | | $ | 112 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.41 | %(j) | | | 1.41 | %(j) | | | 1.40 | %(j) | | | 1.45 | %(m) | | | 1.46 | % |
Before waivers (f) | | | 1.73 | % | | | 1.86 | % | | | 1.92 | % | | | 1.91 | % | | | 2.01 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f)(x) | | | 0.35 | % | | | 0.84 | % | | | 1.44 | % | | | 1.13 | % | | | 0.77 | % |
Before waivers (f)(x) | | | 0.03 | % | | | 0.39 | % | | | 0.93 | % | | | 0.67 | % | | | 0.22 | % |
Portfolio turnover rate^ | | | 106 | % | | | 131 | % | | | 63 | % | | | 79 | % | | | 86 | % |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers would be 1.20% for Class A, 0.95% for Class I and 1.45% for Class R. |
| (m) | Including direct and indirect expenses, the net expense ratio after waivers would be 1.25% for Class A, 1.00% for Class I and 1.50% for Class R. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
See Notes to Financial Statements.
36
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
INVESTMENT SUB-ADVISER
| Ø | | GAMCO Asset Management, Inc. |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | |
| | | | | 1 Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 51.10 | % | | | 12.33 | % | | | 9.67 | % |
| | | with Sales Charge (a) | | | 42.92 | | | | 11.06 | | | | 8.79 | |
Fund – Class I Shares* | | | | | 51.57 | | | | 12.61 | | | | 9.94 | |
Fund – Class R Shares* | | | | | 50.80 | | | | 12.06 | | | | 9.40 | |
Fund – Class T Shares*† | | without Sales Charge | | | 51.57 | | | | 12.60 | | | | 9.94 | |
| | | with Sales Charge (b) | | | 47.82 | | | | 12.04 | | | | 9.53 | |
Russell 2500TM Value Index | | | | | 58.14 | | | | 12.20 | | | | 9.47 | |
| |
* Date of inception 11/12/14. † Class T Shares currently are not offered for sale. (a) A 5.50% front-end sales charge was deducted. (b) A 2.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 GAMCO Small/Mid Cap Value Fund and the Russell 2500TM Value Index from 11/12/14 to 10/31/21. The performance of the Russell 2500TM Value Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the Russell 2500TM Value Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratios including acquired fund fees for Class A, I, R and T shares were 1.58%, 1.33%, 1.83% and 1.58%, respectively. The net expense ratios for Class A, I, R and T shares were 1.25%, 1.00%, 1.50% and 1.25%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 51.57% for the year ended October 31, 2021. The Fund’s benchmark, the Russell 2500TM Value Index, returned 58.14% over the same year.
Overview — GAMCO Asset Management, Inc.
The reporting period began with a continuation of the bull market that had started in late March of 2020 and remained intact during the fourth quarter of 2020, driven by unprecedented monetary and fiscal stimulus, the evolving Chinese and U.S. economic recoveries and heightened virus vaccine hopes. The market was not overly focused on the U.S. presidential election last fall and U.S. equities closed 2020 with a December and fourth-quarter rally as many stock indices continued to set multiple record highs.
After the roller coaster of 2020 ended on a high note, stocks posted their second best first half in 23 years with the S&P 500® Index up over 15% during the first half and up over 8% for the second quarter. Value and smaller capitalization stocks continued to lead growth and larger capitalization companies during the first half, but lost ground to them during the second quarter. Reconsidered expectations for economic growth, inflation and interest rates drove the rotation back to growth, including the mega-capitalization technology-related companies that have dominated returns over the last several years.
Slowing growth, surging inflation, supply chain bottlenecks and the spread of the COVID-19 Delta variant dominated third quarter investment discussions. The stock market posted mixed results in the third quarter, with the large stock S&P 500® Index gaining just 0.6% while the broad market Russell 3000® Index
37
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
declined by -0.1%. July and August were up, led again by the “Big Five” companies that comprise roughly 25% of the S&P 500® Index, but September saw a sharp reversal with all major U.S. market indexes falling about 4.5% for the month. Value stocks also declined in September, but at a lower level, as the tug of war between growth and value that has transpired over the last year continued. The third quarter downturn was caused by a confluence of factors. The surging COVID-19 Delta variant in the U.S. and around the world led to the tempering of economic growth forecasts, just when companies were facing increasingly difficult year-over-year comparisons for financial results as they contended with worsening inflation and supply chain issues.
U.S. equities propelled the market higher in October, with major indices achieving all-time highs. Despite the backdrop of supply chain issues, input cost pressures and tight labor markets, corporate earnings season highlighted higher demand and improved margins.
Fund Highlights
The subadvisor buys businesses they believe are selling at a discount to their Private Market Value (the price an informed industrialist would pay for the entire company), with a catalyst in place that could potentially surface values. Industry consolidation, financial engineering (e.g. spin-offs), changes in management and changes in regulation are just a few catalysts in which the Fund is rich. Their philosophy and process focus on fundamental company research and individual stock selection.
Holdings have tended to be domestically focused with strong franchises and often pricing power. The subadvisor says they have never been top-down allocators, trying to chase every trend. Rather, they rely on fundamental bottom-up research informed by their view of the shifting political and economic tides.
While posting strong absolute returns during the period, the Fund slightly trailed its index for the twelve-month period ended October 31, 2021. The Fund’s lower weighting in financial companies was the largest relative detractor to performance in addition to its lower exposure to energy companies. Both of these areas can be viewed as commodities (financial companies to an extent due to their reliance on interest rates), and the Fund’s strength in its industrials and communication services holdings helped to offset some of the underperformance. The Fund is significantly different than its benchmark index, and performance will often not closely track it.
What helped performance during the year?
| • | | The Fund’s exposure to industrial companies provided the largest relative and absolute contribution to return for the year, delivering over 13% in excess return relative to the index. These cyclical businesses reversed initial underperformance in the early stages of the pandemic and began a steady rise following the vaccine announcements in November of 2020 and amidst the reopening economy in 2021. |
| • | | Communication services companies had the second highest relative contribution to return over the year, as advertising spending began to resume following a drop in spending early in the pandemic. Several deals during the period helped to boost performance as companies bid for prized content assets. Univision’s purchase of Grupo Televisa’s content assets and Gray Television’s purchase of 17 of Meredith Corporation’s TV stations as well as IAC’s announcement that it would purchase Meredith’s National Media Group, comprising its digital and magazine business, helped drive performance during the period. Meredith Corporation more than quintupled during the period. |
| • | | Hospitality companies in the consumer discretionary area benefited from a reopening economy, pent up demand and strong resulting outlook going forward. Churchill Downs was up nearly 50% as the company announced a robust growth project pipeline that will drive earnings over the next several years and Golden Entertainment, Caesars Entertainment and Ryman Hospitality more than doubled during the period, boosted by strong bookings activity and room pricing outlook. |
What hurt performance during the year?
| • | | The Fund’s significant underweighting in financial companies (the Fund has about 10% of the Russell 2500 ValueTM’s exposure to this sector), which can be viewed as commodities to an extent because of these companies’ strong reliance on interest rates, was the largest relative detractor from the Fund’s contribution to return for the year. Financial companies were bolstered by an improving economic outlook and rising interest rates over the period as well as expectations for an eventual higher rate outlook in the face of strongly rising inflation. |
| • | | The Fund’s systemic underweight to energy due to our general avoidance of purely commodity driven businesses also detracted from performance during the period. Crude oil prices rose more than 100% over the year fueled by a series of supply shortages and rising demand against the backdrop of a re-opening economy. |
| • | | The Fund’s lower exposure to technology companies detracted from relative performance during the period. Technology stocks benefited from accelerating adoption of digital goods and services as consumers relied more on internet infrastructure to perform |
38
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
| | many of the activities normally reserved for the physical world over the last year. How these stocks perform in a sustained economic recovery and how large they can get, especially when under increasing government scrutiny, remains a question. |
| | | | |
| | |
Sector Weightings
as of October 31, 2021 | | % of Net Assets | |
Industrials | | | 37.0 | % |
Communication Services | | | 15.6 | |
Consumer Discretionary | | | 10.0 | |
Consumer Staples | | | 9.9 | |
Materials | | | 9.7 | |
Health Care | | | 5.2 | |
Investment Company | | | 3.6 | |
Utilities | | | 3.0 | |
Financials | | | 2.0 | |
Information Technology | | | 1.7 | |
Energy | | | 1.0 | |
Real Estate | | | 0.9 | |
Cash and Other | | | 0.4 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class R and Class T shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class A | |
Actual | | | $1,000.00 | | | | $987.40 | | | | $6.23 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.94 | | | | 6.33 | |
Class I | |
Actual | | | 1,000.00 | | | | 988.50 | | | | 4.98 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.20 | | | | 5.06 | |
Class R | |
Actual | | | 1,000.00 | | | | 986.10 | | | | 7.48 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,017.68 | | | | 7.60 | |
Class T** | |
Actual | | | 1,000.00 | | | | 988.00 | | | | 4.98 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.20 | | | | 5.06 | |
| |
* Expenses are equal to the Portfolio’s A, I, R and T shares annualized expense ratio of 1.24%, 0.99%, 1.49% and 0.99%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). ** Class T shares currently are not offered for sale. | |
39
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
COMMON STOCKS: | | | | | | | | |
Communication Services (15.6%) | |
Diversified Telecommunication Services (0.0%) | |
EchoStar Corp., Class A* | | | 3,000 | | | $ | 70,380 | |
| | | | | | | | |
Entertainment (3.2%) | |
Liberty Media Corp.-Liberty Braves, Class A* | | | 30,000 | | | | 917,100 | |
Liberty Media Corp.-Liberty Braves, Class C* | | | 15,000 | | | | 445,800 | |
Madison Square Garden Entertainment Corp.* | | | 13,000 | | | | 916,110 | |
Madison Square Garden Sports Corp.* | | | 13,500 | | | | 2,558,385 | |
| | | | | | | | |
| | | | | | | 4,837,395 | |
| | | | | | | | |
Media (11.4%) | |
Altice USA, Inc., Class A* | | | 9,000 | | | | 146,700 | |
AMC Networks, Inc., Class A* | | | 22,000 | | | | 875,380 | |
Clear Channel Outdoor Holdings, Inc.* | | | 400,000 | | | | 1,160,000 | |
Corus Entertainment, Inc., Class B | | | 155,000 | | | | 702,610 | |
EW Scripps Co. (The), Class A | | | 33,000 | | | | 613,800 | |
Grupo Televisa SAB (ADR) | | | 275,000 | | | | 2,783,000 | |
JCDecaux SA* | | | 22,000 | | | | 573,746 | |
Liberty Media Corp.-Liberty SiriusXM, Class A* | | | 4,000 | | | | 199,120 | |
Loral Space & Communications, Inc. | | | 31,000 | | | | 1,544,420 | |
Meredith Corp.* | | | 36,000 | | | | 2,096,640 | |
Nexstar Media Group, Inc., Class A | | | 13,000 | | | | 1,949,090 | |
Sinclair Broadcast Group, Inc., Class A | | | 100,000 | | | | 2,613,000 | |
Sirius XM Holdings, Inc. | | | 34,560 | | | | 210,470 | |
TEGNA, Inc. | | | 18,000 | | | | 353,880 | |
ViacomCBS, Inc., Class A | | | 29,000 | | | | 1,128,970 | |
WideOpenWest, Inc.* | | | 25,036 | | | | 476,936 | |
| | | | | | | | |
| | | | | | | 17,427,762 | |
| | | | | | | | |
Wireless Telecommunication Services (1.0%) | |
Gogo, Inc.* | | | 17,500 | | | | 284,550 | |
Millicom International Cellular SA* | | | 13,000 | | | | 454,480 | |
Telephone and Data Systems, Inc. | | | 10,000 | | | | 187,400 | |
United States Cellular Corp.* | | | 18,000 | | | | 550,260 | |
| | | | | | | | |
| | | | | | | 1,476,690 | |
| | | | | | | | |
Total Communication Services | | | | | | | 23,812,227 | |
| | | | | | | | |
Consumer Discretionary (10.0%) | | | | | | | | |
Auto Components (2.7%) | | | | | | | | |
Dana, Inc. | | | 90,000 | | | | 1,997,100 | |
Gentex Corp. | | | 14,000 | | | | 495,460 | |
Modine Manufacturing Co.* | | | 46,000 | | | | 506,000 | |
Strattec Security Corp.* | | | 33,500 | | | | 1,161,445 | |
| | | | | | | | |
| | | | | | | 4,160,005 | |
| | | | | | | | |
Diversified Consumer Services (0.3%) | |
H&R Block, Inc. | | | 14,000 | | | | 322,980 | |
Terminix Global Holdings, Inc.* | | | 3,000 | | | | 121,440 | |
| | | | | | | | |
| | | | | | | 444,420 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (2.7%) | |
Bally’s Corp.* | | | 3,500 | | | | 160,335 | |
Caesars Entertainment, Inc.* | | | 4,000 | | | | 437,840 | |
Churchill Downs, Inc. | | | 3,500 | | | | 805,000 | |
Dover Motorsports, Inc. | | | 30,000 | | | | 67,800 | |
GAN Ltd.* | | | 30,000 | | | | 428,400 | |
Golden Entertainment, Inc.* | | | 22,000 | | | | 1,143,340 | |
Nathan’s Famous, Inc. | | | 16,515 | | | | 1,032,188 | |
Wynn Resorts Ltd.* | | | 1,000 | | | | 89,800 | |
| | | | | | | | |
| | | | | | | 4,164,703 | |
| | | | | | | | |
Household Durables (1.7%) | |
Bassett Furniture Industries, Inc. | | | 25,500 | | | | 430,695 | |
Hunter Douglas NV* | | | 10,000 | | | | 1,190,680 | |
Lennar Corp., Class B | | | 11,000 | | | | 902,880 | |
| | | | | | | | |
| | | | | | | 2,524,255 | |
| | | | | | | | |
Internet & Direct Marketing Retail (0.1%) | |
Lands’ End, Inc.* | | | 3,000 | | | | 78,840 | |
| | | | | | | | |
Leisure Products (1.7%) | |
Brunswick Corp. | | | 19,000 | | | | 1,768,710 | |
Johnson Outdoors, Inc., Class A | | | 5,000 | | | | 530,900 | |
Mattel, Inc.* | | | 16,000 | | | | 348,960 | |
| | | | | | | | |
| | | | | | | 2,648,570 | |
| | | | | | | | |
Specialty Retail (0.8%) | |
AutoNation, Inc.* | | | 8,000 | | | | 968,960 | |
Monro, Inc. | | | 5,000 | | | | 308,800 | |
| | | | | | | | |
| | | | | | | 1,277,760 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 15,298,553 | |
| | | | | | | | |
Consumer Staples (9.9%) | | | | | | | | |
Beverages (2.1%) | | | | | | | | |
National Beverage Corp. | | | 15,000 | | | | 846,000 | |
Remy Cointreau SA | | | 12,000 | | | | 2,422,051 | |
| | | | | | | | |
| | | | | | | 3,268,051 | |
| | | | | | | | |
Food & Staples Retailing (0.8%) | |
Casey’s General Stores, Inc. | | | 1,800 | | | | 344,772 | |
Ingles Markets, Inc., Class A | | | 9,000 | | | | 622,710 | |
Village Super Market, Inc., Class A | | | 10,383 | | | | 231,229 | |
| | | | | | | | |
| | | | | | | 1,198,711 | |
| | | | | | | | |
Food Products (4.7%) | |
Bunge Ltd. | | | 12,000 | | | | 1,111,680 | |
Calavo Growers, Inc. | | | 30,000 | | | | 1,206,000 | |
Farmer Bros Co.* | | | 100,000 | | | | 755,000 | |
Hain Celestial Group, Inc. (The)* | | | 13,000 | | | | 583,310 | |
J M Smucker Co. (The) | | | 15,000 | | | | 1,842,900 | |
Maple Leaf Foods, Inc. | | | 60,000 | | | | 1,308,016 | |
McCormick & Co., Inc. (Non-Voting) | | | 3,600 | | | | 292,464 | |
| | | | | | | | |
| | | | | | | 7,099,370 | |
| | | | | | | | |
Household Products (1.6%) | |
Energizer Holdings, Inc. | | | 43,000 | | | | 1,568,210 | |
Spectrum Brands Holdings, Inc. | | | 10,000 | | | | 937,500 | |
| | | | | | | | |
| | | | | | | 2,505,710 | |
| | | | | | | | |
See Notes to Financial Statements.
40
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Personal Products (0.7%) | |
Edgewell Personal Care Co. | | | 30,000 | | | $ | 1,049,700 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 15,121,542 | |
| | | | | | | | |
Energy (1.0%) | | | | | | | | |
Energy Equipment & Services (1.0%) | |
Dril-Quip, Inc.* | | | 33,000 | | | | 777,480 | |
RPC, Inc.* | | | 150,000 | | | | 808,500 | |
| | | | | | | | |
Total Energy | | | | | | | 1,585,980 | |
| | | | | | | | |
Financials (2.0%) | | | | | | | | |
Banks (1.9%) | | | | | | | | |
Atlantic Capital Bancshares, Inc.* | | | 20,000 | | | | 550,200 | |
Cadence Bank | | | 7,700 | | | | 223,454 | |
First Horizon Corp. | | | 5,000 | | | | 84,850 | |
Flushing Financial Corp. | | | 26,000 | | | | 624,520 | |
Renasant Corp. | | | 5,000 | | | | 187,050 | |
Synovus Financial Corp. | | | 25,000 | | | | 1,164,750 | |
| | | | | | | | |
| | | | | | | 2,834,824 | |
| | | | | | | | |
Capital Markets (0.1%) | |
Janus Henderson Group plc | | | 5,000 | | | | 232,500 | |
| | | | | | | | |
Total Financials | | | | | | | 3,067,324 | |
| | | | | | | | |
Health Care (5.2%) | | | | | | | | |
Biotechnology (0.0%) | | | | | | | | |
Clovis Oncology, Inc.* | | | 16,000 | | | | 69,280 | |
| | | | | | | | |
Health Care Equipment & Supplies (2.1%) | |
Cutera, Inc.* | | | 25,000 | | | | 1,075,000 | |
Hill-Rom Holdings, Inc. | | | 5,500 | | | | 851,950 | |
Intersect ENT, Inc.* | | | 12,000 | | | | 323,640 | |
IntriCon Corp.* | | | 25,024 | | | | 425,408 | |
Quidel Corp.* | | | 4,400 | | | | 584,188 | |
| | | | | | | | |
| | | | | | | 3,260,186 | |
| | | | | | | | |
Health Care Providers & Services (1.2%) | |
Option Care Health, Inc.* | | | 22,527 | | | | 615,663 | |
Patterson Cos., Inc. | | | 40,000 | | | | 1,250,400 | |
| | | | | | | | |
| | | | | | | 1,866,063 | |
| | | | | | | | |
Health Care Technology (1.3%) | |
Evolent Health, Inc., Class A* | | | 21,500 | | | | 629,305 | |
Teladoc Health, Inc.* | | | 8,700 | | | | 1,301,433 | |
| | | | | | | | |
| | | | | | | 1,930,738 | |
| | | | | | | | |
Life Sciences Tools & Services (0.2%) | |
Bio-Rad Laboratories, Inc., Class A* | | | 300 | | | | 238,404 | |
| | | | | | | | |
Pharmaceuticals (0.4%) | |
Teva Pharmaceutical Industries Ltd. (ADR)* | | | 62,000 | | | | 541,880 | |
| | | | | | | | |
Total Health Care | | | | | | | 7,906,551 | |
| | | | | | | | |
Industrials (37.0%) | | | | | | | | |
Aerospace & Defense (4.9%) | | | | | | | | |
AAR Corp.* | | | 22,500 | | | | 795,825 | |
Aerojet Rocketdyne Holdings, Inc. | | | 24,000 | | | | 1,056,240 | |
Kaman Corp. | | | 50,000 | | | | 1,789,500 | |
Moog, Inc., Class A | | | 13,000 | | | | 981,890 | |
Moog, Inc., Class B | | | 4,101 | | | | 309,749 | |
Textron, Inc. | | | 34,000 | | | | 2,510,900 | |
| | | | | | | | |
| | | | | | | 7,444,104 | |
| | | | | | | | |
Building Products (1.8%) | |
Armstrong Flooring, Inc.* | | | 110,000 | | | | 312,400 | |
Griffon Corp. | | | 95,000 | | | | 2,516,550 | |
| | | | | | | | |
| | | | | | | 2,828,950 | |
| | | | | | | | |
Commercial Services & Supplies (2.1%) | |
IAA, Inc.* | | | 8,000 | | | | 477,200 | |
KAR Auction Services, Inc.* | | | 11,000 | | | | 161,370 | |
Matthews International Corp., Class A | | | 75,000 | | | | 2,577,750 | |
Team, Inc.* | | | 22,500 | | | | 54,450 | |
| | | | | | | | |
| | | | | | | 3,270,770 | |
| | | | | | | | |
Construction & Engineering (1.8%) | |
Arcosa, Inc. | | | 18,000 | | | | 931,140 | |
Valmont Industries, Inc. | | | 7,500 | | | | 1,792,200 | |
| | | | | | | | |
| | | | | | | 2,723,340 | |
| | | | | | | | |
Electrical Equipment (1.3%) | |
AZZ, Inc. | | | 36,500 | | | | 1,939,245 | |
| | | | | | | | |
Industrial Conglomerates (0.3%) | |
Raven Industries, Inc.* | | | 8,000 | | | | 462,560 | |
| | | | | | | | |
Machinery (19.9%) | |
Astec Industries, Inc. | | | 44,000 | | | | 2,348,720 | |
CIRCOR International, Inc.* | | | 45,000 | | | | 1,284,300 | |
CNH Industrial NV | | | 39,000 | | | | 667,290 | |
Commercial Vehicle Group, Inc.* | | | 98,500 | | | | 988,940 | |
Crane Co. | | | 20,000 | | | | 2,065,600 | |
Donaldson Co., Inc. | | | 1,000 | | | | 60,010 | |
Eastern Co. (The) | | | 30,000 | | | | 720,900 | |
EnPro Industries, Inc. | | | 35,500 | | | | 3,182,930 | |
Flowserve Corp. | | | 48,000 | | | | 1,613,760 | |
Gorman-Rupp Co. (The) | | | 10,000 | | | | 425,200 | |
Graco, Inc. | | | 3,800 | | | | 285,684 | |
Hyster-Yale Materials Handling, Inc. | | | 18,500 | | | | 888,740 | |
Ingersoll Rand, Inc.* | | | 20,000 | | | | 1,075,200 | |
ITT, Inc. | | | 3,500 | | | | 329,245 | |
Kennametal, Inc. | | | 16,000 | | | | 636,000 | |
L B Foster Co., Class A* | | | 28,300 | | | | 450,819 | |
Mueller Industries, Inc. | | | 43,000 | | | | 2,263,520 | |
Mueller Water Products, Inc., Class A | | | 17,000 | | | | 278,970 | |
Park-Ohio Holdings Corp. | | | 42,000 | | | | 979,440 | |
Shyft Group, Inc. (The) | | | 5,000 | | | | 206,050 | |
Snap-on, Inc. | | | 9,000 | | | | 1,829,070 | |
Tennant Co. | | | 7,500 | | | | 595,950 | |
Toro Co. (The) | | | 6,000 | | | | 572,820 | |
Trinity Industries, Inc. | | | 88,000 | | | | 2,468,400 | |
Twin Disc, Inc.* | | | 110,075 | | | | 1,494,818 | |
Watts Water Technologies, Inc., Class A | | | 8,000 | | | | 1,520,160 | |
Welbilt, Inc.* | | | 45,000 | | | | 1,064,700 | |
| | | | | | | | |
| | | | | | | 30,297,236 | |
| | | | | | | | |
Marine (0.5%) | |
Kirby Corp.* | | | 14,000 | | | | 733,740 | |
| | | | | | | | |
Trading Companies & Distributors (4.4%) | |
Ashtead Group plc | | | 3,000 | | | | 251,430 | |
GATX Corp. | | | 16,000 | | | | 1,517,600 | |
Herc Holdings, Inc. | | | 27,000 | | | | 4,915,080 | |
| | | | | | | | |
| | | | | | | 6,684,110 | |
| | | | | | | | |
See Notes to Financial Statements.
41
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Transportation Infrastructure (0.0%) | |
Macquarie Infrastructure Holdings LLC | | | 20,000 | | | $ | 73,800 | |
| | | | | | | | |
Total Industrials | | | | | | | 56,457,855 | |
| | | | | | | | |
Information Technology (1.7%) | | | | | | | | |
Communications Equipment (0.1%) | |
Communications Systems, Inc. | | | 25,000 | | | | 95,000 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.4%) | |
Landis+Gyr Group AG* | | | 9,000 | | | | 619,266 | |
| | | | | | | | |
IT Services (0.2%) | |
Cloudflare, Inc., Class A* | | | 500 | | | | 97,360 | |
MoneyGram International, Inc.* | | | 27,000 | | | | 161,190 | |
| | | | | | | | |
| | | | | | | 258,550 | |
| | | | | | | | |
Software (0.4%) | |
A10 Networks, Inc.* | | | 16,500 | | | | 308,385 | |
Mandiant Corp.* | | | 16,000 | | | | 279,040 | |
| | | | | | | | |
| | | | | | | 587,425 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (0.6%) | |
Diebold Nixdorf, Inc.* | | | 112,000 | | | | 1,008,000 | |
| | | | | | | | |
Total Information Technology | | | | | | | 2,568,241 | |
| | | | | | | | |
Materials (9.7%) | | | | | | | | |
Chemicals (7.2%) | | | | | | | | |
Axalta Coating Systems Ltd.* | | | 24,000 | | | | 748,560 | |
Chr Hansen Holding A/S | | | 1,200 | | | | 95,478 | |
Core Molding Technologies, Inc.* | | | 84,000 | | | | 924,000 | |
Element Solutions, Inc. | | | 86,000 | | | | 1,953,060 | |
Ferro Corp.* | | | 65,172 | | | | 1,369,915 | |
GCP Applied Technologies, Inc.* | | | 122,000 | | | | 2,758,420 | |
HB Fuller Co. | | | 12,000 | | | | 846,120 | |
Scotts Miracle-Gro Co. (The) | | | 8,500 | | | | 1,261,910 | |
Tredegar Corp. | | | 50,000 | | | | 603,000 | |
Valvoline, Inc. | | | 12,000 | | | | 407,520 | |
| | | | | | | | |
| | | | | | | 10,967,983 | |
| | | | | | | | |
Containers & Packaging (1.8%) | |
Greif, Inc., Class A | | | 25,000 | | | | 1,617,000 | |
Myers Industries, Inc. | | | 50,950 | | | | 1,048,551 | |
| | | | | | | | |
| | | | | | | 2,665,551 | |
| | | | | | | | |
Metals & Mining (0.7%) | |
Ampco-Pittsburgh Corp.* | | | 40,000 | | | | 224,800 | |
Freeport-McMoRan, Inc. | | | 23,000 | | | | 867,560 | |
| | | | | | | | |
| | | | | | | 1,092,360 | |
| | | | | | | | |
Total Materials | | | | | | | 14,725,894 | |
| | | | | | | | |
Real Estate (0.9%) | | | | | | | | |
Equity Real Estate Investment Trusts (REITs) (0.3%) | |
Ryman Hospitality Properties, Inc. (REIT)* | | | 3,000 | | | | 256,620 | |
Seritage Growth Properties (REIT), Class A* | | | 16,000 | | | | 246,400 | |
| | | | | | | | |
| | | | | | | 503,020 | |
| | | | | | | | |
Real Estate Management & Development (0.6%) | |
St Joe Co. (The) | | | 20,000 | | | | 940,400 | |
| | | | | | | | |
Total Real Estate | | | | | | | 1,443,420 | |
| | | | | | | | |
Utilities (3.0%) | | | | | | | | |
Electric Utilities (0.8%) | | | | | | | | |
PNM Resources, Inc. | | | 24,000 | | | | 1,194,000 | |
| | | | | | | | |
Gas Utilities (1.2%) | |
National Fuel Gas Co. | | | 25,000 | | | | 1,435,750 | |
Southwest Gas Holdings, Inc. | | | 5,000 | | | | 346,250 | |
| | | | | | | | |
| | | | | | | 1,782,000 | |
| | | | | | | | |
Independent Power and Renewable Electricity Producers (1.0%) | |
AES Corp. (The) | | | 61,000 | | | | 1,532,930 | |
| | | | | | | | |
Total Utilities | | | | | | | 4,508,930 | |
| | | | | | | | |
Total Common Stocks (96.0%)
(Cost $116,268,788) | | | | | | | 146,496,517 | |
| | | | | | | | |
| | | |
| | | Number of
Warrants | | | Value
(Note 1) | |
WARRANTS: | | | | | | | | |
Energy (0.0%) | | | | | | | | |
Energy Equipment & Services (0.0%) | |
Weatherford International plc, expiring 12/13/23* | | | 1,117 | | | | 570 | |
| | | | | | | | |
Total Energy | | | | | | | 570 | |
| | | | | | | | |
Health Care (0.0%) | | | | | | | | |
Health Care Providers & Services (0.0%) | |
Option Care Health, Inc., expiring 6/30/25* | | | 22 | | | | 7 | |
| | | | | | | | |
Total Health Care | | | | | | | 7 | |
| | | | | | | | |
Materials (0.0%) | | | | | | | | |
Metals & Mining (0.0%) | |
Ampco-Pittsburgh Corp., expiring 8/1/25* | | | 30,000 | | | | 27,000 | |
| | | | | | | | |
Total Materials | | | | | | | 27,000 | |
| | | | | | | | |
Total Warrants (0.0%)
(Cost $—) | | | | | | | 27,577 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENT: | | | | | | | | |
Investment Company (3.6%) | | | | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 5,453,413 | | | | 5,456,140 | |
| | | | | | | | |
Total Short-Term
Investment (3.6%)
(Cost $5,456,140) | | | | | | | 5,456,140 | |
| | | | | | | | |
Total Investments in
Securities (99.6%)
(Cost $121,724,928) | | | | | | | 151,980,234 | |
Other Assets Less Liabilities (0.4%) | | | | | | | 589,958 | |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 152,570,192 | |
| | | | | | | | |
Glossary:
| | ADR | — American Depositary Receipt |
See Notes to Financial Statements.
42
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks | | | | | | | | | | | | | | | | |
Communication Services | | $ | 23,238,481 | | | $ | 573,746 | | | $ | — | | | $ | 23,812,227 | |
Consumer Discretionary | | | 14,107,873 | | | | 1,190,680 | | | | — | | | | 15,298,553 | |
Consumer Staples | | | 12,407,027 | | | | 2,714,515 | | | | — | | | | 15,121,542 | |
Energy | | | 1,585,980 | | | | — | | | | — | | | | 1,585,980 | |
Financials | | | 3,067,324 | | | | — | | | | — | | | | 3,067,324 | |
Health Care | | | 7,906,551 | | | | — | | | | — | | | | 7,906,551 | |
Industrials | | | 55,175,776 | | | | 1,282,079 | | | | — | | | | 56,457,855 | |
Information Technology | | | 1,948,975 | | | | 619,266 | | | | — | | | | 2,568,241 | |
Materials | | | 14,630,416 | | | | 95,478 | | | | — | | | | 14,725,894 | |
Real Estate | | | 1,443,420 | | | | — | | | | — | | | | 1,443,420 | |
Utilities | | | 4,508,930 | | | | — | | | | — | | | | 4,508,930 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 5,456,140 | | | | — | | | | — | | | | 5,456,140 | |
Warrants | | | | | | | | | | | | | | | | |
Energy | | | 570 | | | | — | | | | — | | | | 570 | |
Health Care | | | — | | | | 7 | | | | — | | | | 7 | |
Materials | | | — | | | | 27,000 | | | | — | | | | 27,000 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 145,477,463 | | | $ | 6,502,771 | | | $ | — | | | $ | 151,980,234 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 145,477,463 | | | $ | 6,502,771 | | | $ | — | | | $ | 151,980,234 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 59,897,966 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 46,779,883 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 34,611,570 | |
Aggregate gross unrealized depreciation | | | (6,897,631 | ) |
| | | | |
Net unrealized appreciation | | $ | 27,713,939 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 124,266,295 | |
| | | | |
For the year ended October 31, 2021, the Fund incurred approximately $1,979 as brokerage commissions with G. Research, an affiliated broker/dealer.
See Notes to Financial Statements.
43
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value (Cost $121,724,928) | | $ | 151,980,234 | |
Cash | | | 331,000 | |
Foreign cash (Cost $7,364) | | | 7,593 | |
Receivable for Fund shares sold | | | 439,878 | |
Dividends, interest and other receivables | | | 42,548 | |
Prepaid registration and filing fees | | | 26,644 | |
Other assets | | | 1,176 | |
| | | | |
Total assets | | | 152,829,073 | |
| | | | |
LIABILITIES | |
Investment advisory fees payable | | | 73,799 | |
Payable for Fund shares redeemed | | | 70,612 | |
Transfer agent fees payable | | | 24,383 | |
Administrative fees payable | | | 19,299 | |
Distribution fees payable – Class A | | | 1,249 | |
Distribution fees payable – Class R | | | 447 | |
Accrued expenses | | | 69,092 | |
| | | | |
Total liabilities | | | 258,881 | |
| | | | |
NET ASSETS | | $ | 152,570,192 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 116,301,836 | |
Total distributable earnings (loss) | | | 36,268,356 | |
| | | | |
Net assets | | $ | 152,570,192 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $5,904,489 / 343,395 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.19 | |
Maximum sales charge (5.50% of offering price) | | | 1.00 | |
| | | | |
Maximum offering price per share | | $ | 18.19 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $145,393,786 / 8,433,973 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.24 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $1,096,407 / 64,216 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.07 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $175,510 / 10,179 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.24 | |
Maximum sales charge (2.50% of offering price) | | | 0.44 | |
| | | | |
Maximum offering price per share | | $ | 17.68 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends (net of $20,138 foreign withholding tax) | | $ | 2,546,978 | |
Interest | | | 90 | |
| | | | |
Total income | | | 2,547,068 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 1,086,109 | |
Administrative fees | | | 217,223 | |
Transfer agent fees | | | 155,750 | |
Professional fees | | | 86,512 | |
Printing and mailing expenses | | | 54,885 | |
Registration and filing fees | | | 44,686 | |
Custodian fees | | | 15,575 | |
Distribution fees – Class A | | | 13,038 | |
Trustees’ fees | | | 6,547 | |
Distribution fees – Class R | | | 5,031 | |
Distribution fees – Class T** | | | 418 | |
Miscellaneous | | | 25,053 | |
| | | | |
Gross expenses | | | 1,710,827 | |
Less: Waiver from investment adviser | | | (251,731 | ) |
Waiver from distributor | | | (418 | ) |
| | | | |
Net expenses | | | 1,458,678 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 1,088,390 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | 11,729,198 | |
Foreign currency transactions | | | (236 | ) |
| | | | |
Net realized gain (loss) | | | 11,728,962 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | |
Investments in securities | | | 35,891,603 | |
Foreign currency translations | | | (47 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 35,891,556 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 47,620,518 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 48,708,908 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
44
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 1,088,390 | | | $ | 558,635 | |
Net realized gain (loss) | | | 11,728,962 | | | | (5,634,997 | ) |
Net change in unrealized appreciation (depreciation) | | | 35,891,556 | | | | (2,560,107 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 48,708,908 | | | | (7,636,469 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (12,078 | ) | | | (60,182 | ) |
Class I | | | (534,394 | ) | | | (1,732,560 | ) |
Class R | | | (785 | ) | | | (12,206 | ) |
Class T** | | | (697 | ) | | | (2,304 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (547,954 | ) | | | (1,807,252 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 90,890 and 70,938 shares, respectively ] | | | 1,514,997 | | | | 814,267 | |
Capital shares issued in reinvestment of dividends [ 835 and 4,524 shares, respectively ] | | | 11,650 | | | | 58,133 | |
Capital shares repurchased [ (46,339) and (90,086) shares, respectively ] | | | (753,049 | ) | | | (1,052,654 | ) |
| | | | | | | | |
Total Class A transactions | | | 773,598 | | | | (180,254 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 3,882,154 and 1,728,565 shares, respectively ] | | | 63,254,932 | | | | 19,427,004 | |
Capital shares issued in reinvestment of dividends [ 22,687 and 78,814 shares, respectively ] | | | 316,480 | | | | 1,012,764 | |
Capital shares repurchased [ (2,865,531) and (2,068,613) shares, respectively ] | | | (48,733,330 | ) | | | (22,454,789 | ) |
| | | | | | | | |
Total Class I transactions | | | 14,838,082 | | | | (2,015,021 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 25,034 and 13,459 shares, respectively ] | | | 419,982 | | | | 146,764 | |
Capital shares issued in reinvestment of dividends [ 47 and 820 shares, respectively ] | | | 651 | | | | 10,489 | |
Capital shares repurchased [ (21,300) and (27,510) shares, respectively ] | | | (360,808 | ) | | | (316,593 | ) |
| | | | | | | | |
Total Class R transactions | | | 59,825 | | | | (159,340 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 15,671,505 | | | | (2,354,615 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 63,832,459 | | | | (11,798,336 | ) |
NET ASSETS: | |
Beginning of year | | | 88,737,733 | | | | 100,536,069 | |
| | | | | | | | |
End of year | | $ | 152,570,192 | | | $ | 88,737,733 | |
| | | | | | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
45
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.41 | | | $ | 12.46 | | | $ | 12.33 | | | $ | 12.83 | | | $ | 10.28 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.09 | #### | | | 0.04 | # | | | 0.05 | | | | 0.03 | | | | 0.06 | ### |
Net realized and unrealized gain (loss) | | | 5.73 | | | | (0.90 | ) | | | 0.22 | | | | (0.25 | ) | | | 2.67 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 5.82 | | | | (0.86 | ) | | | 0.27 | | | | (0.22 | ) | | | 2.73 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.04 | ) | | | (0.04 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.02 | ) |
Distributions from net realized gains | | | — | | | | (0.15 | ) | | | (0.12 | ) | | | (0.25 | ) | | | (0.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.04 | ) | | | (0.19 | ) | | | (0.14 | ) | | | (0.28 | ) | | | (0.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.19 | | | $ | 11.41 | | | $ | 12.46 | | | $ | 12.33 | | | $ | 12.83 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 51.10 | % | | | (7.04 | )% | | | 2.29 | % | | | (1.84 | )% | | | 26.72 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 5,904 | | | $ | 3,400 | | | $ | 3,896 | | | $ | 3,599 | | | $ | 2,063 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.24 | %(j) | | | 1.25 | %(j) | | | 1.24 | %(j) | | | 1.24 | %(j) | | | 1.27 | % |
Before waivers and reimbursements (f) | | | 1.42 | % | | | 1.58 | % | | | 1.66 | % | | | 1.79 | % | | | 2.72 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.55 | %(bb) | | | 0.40 | %(g) | | | 0.39 | % | | | 0.26 | % | | | 0.48 | %(aa) |
Before waivers and reimbursements (f) | | | 0.37 | %(bb) | | | 0.07 | %(g) | | | (0.03 | )% | | | (0.28 | )% | | | (0.97 | )%(aa) |
Portfolio turnover rate^ | | | 35 | % | | | 19 | % | | | 37 | % | | | 49 | % | | | 88 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | | | $ | 12.86 | | | $ | 10.30 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.13 | #### | | | 0.07 | # | | | 0.08 | | | | 0.07 | | | | 0.08 | ### |
Net realized and unrealized gain (loss) | | | 5.75 | | | | (0.91 | ) | | | 0.23 | | | | (0.26 | ) | | | 2.68 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 5.88 | | | | (0.84 | ) | | | 0.31 | | | | (0.19 | ) | | | 2.76 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.07 | ) | | | (0.07 | ) | | | (0.06 | ) | | | (0.06 | ) | | | (0.04 | ) |
Distributions from net realized gains | | | — | | | | (0.15 | ) | | | (0.12 | ) | | | (0.25 | ) | | | (0.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.07 | ) | | | (0.22 | ) | | | (0.18 | ) | | | (0.31 | ) | | | (0.20 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | | | $ | 12.86 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 51.57 | % | | | (6.88 | )% | | | 2.57 | % | | | (1.60 | )% | | | 27.09 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 145,394 | | | $ | 84,537 | | | $ | 95,601 | | | $ | 86,815 | | | $ | 21,317 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.99 | %(j) | | | 1.00 | %(j) | | | 0.99 | %(j) | | | 0.99 | %(j) | | | 1.02 | % |
Before waivers and reimbursements (f) | | | 1.17 | % | | | 1.33 | % | | | 1.41 | % | | | 1.51 | % | | | 2.47 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.76 | %(bb) | | | 0.64 | %(g) | | | 0.64 | % | | | 0.54 | % | | | 0.69 | %(aa) |
Before waivers and reimbursements (f) | | | 0.59 | %(bb) | | | 0.31 | %(g) | | | 0.22 | % | | | 0.03 | % | | | (0.76 | )%(aa) |
Portfolio turnover rate^ | | | 35 | % | | | 19 | % | | | 37 | % | | | 49 | % | | | 88 | % |
See Notes to Financial Statements.
46
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.33 | | | $ | 12.38 | | | $ | 12.26 | | | $ | 12.76 | | | $ | 10.23 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.05 | #### | | | 0.02 | # | | | 0.02 | | | | — | ## | | | 0.03 | ### |
Net realized and unrealized gain (loss) | | | 5.70 | | | | (0.91 | ) | | | 0.22 | | | | (0.25 | ) | | | 2.66 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 5.75 | | | | (0.89 | ) | | | 0.24 | | | | (0.25 | ) | | | 2.69 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.01 | ) | | | (0.01 | ) | | | — | | | | — | | | | — | |
Distributions from net realized gains | | | — | | | | (0.15 | ) | | | (0.12 | ) | | | (0.25 | ) | | | (0.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.01 | ) | | | (0.16 | ) | | | (0.12 | ) | | | (0.25 | ) | | | (0.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.07 | | | $ | 11.33 | | | $ | 12.38 | | | $ | 12.26 | | | $ | 12.76 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 50.80 | % | | | (7.31 | )% | | | 2.02 | % | | | (2.07 | )% | | | 26.49 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 1,096 | | | $ | 685 | | | $ | 912 | | | $ | 801 | | | $ | 332 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.49 | %(j) | | | 1.50 | %(j) | | | 1.49 | %(j) | | | 1.49 | %(j) | | | 1.53 | % |
Before waivers and reimbursements (f) | | | 1.67 | % | | | 1.83 | % | | | 1.91 | % | | | 2.05 | % | | | 3.00 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.28 | %(bb) | | | 0.15 | %(g) | | | 0.14 | % | | | 0.02 | % | | | 0.27 | %(aa) |
Before waivers and reimbursements (f) | | | 0.11 | %(bb) | | | (0.19 | )%(g) | | | (0.28 | )% | | | (0.54 | )% | | | (1.21 | )%(aa) |
Portfolio turnover rate^ | | | 35 | % | | | 19 | % | | | 37 | % | | | 49 | % | | | 88 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | | | $ | 12.86 | | | $ | 10.30 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.13 | #### | | | 0.07 | # | | | 0.08 | | | | 0.07 | | | | 0.11 | ### |
Net realized and unrealized gain (loss) | | | 5.75 | | | | (0.91 | ) | | | 0.23 | | | | (0.26 | ) | | | 2.65 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 5.88 | | | | (0.84 | ) | | | 0.31 | | | | (0.19 | ) | | | 2.76 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.07 | ) | | | (0.07 | ) | | | (0.06 | ) | | | (0.06 | ) | | | (0.04 | ) |
Distributions from net realized gains | | | — | | | | (0.15 | ) | | | (0.12 | ) | | | (0.25 | ) | | | (0.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.07 | ) | | | (0.22 | ) | | | (0.18 | ) | | | (0.31 | ) | | | (0.20 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | | | $ | 12.86 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 51.57 | % | | | (6.88 | )% | | | 2.57 | % | | | (1.60 | )% | | | 27.09 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 176 | | | $ | 116 | | | $ | 127 | | | $ | 126 | | | $ | 131 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.99 | %(j) | | | 1.00 | %(j) | | | 0.99 | %(j) | | | 0.99 | %(j) | | | 1.03 | % |
Before waivers and reimbursements (f) | | | 1.42 | % | | | 1.58 | % | | | 1.66 | % | | | 1.80 | % | | | 3.02 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.79 | %(bb) | | | 0.64 | %(g) | | | 0.64 | % | | | 0.50 | % | | | 0.89 | %(aa) |
Before waivers and reimbursements (f) | | | 0.37 | %(bb) | | | 0.06 | %(g) | | | (0.02 | )% | | | (0.31 | )% | | | (1.10 | )%(aa) |
Portfolio turnover rate^ | | | 35 | % | | | 19 | % | | | 37 | % | | | 49 | % | | | 88 | % |
See Notes to Financial Statements.
47
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
| ** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C Shares. |
| # | Includes income resulting from a special dividend. Without this dividend, the per share income amounts would be $0.04, $0.06, $0.01 and $0.06 for Class A, Class I, Class R and Class T, respectively. |
| ## | Per share amount is less than $0.005. |
| ### | Includes income resulting from a special dividend. Without this dividend, the per share income amounts would be $0.02, $0.04, $(0.01) and $0.07 for Class A, Class I, Class R and Class T, respectively. |
| #### | Includes income resulting from a special dividend. Without this dividend, the per share income amounts would be $0.02, $0.05, $(0.02) and $0.06 for Class A, Class I, Class R and Class T, respectively. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (g) | Includes income resulting from a special dividend. Without this dividend, the ratios for each class would have been 0.09% lower. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.25% for Class A, 1.00% for Class I, 1.50% for Class R and 1.00% for Class T. |
| (aa) | Includes income resulting from a special dividend. Without this dividend, the ratios for each class would have been 0.34% lower. |
| (bb) | Includes income resulting from a special dividend. Without this dividend, the ratios for each class would have been 0.43% lower. |
See Notes to Financial Statements.
48
1290 HIGH YIELD BOND FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
INVESTMENT SUB-ADVISER
| Ø | | AXA Investment Managers, Inc. |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | |
| | | | | 1 Year | | | 5 Years | | | Since Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 7.27 | % | | | 5.76 | % | | | 4.60 | % |
| | | with Sales Charge (a) | | | 2.49 | | | | 4.80 | | | | 3.91 | |
Fund – Class I Shares* | | | | | 7.65 | | | | 6.02 | | | | 4.86 | |
Fund – Class R Shares* | | | | | 7.01 | | | | 5.49 | | | | 4.33 | |
Fund – Class T Shares*† | | without Sales Charge | | | 7.53 | | | | 6.02 | | | | 4.86 | |
| | | with Sales Charge (b) | | | 4.86 | | | | 5.49 | | | | 4.48 | |
ICE BofA U.S. High Yield Index | | | | | 10.74 | | | | 6.25 | | | | 5.61 | |
| |
* Date of inception 11/12/14. † Class T Shares currently are not offered for sale. (a) A 4.50% front-end sales charge was deducted. (b) A 2.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 High Yield Bond Fund and the ICE BofA U.S. High Yield Index from 11/12/14 to 10/31/21. The performance of the ICE BofA U.S. High Yield Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the ICE BofA U.S. High Yield Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratios for Class A, I, R and T shares were 1.68%, 1.43%, 1.92% and 1.68%, respectively. The net expense ratios for Class A, I, R and T shares were 1.00%, 0.75%, 1.25% and 1.00%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 7.53% for the year ended October 31, 2021. The Fund’s benchmark, the ICE BofA U.S. High Yield Index, returned 10.74% over the same year.
Overview — AXA Investment Managers, Inc.
The high-yield bond market posted a very strong return in the twelve-months ending October 31, 2021, as the ICE BofA U.S. High Yield Index generated a total return of 10.74% for the period. The COVID recovery continued its upward trajectory for the bulk of the twelve-month period. Around the end of the third quarter in 2021 market participants focused on newly renewed concerns about inflation and economic growth. High-yield market flows were negative for the period, with roughly -$10.3 billion of outflows. Outflows were evenly spread out during the period with the first six months of the period seeing -$5.3 billion followed by an additional -$5 billion of outflows for the latter half of the period. The high-yield primary market was robust over the twelve months, pricing roughly $500.1 billion of high yield bonds, including the most active month ever with March 2021’s $65 billion of issuance. The period saw approximately $5.4 billion of high-yield default volume, significantly lower than the roughly $82.9 billion of high yield default volume during the prior twelve-month period. The par weighted high-yield default rate ended the period at 0.36%, down from 6.15% in October 2020.
49
1290 HIGH YIELD BOND FUND (Unaudited)
Fund Highlights
What helped performance during the year?
| • | | Fund performance benefited from participating in multiple new issues which performed well post pricing. |
| • | | Fund performance benefited from positive security selection within a number of sectors including the media, telecommunications and financial services sectors. |
| • | | The Fund’s underweight positioning within the media, telecommunications and utility sectors positively impacted relative performance. |
What hurt performance during the year?
| • | | Negative security selection within the highest yielding portion of the market detracted from performance for the period. |
| • | | Macro risk positioning had a negative impact on relative performance. Specifically, the Fund’s overweight within the short duration segment of the market and underweight within the highest yielding and longest duration segments of the market detracted from relative performance. |
| • | | The Fund’s underweight positioning and negative security selection within the outperforming energy sector detracted from relative performance. |
| • | | An overweight position within the technology sector detracted from relative performance during the period. |
| | | | |
| | |
Fund Characteristics As of October 31, 2021 | | | |
Weighted Average Life (Years) | | | 5.73 | |
Weighted Average Coupon (%) | | | 6.29 | |
Weighted Average Effective Duration (Years)* | | | 2.98 | |
Weighted Average Rating** | | | B2 | |
| |
* Effective duration is a measure of the price sensitivity of the Fund to interest rate movements, taking into account specific features of the securities in which it invests. ** Weighted Average Rating has been provided by the Investment Sub-Adviser. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations, including specific securities, money market instruments or other debts. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest); ratings are subject to change without notice. | |
| | | | |
| | |
Sector Weightings as of October 31, 2021 | | % of Net Assets | |
Industrials | | | 16.5 | % |
Consumer Discretionary | | | 13.8 | |
Information Technology | | | 12.7 | |
Communication Services | | | 11.4 | |
Materials | | | 10.8 | |
Energy | | | 7.6 | |
Health Care | | | 6.4 | |
Financials | | | 5.8 | |
Consumer Staples | | | 5.4 | |
Real Estate | | | 4.1 | |
Investment Company | | | 3.6 | |
Utilities | | | 0.3 | |
Cash and Other | | | 1.6 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class R and Class T shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual
50
1290 HIGH YIELD BOND FUND (Unaudited)
return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses Paid
During
Period*
5/1/21 -
10/31/21 | |
Class A | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,014.50 | | | | $5.08 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.16 | | | | 5.09 | |
Class I | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,014.70 | | | | 3.81 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.42 | | | | 3.82 | |
Class R | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,012.10 | | | | 6.34 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.90 | | | | 6.36 | |
Class T** | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,014.70 | | | | 3.81 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.42 | | | | 3.82 | |
| |
* Expenses are equal to the Portfolio’s A, I, R and T shares annualized expense ratio of 1.00%, 0.75%, 1.25% and 0.75%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). ** Class T shares currently are not offered for sale. | |
51
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
LONG-TERM DEBT SECURITIES: | |
Corporate Bonds (94.8%) | |
Communication Services (11.4%) | | | | | |
Diversified Telecommunication Services (4.2%) | |
CCO Holdings LLC
5.500%, 5/1/26§ | | $ | 132,000 | | | $ | 136,356 | |
4.750%, 3/1/30§ | | | 110,000 | | | | 113,300 | |
4.500%, 5/1/32 | | | 159,000 | | | | 159,362 | |
4.500%, 6/1/33§ | | | 168,000 | | | | 167,580 | |
Cincinnati Bell, Inc.
7.000%, 7/15/24§ | | | 485,000 | | | | 494,094 | |
Iliad Holding SAS
6.500%, 10/15/26§ | | | 200,000 | | | | 206,040 | |
Lumen Technologies, Inc.
5.125%, 12/15/26§ | | | 230,000 | | | | 234,911 | |
5.375%, 6/15/29§ | | | 270,000 | | | | 270,337 | |
Series G
6.875%, 1/15/28 | | | 128,000 | | | | 142,240 | |
Series W
6.750%, 12/1/23 | | | 170,000 | | | | 186,021 | |
Sprint Capital Corp.
8.750%, 3/15/32 | | | 156,000 | | | | 233,103 | |
Windstream Escrow LLC
7.750%, 8/15/28§ | | | 149,000 | | | | 157,229 | |
Zayo Group Holdings, Inc.
4.000%, 3/1/27§ | | | 245,000 | | | | 237,956 | |
6.125%, 3/1/28§ | | | 209,000 | | | | 203,514 | |
| | | | | | | | |
| | | | | | | 2,942,043 | |
| | | | | | | | |
Entertainment (1.4%) | |
Lions Gate Capital Holdings LLC
5.500%, 4/15/29§ | | | 454,000 | | | | 463,080 | |
Live Nation Entertainment, Inc.
4.875%, 11/1/24§ | | | 164,000 | | | | 165,640 | |
6.500%, 5/15/27§ | | | 286,000 | | | | 312,813 | |
| | | | | | | | |
| | | | | | | 941,533 | |
| | | | | | | | |
Interactive Media & Services (0.1%) | |
Rackspace Technology Global, Inc.
5.375%, 12/1/28§ | | | 105,000 | | | | 101,588 | |
| | | | | | | | |
Media (5.0%) | |
DISH DBS Corp.
5.875%, 7/15/22 | | | 112,000 | | | | 114,660 | |
Gray Escrow II, Inc.
5.375%, 11/15/31§ | | | 163,000 | | | | 165,135 | |
Gray Television, Inc.
5.875%, 7/15/26§ | | | 140,000 | | | | 144,480 | |
4.750%, 10/15/30§ | | | 282,000 | | | | 277,462 | |
Mav Acquisition Corp.
8.000%, 8/1/29§ | | | 319,000 | | | | 310,626 | |
Meredith Corp.
6.875%, 2/1/26 | | | 170,000 | | | | 176,443 | |
Midas OpCo Holdings LLC
5.625%, 8/15/29§ | | | 235,000 | | | | 239,726 | |
Nexstar Media, Inc.
5.625%, 7/15/27§ | | | 446,000 | | | | 470,530 | |
Outfront Media Capital LLC
5.000%, 8/15/27§ | | | 351,000 | | | | 358,020 | |
Sinclair Television Group, Inc.
5.500%, 3/1/30§ | | | 166,000 | | | | 158,737 | |
TEGNA, Inc.
5.500%, 9/15/24§ | | | 33,000 | | | | 33,413 | |
4.750%, 3/15/26§ | | | 248,000 | | | | 257,622 | |
5.000%, 9/15/29 | | | 94,000 | | | | 94,933 | |
Videotron Ltd.
3.625%, 6/15/29§ | | | 118,000 | | | | 118,885 | |
Ziggo Bond Co. BV
6.000%, 1/15/27§ | | | 200,000 | | | | 206,455 | |
Ziggo BV
5.500%, 1/15/27§ | | | 330,000 | | | | 339,042 | |
| | | | | | | | |
| | | | | | | 3,466,169 | |
| | | | | | | | |
Wireless Telecommunication Services (0.7%) | |
Sprint Corp.
7.875%, 9/15/23 | | | 128,000 | | | | 142,240 | |
7.625%, 3/1/26 | | | 114,000 | | | | 136,372 | |
Vmed O2 UK Financing I plc
4.750%, 7/15/31§ | | | 200,000 | | | | 201,000 | |
| | | | | | | | |
| | | | | | | 479,612 | |
| | | | | | | | |
Total Communication Services | | | | | | | 7,930,945 | |
| | | | | | | | |
Consumer Discretionary (13.8%) | | | | | |
Auto Components (0.2%) | |
Icahn Enterprises LP
6.375%, 12/15/25 | | | 120,000 | | | | 121,950 | |
Real Hero Merger Sub 2, Inc.
6.250%, 2/1/29§ | | | 42,000 | | | | 43,050 | |
| | | | | | | | |
| | | | | | | 165,000 | |
| | | | | | | | |
Automobiles (0.7%) | |
Ford Motor Co.
9.000%, 4/22/25 | | | 271,000 | | | | 325,200 | |
9.625%, 4/22/30 | | | 87,000 | | | | 125,117 | |
| | | | | | | | |
| | | | | | | 450,317 | |
| | | | | | | | |
Distributors (0.3%) | |
Univar Solutions USA, Inc.
5.125%, 12/1/27§ | | | 209,000 | | | | 217,882 | |
| | | | | | | | |
Diversified Consumer Services (0.3%) | |
GEMS MENASA Cayman Ltd.
7.125%, 7/31/26§ | | | 200,000 | | | | 207,000 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (5.2%) | |
1011778 BC ULC
5.750%, 4/15/25§ | | | 214,000 | | | | 223,630 | |
Caesars Entertainment, Inc.
6.250%, 7/1/25§ | | | 321,000 | | | | 337,040 | |
4.625%, 10/15/29§ | | | 87,000 | | | | 87,200 | |
Carnival Corp.
6.000%, 5/1/29§ | | | 186,000 | | | | 185,675 | |
CEC Entertainment LLC
6.750%, 5/1/26§ | | | 136,000 | | | | 135,320 | |
Churchill Downs, Inc.
5.500%, 4/1/27§ | | | 258,000 | | | | 267,675 | |
Dave & Buster’s, Inc.
7.625%, 11/1/25§ | | | 344,000 | | | | 369,408 | |
Everi Holdings, Inc.
5.000%, 7/15/29§ | | | 79,000 | | | | 80,679 | |
Golden Entertainment, Inc.
7.625%, 4/15/26§ | | | 134,000 | | | | 140,700 | |
Hilton Domestic Operating Co., Inc.
5.750%, 5/1/28§ | | | 226,000 | | | | 242,102 | |
IRB Holding Corp.
7.000%, 6/15/25§ | | | 180,000 | | | | 190,035 | |
6.750%, 2/15/26§ | | | 140,000 | | | | 143,325 | |
See Notes to Financial Statements.
52
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Life Time, Inc.
5.750%, 1/15/26§ | | $ | 346,000 | | | $ | 354,079 | |
MajorDrive Holdings IV LLC
6.375%, 6/1/29§ | | | 174,000 | | | | 167,040 | |
Powdr Corp.
6.000%, 8/1/25§ | | | 41,000 | | | | 42,845 | |
Station Casinos LLC
4.500%, 2/15/28§ | | | 328,000 | | | | 329,640 | |
Vail Resorts, Inc.
6.250%, 5/15/25§ | | | 58,000 | | | | 60,900 | |
Wyndham Hotels & Resorts, Inc.
4.375%, 8/15/28§ | | | 205,000 | | | | 211,263 | |
| | | | | | | | |
| | | | | | | 3,568,556 | |
| | | | | | | | |
Household Durables (0.9%) | |
CD&R Smokey Buyer, Inc.
6.750%, 7/15/25§ | | | 532,000 | | | | 561,925 | |
Picasso Finance Sub, Inc.
6.125%, 6/15/25§ | | | 34,000 | | | | 35,700 | |
Williams Scotsman International, Inc.
4.625%, 8/15/28§ | | | 48,000 | | | | 49,620 | |
| | | | | | | | |
| | | | | | | 647,245 | |
| | | | | | | | |
Internet & Direct Marketing Retail (1.7%) | |
Getty Images, Inc.
9.750%, 3/1/27§ | | | 628,000 | | | | 666,302 | |
Photo Holdings Merger Sub, Inc.
8.500%, 10/1/26§ | | | 512,000 | | | | 536,448 | |
| | | | | | | | |
| | | | | | | 1,202,750 | |
| | | | | | | | |
Leisure Products (0.7%) | |
Mattel, Inc.
3.750%, 4/1/29§ | | | 102,000 | | | | 105,647 | |
Vista Outdoor, Inc.
4.500%, 3/15/29§ | | | 400,000 | | | | 400,500 | |
| | | | | | | | |
| | | | | | | 506,147 | |
| | | | | | | | |
Specialty Retail (3.3%) | |
Asbury Automotive Group, Inc.
4.750%, 3/1/30 | | | 163,000 | | | | 165,852 | |
eG Global Finance plc
8.500%, 10/30/25§ | | | 400,000 | | | | 415,280 | |
Ken Garff Automotive LLC
4.875%, 9/15/28§ | | | 96,000 | | | | 97,200 | |
LBM Acquisition LLC
6.250%, 1/15/29§ | | | 251,000 | | | | 243,746 | |
LCM Investments Holdings II LLC
4.875%, 5/1/29§ | | | 247,000 | | | | 253,625 | |
Sonic Automotive, Inc.
4.875%, 11/15/31§ | | | 176,000 | | | | 176,440 | |
Specialty Building Products Holdings LLC
6.375%, 9/30/26§ | | | 435,000 | | | | 451,313 | |
SRS Distribution, Inc.
4.625%, 7/1/28§ | | | 179,000 | | | | 183,251 | |
White Cap Buyer LLC
6.875%, 10/15/28§ | | | 266,000 | | | | 273,956 | |
| | | | | | | | |
| | | | | | | 2,260,663 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.5%) | |
G-III Apparel Group Ltd.
7.875%, 8/15/25§ | | | 342,000 | | | | 363,802 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 9,589,362 | |
| | | | | | | | |
Consumer Staples (5.4%) | | | | | |
Beverages (0.4%) | |
Primo Water Holdings, Inc.
4.375%, 4/30/29§ | | | 155,000 | | | | 153,277 | |
Triton Water Holdings, Inc.
6.250%, 4/1/29§ | | | 146,000 | | | | 145,270 | |
| | | | | | | | |
| | | | | | | 298,547 | |
| | | | | | | | |
Food & Staples Retailing (0.8%) | |
Performance Food Group, Inc.
6.875%, 5/1/25§ | | | 193,000 | | | | 203,133 | |
United Natural Foods, Inc.
6.750%, 10/15/28§ | | | 87,000 | | | | 94,177 | |
US Foods, Inc.
6.250%, 4/15/25§ | | | 248,000 | | | | 259,160 | |
| | | | | | | | |
| | | | | | | 556,470 | |
| | | | | | | | |
Food Products (3.2%) | |
B&G Foods, Inc.
5.250%, 4/1/25 | | | 101,000 | | | | 103,020 | |
Kraft Heinz Foods Co.
6.875%, 1/26/39 | | | 116,000 | | | | 170,230 | |
4.375%, 6/1/46 | | | 265,000 | | | | 308,738 | |
Lamb Weston Holdings, Inc.
4.625%, 11/1/24§ | | | 22,000 | | | | 22,429 | |
4.875%, 11/1/26§ | | | 227,000 | | | | 232,675 | |
Post Holdings, Inc.
5.750%, 3/1/27§ | | | 336,000 | | | | 348,600 | |
4.625%, 4/15/30§ | | | 100,000 | | | | 100,500 | |
4.500%, 9/15/31§ | | | 379,000 | | | | 371,488 | |
Sigma Holdco BV
7.875%, 5/15/26§ | | | 400,000 | | | | 392,000 | |
Simmons Foods, Inc.
4.625%, 3/1/29§ | | | 149,000 | | | | 149,931 | |
| | | | | | | | |
| | | | | | | 2,199,611 | |
| | | | | | | | |
Household Products (0.8%) | |
Central Garden & Pet Co.
4.125%, 10/15/30 | | | 84,000 | | | | 84,420 | |
Energizer Holdings, Inc.
4.750%, 6/15/28§ | | | 223,000 | | | | 222,461 | |
Spectrum Brands, Inc.
5.750%, 7/15/25 | | | 220,000 | | | | 225,225 | |
5.500%, 7/15/30§ | | | 21,000 | | | | 22,785 | |
| | | | | | | | |
| | | | | | | 554,891 | |
| | | | | | | | |
Personal Products (0.2%) | |
Prestige Brands, Inc.
3.750%, 4/1/31§ | | | 139,000 | | | | 133,961 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 3,743,480 | |
| | | | | | | | |
Energy (7.6%) | | | | | |
Energy Equipment & Services (0.2%) | |
Precision Drilling Corp.
7.125%, 1/15/26§ | | | 139,000 | | | | 141,780 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (7.4%) | |
Aethon United BR LP
8.250%, 2/15/26§ | | | 96,000 | | | | 103,124 | |
Antero Resources Corp.
7.625%, 2/1/29§ | | | 52,000 | | | | 57,434 | |
Ascent Resources Utica Holdings LLC
7.000%, 11/1/26§ | | | 170,000 | | | | 175,313 | |
See Notes to Financial Statements.
53
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Blue Racer Midstream LLC
7.625%, 12/15/25§ | | $ | 58,000 | | | $ | 62,205 | |
6.625%, 7/15/26§ | | | 150,000 | | | | 154,875 | |
Colgate Energy Partners III LLC
5.875%, 7/1/29§ | | | 77,000 | | | | 78,636 | |
Crestwood Midstream Partners LP
5.625%, 5/1/27§ | | | 54,000 | | | | 55,080 | |
6.000%, 2/1/29§ | | | 365,000 | | | | 377,607 | |
CrownRock LP
5.625%, 10/15/25§ | | | 393,000 | | | | 399,878 | |
Delek Logistics Partners LP
6.750%, 5/15/25 | | | 395,000 | | | | 400,925 | |
7.125%, 6/1/28§ | | | 80,000 | | | | 83,800 | |
Encino Acquisition Partners Holdings LLC | | | | | |
8.500%, 5/1/28§ | | | 164,000 | | | | 171,380 | |
Endeavor Energy Resources LP
6.625%, 7/15/25§ | | | 28,000 | | | | 29,457 | |
Genesis Energy LP
8.000%, 1/15/27 | | | 95,000 | | | | 95,447 | |
7.750%, 2/1/28 | | | 362,000 | | | | 357,022 | |
Hilcorp Energy I LP
6.250%, 11/1/28§ | | | 101,000 | | | | 103,656 | |
Holly Energy Partners LP
5.000%, 2/1/28§ | | | 221,000 | | | | 221,000 | |
Independence Energy Finance LLC
7.250%, 5/1/26§ | | | 202,000 | | | | 209,070 | |
NuStar Logistics LP
5.750%, 10/1/25 | | | 85,000 | | | | 90,738 | |
Occidental Petroleum Corp.
6.625%, 9/1/30 | | | 100,000 | | | | 122,115 | |
6.125%, 1/1/31 | | | 55,000 | | | | 65,725 | |
6.450%, 9/15/36 | | | 346,000 | | | | 440,718 | |
PBF Logistics LP
6.875%, 5/15/23 | | | 220,000 | | | | 215,600 | |
Rockcliff Energy II LLC
5.500%, 10/15/29§ | | | 97,000 | | | | 99,546 | |
Southwestern Energy Co.
7.750%, 10/1/27 | | | 97,000 | | | | 103,426 | |
Summit Midstream Holdings LLC
8.500%, 10/15/26§ | | | 178,000 | | | | 178,587 | |
Sunoco LP
4.500%, 4/30/30§ | | | 238,000 | | | | 240,099 | |
Targa Resources Partners LP
5.875%, 4/15/26 | | | 342,000 | | | | 357,500 | |
4.875%, 2/1/31 | | | 105,000 | | | | 112,820 | |
| | | | | | | | |
| | | | | | | 5,162,783 | |
| | | | | | | | |
Total Energy | | | | | | | 5,304,563 | |
| | | | | | | | |
Financials (5.8%) | | | | | |
Consumer Finance (1.4%) | |
Curo Group Holdings Corp.
7.500%, 8/1/28§ | | | 298,000 | | | | 301,166 | |
Enova International, Inc.
8.500%, 9/1/24§ | | | 252,000 | | | | 255,780 | |
Ford Motor Credit Co. LLC
4.000%, 11/13/30 | | | 322,000 | | | | 335,283 | |
OneMain Finance Corp.
8.875%, 6/1/25 | | | 77,000 | | | | 83,353 | |
| | | | | | | | |
| | | | | | | 975,582 | |
| | | | | | | | |
Diversified Financial Services (1.5%) | |
Armor Holdco, Inc.
8.500%, 11/15/29§ | | | 155,000 | | | | 157,481 | |
Shift4 Payments LLC
4.625%, 11/1/26§ | | | 385,000 | | | | 397,994 | |
Verscend Escrow Corp.
9.750%, 8/15/26§ | | | 480,000 | | | | 508,469 | |
| | | | | | | | |
| | | | | | | 1,063,944 | |
| | | | | | | | |
Insurance (1.9%) | |
Alliant Holdings Intermediate LLC
6.750%, 10/15/27§ | | | 402,000 | | | | 415,065 | |
AmWINS Group, Inc.
4.875%, 6/30/29§ | | | 72,000 | | | | 71,878 | |
HUB International Ltd.
7.000%, 5/1/26§ | | | 706,000 | | | | 730,710 | |
NFP Corp.
6.875%, 8/15/28§ | | | 57,000 | | | | 57,782 | |
| | | | | | | | |
| | | | | | | 1,275,435 | |
| | | | | | | | |
Thrifts & Mortgage Finance (1.0%) | |
Freedom Mortgage Corp.
8.250%, 4/15/25§ | | | 310,000 | | | | 313,100 | |
7.625%, 5/1/26§ | | | 53,000 | | | | 51,807 | |
6.625%, 1/15/27§ | | | 237,000 | | | | 224,558 | |
PHH Mortgage Corp.
7.875%, 3/15/26§ | | | 104,000 | | | | 105,170 | |
| | | | | | | | |
| | | | | | | 694,635 | |
| | | | | | | | |
Total Financials | | | | | | | 4,009,596 | |
| | | | | | | | |
Health Care (6.4%) | | | | | |
Biotechnology (0.3%) | |
Grifols Escrow Issuer SA
4.750%, 10/15/28§ | | | 200,000 | | | | 203,000 | |
| | | | | | | | |
Health Care Equipment & Supplies (0.9%) | |
Mozart Debt Merger Sub, Inc.
3.875%, 4/1/29§ | | | 214,000 | | | | 212,282 | |
5.250%, 10/1/29§ | | | 138,000 | | | | 140,070 | |
Varex Imaging Corp.
7.875%, 10/15/27§ | | | 237,000 | | | | 261,885 | |
| | | | | | | | |
| | | | | | | 614,237 | |
| | | | | | | | |
Health Care Providers & Services (1.7%) | |
AdaptHealth LLC
6.125%, 8/1/28§ | | | 178,000 | | | | 187,790 | |
5.125%, 3/1/30§ | | | 178,000 | | | | 178,890 | |
HCA, Inc.
7.690%, 6/15/25 | | | 91,000 | | | | 108,631 | |
HealthEquity, Inc.
4.500%, 10/1/29§ | | | 152,000 | | | | 153,330 | |
Tenet Healthcare Corp.
4.875%, 1/1/26§ | | | 304,000 | | | | 310,840 | |
US Acute Care Solutions LLC
6.375%, 3/1/26§ | | | 166,000 | | | | 171,810 | |
Vizient, Inc.
6.250%, 5/15/27§ | | | 91,000 | | | | 95,209 | |
| | | | | | | | |
| | | | | | | 1,206,500 | |
| | | | | | | | |
Health Care Technology (0.4%) | |
IQVIA, Inc.
5.000%, 5/15/27§ | | | 260,000 | | | | 269,508 | |
| | | | | | | | |
See Notes to Financial Statements.
54
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Pharmaceuticals (3.1%) | |
Bausch Health Americas, Inc.
9.250%, 4/1/26§ | | $ | 317,000 | | | $ | 336,813 | |
Bausch Health Cos., Inc.
5.500%, 11/1/25§ | | | 310,000 | | | | 315,037 | |
4.875%, 6/1/28§ | | | 146,000 | | | | 150,015 | |
6.250%, 2/15/29§ | | | 144,000 | | | | 139,500 | |
Catalent Pharma Solutions, Inc.
5.000%, 7/15/27§ | | | 287,000 | | | | 298,121 | |
Cheplapharm Arzneimittel GmbH
5.500%, 1/15/28§ | | | 200,000 | | | | 206,125 | |
Herbalife Nutrition Ltd.
7.875%, 9/1/25§ | | | 291,000 | | | | 311,722 | |
Organon & Co.
5.125%, 4/30/31§ | | | 200,000 | | | | 205,536 | |
P&L Development LLC
7.750%, 11/15/25§ | | | 196,000 | | | | 201,145 | |
| | | | | | | | |
| | | | | | | 2,164,014 | |
| | | | | | | | |
Total Health Care | | | | | | | 4,457,259 | |
| | | | | | | | |
Industrials (16.5%) | | | | | |
Aerospace & Defense (0.8%) | |
Howmet Aerospace, Inc.
6.875%, 5/1/25 | | | 4,000 | | | | 4,625 | |
Rolls-Royce plc
5.750%, 10/15/27§ | | | 200,000 | | | | 221,500 | |
Spirit AeroSystems, Inc.
7.500%, 4/15/25§ | | | 302,000 | | | | 318,081 | |
| | | | | | | | |
| | | | | | | 544,206 | |
| | | | | | | | |
Building Products (2.3%) | |
CP Atlas Buyer, Inc.
7.000%, 12/1/28§ | | | 196,000 | | | | 188,650 | |
Forterra Finance LLC
6.500%, 7/15/25§ | | | 59,000 | | | | 62,879 | |
JELD-WEN, Inc.
6.250%, 5/15/25§ | | | 111,000 | | | | 117,105 | |
New Enterprise Stone & Lime Co., Inc.
6.250%, 3/15/26§ | | | 441,000 | | | | 455,386 | |
5.250%, 7/15/28§ | | | 173,000 | | | | 174,536 | |
Standard Industries, Inc.
4.375%, 7/15/30§ | | | 124,000 | | | | 123,690 | |
Summit Materials LLC
5.250%, 1/15/29§ | | | 222,000 | | | | 233,100 | |
Victors Merger Corp.
6.375%, 5/15/29§ | | | 222,000 | | | | 208,403 | |
| | | | | | | | |
| | | | | | | 1,563,749 | |
| | | | | | | | |
Commercial Services & Supplies (6.8%) | |
ACCO Brands Corp.
4.250%, 3/15/29§ | | | 54,000 | | | | 53,258 | |
ADT Security Corp. (The)
4.125%, 6/15/23 | | | 110,000 | | | | 114,233 | |
4.875%, 7/15/32§ | | | 156,000 | | | | 155,493 | |
Allied Universal Holdco LLC
6.625%, 7/15/26§ | | | 230,000 | | | | 241,414 | |
9.750%, 7/15/27§ | | | 374,000 | | | | 402,985 | |
6.000%, 6/1/29§ | | | 48,000 | | | | 47,210 | |
Aramark Services, Inc.
5.000%, 4/1/25§ | | | 116,000 | | | | 118,755 | |
6.375%, 5/1/25§ | | | 224,000 | | | | 235,175 | |
Cimpress plc
7.000%, 6/15/26§ | | | 150,000 | | | | 155,812 | |
Covanta Holding Corp.
5.000%, 9/1/30 | | | 55,000 | | | | 54,588 | |
Garda World Security Corp.
9.500%, 11/1/27§ | | | 502,000 | | | | 539,650 | |
6.000%, 6/1/29§ | | | 249,000 | | | | 243,398 | |
GFL Environmental, Inc.
3.750%, 8/1/25§ | | | 80,000 | | | | 82,116 | |
5.125%, 12/15/26§ | | | 220,000 | | | | 229,900 | |
4.750%, 6/15/29§ | | | 160,000 | | | | 161,000 | |
KAR Auction Services, Inc.
5.125%, 6/1/25§ | | | 819,000 | | | | 821,047 | |
Madison IAQ LLC
5.875%, 6/30/29§ | | | 94,000 | | | | 93,060 | |
Matthews International Corp.
5.250%, 12/1/25§ | | | 471,000 | | | | 483,952 | |
Nielsen Finance LLC
5.875%, 10/1/30§ | | | 296,000 | | | | 309,113 | |
4.750%, 7/15/31§ | | | 206,000 | | | | 200,252 | |
| | | | | | | | |
| | | | | | | 4,742,411 | |
| | | | | | | | |
Construction & Engineering (1.4%) | |
Artera Services LLC
9.033%, 12/4/25§ | | | 493,333 | | | | 529,100 | |
Dycom Industries, Inc.
4.500%, 4/15/29§ | | | 162,000 | | | | 164,025 | |
MasTec, Inc.
4.500%, 8/15/28§ | | | 92,000 | | | | 94,415 | |
Pike Corp.
5.500%, 9/1/28§ | | | 66,000 | | | | 66,990 | |
Weekley Homes LLC
4.875%, 9/15/28§ | | | 111,000 | | | | 114,607 | |
| | | | | | | | |
| | | | | | | 969,137 | |
| | | | | | | | |
Machinery (1.5%) | |
ATS Automation Tooling Systems, Inc.
4.125%, 12/15/28§ | | | 300,000 | | | | 302,250 | |
Clark Equipment Co.
5.875%, 6/1/25§ | | | 285,000 | | | | 296,008 | |
Welbilt, Inc.
9.500%, 2/15/24 | | | 447,000 | | | | 459,293 | |
| | | | | | | | |
| | | | | | | 1,057,551 | |
| | | | | | | | |
Professional Services (1.0%) | |
Dun & Bradstreet Corp. (The)
6.875%, 8/15/26§ | | | 303,000 | | | | 316,635 | |
10.250%, 2/15/27§ | | | 347,000 | | | | 372,331 | |
Science Applications International Corp.
4.875%, 4/1/28§ | | | 40,000 | | | | 41,100 | |
| | | | | | | | |
| | | | | | | 730,066 | |
| | | | | | | | |
Road & Rail (1.7%) | |
NESCO Holdings II, Inc.
5.500%, 4/15/29§ | | | 212,000 | | | | 216,505 | |
Watco Cos. LLC
6.500%, 6/15/27§ | | | 696,000 | | | | 740,370 | |
XPO Logistics, Inc.
6.250%, 5/1/25§ | | | 199,000 | | | | 209,636 | |
| | | | | | | | |
| | | | | | | 1,166,511 | |
| | | | | | | | |
Trading Companies & Distributors (1.0%) | |
Brightstar Escrow Corp.
9.750%, 10/15/25§ | | | 327,000 | | | | 349,890 | |
See Notes to Financial Statements.
55
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
WESCO Distribution, Inc.
7.250%, 6/15/28§ | | $ | 287,000 | | | $ | 315,818 | |
| | | | | | | | |
| | | | | | | 665,708 | |
| | | | | | | | |
Total Industrials | | | | | | | 11,439,339 | |
| | | | | | | | |
Information Technology (12.7%) | | | | | |
Communications Equipment (1.8%) | |
CommScope Technologies LLC
6.000%, 6/15/25§ | | | 196,000 | | | | 193,168 | |
CommScope, Inc.
6.000%, 3/1/26§ | | | 394,000 | | | | 406,976 | |
8.250%, 3/1/27§ | | | 237,000 | | | | 241,489 | |
4.750%, 9/1/29§ | | | 412,000 | | | | 404,254 | |
| | | | | | | | |
| | | | | | | 1,245,887 | |
| | | | | | | | |
IT Services (2.6%) | |
Ahead DB Holdings LLC
6.625%, 5/1/28§ | | | 228,000 | | | | 233,130 | |
Alliance Data Systems Corp.
4.750%, 12/15/24§ | | | 489,000 | | | | 500,002 | |
7.000%, 1/15/26§ | | | 162,000 | | | | 171,720 | |
Black Knight InfoServ LLC
3.625%, 9/1/28§ | | | 140,000 | | | | 139,300 | |
ION Trading Technologies Sarl
5.750%, 5/15/28§ | | | 200,000 | | | | 205,750 | |
Northwest Fiber LLC
6.000%, 2/15/28§ | | | 179,000 | | | | 171,840 | |
Unisys Corp.
6.875%, 11/1/27§ | | | 343,000 | | | | 373,870 | |
| | | | | | | | |
| | | | | | | 1,795,612 | |
| | | | | | | | |
Software (7.9%) | |
ACI Worldwide, Inc.
5.750%, 8/15/26§ | | | 217,000 | | | | 226,223 | |
Ascend Learning LLC
6.875%, 8/1/25§ | | | 474,000 | | | | 482,295 | |
Boxer Parent Co., Inc.
7.125%, 10/2/25§ | | | 159,000 | | | | 167,745 | |
Camelot Finance SA
4.500%, 11/1/26§ | | | 626,000 | | | | 647,365 | |
Change Healthcare Holdings LLC
5.750%, 3/1/25§ | | | 759,000 | | | | 764,693 | |
Clarivate Science Holdings Corp.
4.875%, 7/1/29§ | | | 315,000 | | | | 313,053 | |
Granite Merger Sub 2, Inc.
11.000%, 7/15/27§ | | | 439,000 | | | | 500,460 | |
Helios Software Holdings, Inc.
4.625%, 5/1/28§ | | | 400,000 | | | | 395,000 | |
LogMeIn, Inc.
5.500%, 9/1/27§ | | | 96,000 | | | | 96,085 | |
NCR Corp.
5.000%, 10/1/28§ | | | 315,000 | | | | 320,513 | |
5.125%, 4/15/29§ | | | 317,000 | | | | 323,365 | |
NortonLifeLock, Inc.
5.000%, 4/15/25§ | | | 112,000 | | | | 112,980 | |
Rocket Software, Inc.
6.500%, 2/15/29§ | | | 353,000 | | | | 340,221 | |
SS&C Technologies, Inc.
5.500%, 9/30/27§ | | | 551,000 | | | | 579,928 | |
ZoomInfo Technologies LLC
3.875%, 2/1/29§ | | | 229,000 | | | | 227,569 | |
| | | | | | | | |
| | | | | | | 5,497,495 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (0.4%) | |
Dell International LLC
7.125%, 6/15/24§ | | | 219,000 | | | | 222,099 | |
Diebold Nixdorf, Inc.
9.375%, 7/15/25§ | | | 60,000 | | | | 64,650 | |
| | | | | | | | |
| | | | | | | 286,749 | |
| | | | | | | | |
Total Information Technology | | | | | | | 8,825,743 | |
| | | | | | | | |
Materials (10.8%) | | | | | |
Chemicals (3.8%) | |
Avient Corp.
5.750%, 5/15/25§ | | | 73,000 | | | | 76,194 | |
Diamond BC BV
4.625%, 10/1/29§ | | | 67,000 | | | | 67,343 | |
Illuminate Buyer LLC
9.000%, 7/1/28§ | | | 491,000 | | | | 530,280 | |
INEOS Group Holdings SA
5.625%, 8/1/24§ | | | 200,000 | | | | 199,500 | |
Minerals Technologies, Inc.
5.000%, 7/1/28§ | | | 183,000 | | | | 188,033 | |
NOVA Chemicals Corp.
4.875%, 6/1/24§ | | | 104,000 | | | | 108,042 | |
Nufarm Australia Ltd.
5.750%, 4/30/26§ | | | 479,000 | | | | 489,478 | |
Olin Corp.
9.500%, 6/1/25§ | | | 117,000 | | | | 143,617 | |
Olympus Water US Holding Corp.
4.250%, 10/1/28§ | | | 343,000 | | | | 336,397 | |
6.250%, 10/1/29§ | | | 200,000 | | | | 199,500 | |
WR Grace Holdings LLC
5.625%, 8/15/29§ | | | 269,000 | | | | 271,354 | |
| | | | | | | | |
| | | | | | | 2,609,738 | |
| | | | | | | | |
Containers & Packaging (6.2%) | |
ARD Finance SA
6.500%, 6/30/27§ | | | 400,000 | | | | 417,740 | |
Ardagh Metal Packaging Finance USA LLC | |
4.000%, 9/1/29§ | | | 200,000 | | | | 198,380 | |
Ardagh Packaging Finance plc
4.125%, 8/15/26§ | | | 400,000 | | | | 407,000 | |
Flex Acquisition Co., Inc.
7.875%, 7/15/26§ | | | 361,000 | | | | 375,963 | |
Graham Packaging Co., Inc.
7.125%, 8/15/28§ | | | 81,000 | | | | 83,090 | |
Intelligent Packaging Ltd. Finco, Inc.
6.000%, 9/15/28§ | | | 243,000 | | | | 249,683 | |
LABL, Inc.
6.750%, 7/15/26§ | | | 219,000 | | | | 227,213 | |
10.500%, 7/15/27§ | | | 390,000 | | | | 412,912 | |
5.875%, 11/1/28§ | | | 143,000 | | | | 143,672 | |
Mauser Packaging Solutions Holding Co. | |
5.500%, 4/15/24§ | | | 286,000 | | | | 286,929 | |
7.250%, 4/15/25§ | | | 658,000 | | | | 635,911 | |
OI European Group BV
4.000%, 3/15/23§ | | | 150,000 | | | | 152,858 | |
Owens-Brockway Glass Container, Inc.
5.875%, 8/15/23§ | | | 130,000 | | | | 136,500 | |
6.625%, 5/13/27§ | | | 144,000 | | | | 153,180 | |
Trivium Packaging Finance BV
5.500%, 8/15/26 (e)§ | | | 400,000 | | | | 415,500 | |
| | | | | | | | |
| | | | | | | 4,296,531 | |
| | | | | | | | |
See Notes to Financial Statements.
56
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Metals & Mining (0.8%) | |
Hudbay Minerals, Inc.
4.500%, 4/1/26§ | | $ | 198,000 | | | $ | 196,763 | |
Kaiser Aluminum Corp.
4.500%, 6/1/31§ | | | 204,000 | | | | 199,940 | |
Novelis Corp.
4.750%, 1/30/30§ | | | 150,000 | | | | 155,625 | |
| | | | | | | | |
| | | | | | | 552,328 | |
| | | | | | | | |
Total Materials | | | | | | | 7,458,597 | |
| | | | | | | | |
Real Estate (4.1%) | | | | | |
Equity Real Estate Investment Trusts (REITs) (2.4%) | |
Iron Mountain, Inc. (REIT)
5.000%, 7/15/28§ | | | 270,000 | | | | 279,788 | |
MGM Growth Properties Operating Partnership LP (REIT)
4.625%, 6/15/25§ | | | 153,000 | | | | 164,475 | |
Park Intermediate Holdings LLC (REIT)
7.500%, 6/1/25§ | | | 79,000 | | | | 84,135 | |
5.875%, 10/1/28§ | | | 303,000 | | | | 318,150 | |
4.875%, 5/15/29§ | | | 129,000 | | | | 130,613 | |
SBA Communications Corp. (REIT)
4.875%, 9/1/24 | | | 88,000 | | | | 88,686 | |
Service Properties Trust (REIT)
7.500%, 9/15/25 | | | 212,000 | | | | 233,772 | |
5.500%, 12/15/27 | | | 102,000 | | | | 106,590 | |
XHR LP (REIT)
6.375%, 8/15/25§ | | | 166,000 | | | | 174,715 | |
4.875%, 6/1/29§ | | | 86,000 | | | | 88,232 | |
| | | | | | | | |
| | | | | | | 1,669,156 | |
| | | | | | | | |
Real Estate Management & Development (1.7%) | |
Cushman & Wakefield US Borrower LLC | |
6.750%, 5/15/28§ | | | 149,000 | | | | 159,057 | |
Greystar Real Estate Partners LLC
5.750%, 12/1/25§ | | | 361,000 | | | | 366,866 | |
Howard Hughes Corp. (The)
4.375%, 2/1/31§ | | | 122,000 | | | | 122,027 | |
Realogy Group LLC
7.625%, 6/15/25§ | | | 294,000 | | | | 314,124 | |
9.375%, 4/1/27§ | | | 222,000 | | | | 242,258 | |
| | | | | | | | |
| | | | | | | 1,204,332 | |
| | | | | | | | |
Total Real Estate | | | | | | | 2,873,488 | |
| | | | | | | | |
Utilities (0.3%) | | | | | |
Water Utilities (0.3%) | |
Solaris Midstream Holdings LLC
7.625%, 4/1/26§ | | | 191,000 | | | | 201,448 | |
| | | | | | | | |
Total Utilities | | | | | | | 201,448 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 65,833,820 | |
| | | | | | | | |
Total Long-Term Debt Securities (94.8%)
(Cost $64,609,514) | | | | | | | 65,833,820 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENT: | | | | | | | | |
Investment Company (3.6%) | | | | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 2,523,707 | | | | 2,524,969 | |
| | | | | | | | |
Total Short-Term Investment (3.6%)
(Cost $2,524,969) | | | | | | | 2,524,969 | |
| | | | | | | | |
Total Investments in Securities (98.4%)
(Cost $67,134,483) | | | | | | | 68,358,789 | |
Other Assets Less Liabilities (1.6%) | | | | | | | 1,098,338 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 69,457,127 | |
| | | | | | | | |
| § | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold to qualified institutional buyers. At October 31, 2021, the market value of these securities amounted to $58,867,604 or 84.8% of net assets. Securities denoted with “§” but without “b” have been determined to be liquid under the guidelines established by the Board of Trustees. To the extent any securities might provide a right to demand registration, such rights have not been relied upon when determining liquidity. |
| (e) | Step Bond - Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2021. Maturity date disclosed is the ultimate maturity date. |
See Notes to Financial Statements.
57
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Corporate Bonds | | | | | | | | | | | | | | | | |
Communication Services | | $ | — | | | $ | 7,930,945 | | | $ | — | | | $ | 7,930,945 | |
Consumer Discretionary | | | — | | | | 9,589,362 | | | | — | | | | 9,589,362 | |
Consumer Staples | | | — | | | | 3,743,480 | | | | — | | | | 3,743,480 | |
Energy | | | — | | | | 5,304,563 | | | | — | | | | 5,304,563 | |
Financials | | | — | | | | 4,009,596 | | | | — | | | | 4,009,596 | |
Health Care | | | — | | | | 4,457,259 | | | | — | | | | 4,457,259 | |
Industrials | | | — | | | | 11,439,339 | | | | — | | | | 11,439,339 | |
Information Technology | | | — | | | | 8,825,743 | | | | — | | | | 8,825,743 | |
Materials | | | — | | | | 7,458,597 | | | | — | | | | 7,458,597 | |
Real Estate | | | — | | | | 2,873,488 | | | | — | | | | 2,873,488 | |
Utilities | | | — | | | | 201,448 | | | | — | | | | 201,448 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 2,524,969 | | | | — | | | | — | | | | 2,524,969 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 2,524,969 | | | $ | 65,833,820 | | | $ | — | | | $ | 68,358,789 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 2,524,969 | | | $ | 65,833,820 | | | $ | — | | | $ | 68,358,789 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 43,763,383 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 21,238,844 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,366,531 | |
Aggregate gross unrealized depreciation | | | (326,450 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,040,081 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 67,318,708 | |
| | | | |
See Notes to Financial Statements.
58
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value
(Cost $67,134,483) | | $ | 68,358,789 | |
Cash | | | 894,998 | |
Dividends, interest and other receivables | | | 1,037,246 | |
Receivable for Fund shares sold | | | 306,701 | |
Receivable for securities sold | | | 196,080 | |
Prepaid registration and filing fees | | | 21,596 | |
Other assets | | | 411 | |
| | | | |
Total assets | | | 70,815,821 | |
| | | | |
LIABILITIES | |
Payable for securities purchased | | | 1,078,913 | |
Dividends and distributions payable | | | 111,477 | |
Payable for Fund shares redeemed | | | 57,291 | |
Investment advisory fees payable | | | 17,811 | |
Transfer agent fees payable | | | 9,520 | |
Administrative fees payable | | | 8,775 | |
Distribution fees payable – Class A | | | 447 | |
Distribution fees payable – Class R | | | 300 | |
Accrued expenses | | | 74,160 | |
| | | | |
Total liabilities | | | 1,358,694 | |
| | | | |
NET ASSETS | | $ | 69,457,127 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 71,584,872 | |
Total distributable earnings (loss) | | | (2,127,745 | ) |
| | | | |
Net assets | | $ | 69,457,127 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $2,144,579 / 232,134 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.24 | |
Maximum sales charge (4.50% of offering price) | | | 0.44 | |
| | | | |
Maximum offering price per share | | $ | 9.68 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $66,473,159 / 7,190,118 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.25 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $708,209 / 76,699 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.23 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $131,180 / 14,192 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.24 | |
Maximum sales charge (2.50% of offering price) | | | 0.24 | |
| | | | |
Maximum offering price per share | | $ | 9.48 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Interest | | $ | 2,990,528 | |
Dividends | | | 1,571 | |
| | | | |
Total income | | | 2,992,099 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 343,868 | |
Administrative fees | | | 85,967 | |
Professional fees | | | 79,821 | |
Transfer agent fees | | | 70,000 | |
Registration and filing fees | | | 40,326 | |
Printing and mailing expenses | | | 32,466 | |
Custodian fees | | | 11,300 | |
Distribution fees – Class A | | | 5,020 | |
Distribution fees – Class R | | | 3,325 | |
Trustees’ fees | | | 2,703 | |
Distribution fees – Class T** | | | 330 | |
Miscellaneous | | | 11,730 | |
| | | | |
Gross expenses | | | 686,856 | |
Less: Waiver from investment adviser | | | (248,164 | ) |
Waiver from distributor | | | (330 | ) |
| | | | |
Net expenses | | | 438,362 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 2,553,737 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 425,483 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 719,925 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,145,408 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 3,699,145 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
59
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 2,553,737 | | | $ | 2,032,993 | |
Net realized gain (loss) | | | 425,483 | | | | (779,061 | ) |
Net change in unrealized appreciation (depreciation) | | | 719,925 | | | | 638,517 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 3,699,145 | | | | 1,892,449 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (89,733 | ) | | | (97,300 | ) |
Class I | | | (2,597,218 | ) | | | (1,991,604 | ) |
Class R | | | (28,070 | ) | | | (20,555 | ) |
Class T** | | | (6,224 | ) | | | (6,828 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (2,721,245 | ) | | | (2,116,287 | ) |
| | | | | | | | |
Tax return of capital: | | | | | | | | |
Class A | | | (665 | ) | | | — | |
Class I | | | (19,245 | ) | | | — | |
Class R | | | (208 | ) | | | — | |
Class T | | | (46 | ) | | | — | |
| | | | | | | | |
Total tax return of capital | | | (20,164 | ) | | | — | |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 27,116 and 89,343 shares, respectively ] | | | 252,459 | | | | 763,955 | |
Capital shares issued in reinvestment of dividends [ 8,735 and 9,833 shares, respectively ] | | | 81,160 | | | | 87,170 | |
Capital shares repurchased [ (38,563) and (43,500) shares, respectively ] | | | (357,887 | ) | | | (366,344 | ) |
| | | | | | | | |
Total Class A transactions | | | (24,268 | ) | | | 484,781 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 3,042,995 and 1,051,502 shares, respectively ] | | | 28,373,193 | | | | 9,441,895 | |
Capital shares issued in reinvestment of dividends [ 139,589 and 62,699 shares, respectively ] | | | 1,298,274 | | | | 556,687 | |
Capital shares repurchased [ (669,848) and (349,797) shares, respectively ] | | | (6,242,382 | ) | | | (3,056,860 | ) |
| | | | | | | | |
Total Class I transactions | | | 23,429,085 | | | | 6,941,722 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 11,691 and 36,206 shares, respectively ] | | | 108,891 | | | | 319,125 | |
Capital shares issued in reinvestment of dividends [ 2,126 and 1,252 shares, respectively ] | | | 19,746 | | | | 11,136 | |
Capital shares repurchased [ (8,024) and (480) shares, respectively ] | | | (74,269 | ) | | | (4,274 | ) |
| | | | | | | | |
Total Class R transactions | | | 54,368 | | | | 325,987 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS. | | | 23,459,185 | | | | 7,752,490 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 24,416,921 | | | | 7,528,652 | |
NET ASSETS: | |
Beginning of year | | | 45,040,206 | | | | 37,511,554 | |
| | | | | | | | |
End of year | | $ | 69,457,127 | | | $ | 45,040,206 | |
| | | | | | | | |
| | ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
60
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class A | | Year Ended October 31, | |
| | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | | | $ | 9.33 | | | $ | 9.01 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.39 | | | | 0.44 | | | | 0.47 | | | | 0.48 | | | | 0.49 | |
Net realized and unrealized gain (loss) | | | 0.26 | | | | (0.03 | ) | | | 0.14 | | | | (0.40 | ) | | | 0.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.65 | | | | 0.41 | | | | 0.61 | | | | 0.08 | | | | 0.81 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.42 | ) | | | (0.46 | ) | | | (0.47 | ) | | | (0.48 | ) | | | (0.48 | ) |
Return of capital | | | — | # | | | — | | | | (0.01 | ) | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.42 | ) | | | (0.46 | ) | | | (0.48 | ) | | | (0.48 | ) | | | (0.49 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | | | $ | 9.33 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.27 | % | | | 4.72 | % | | | 6.97 | % | | | 0.86 | % | | | 9.20 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 2,145 | | | $ | 2,115 | | | $ | 1,623 | | | $ | 2,500 | | | $ | 709 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.04 | % | | | 1.06 | % |
Before waivers and reimbursements (f) | | | 1.44 | % | | | 1.68 | % | | | 1.79 | % | | | 1.77 | % | | | 1.84 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 4.24 | % | | | 4.97 | % | | | 5.27 | % | | | 5.20 | % | | | 5.26 | % |
Before waivers and reimbursements (f) | | | 3.80 | % | | | 4.29 | % | | | 4.48 | % | | | 4.47 | % | | | 4.48 | % |
Portfolio turnover rate^ | | | 39 | % | | | 59 | % | | | 54 | % | | | 45 | % | | | 54 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.94 | | | $ | 9.34 | | | $ | 9.01 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.42 | | | | 0.47 | | | | 0.50 | | | | 0.50 | | | | 0.52 | |
Net realized and unrealized gain (loss) | | | 0.26 | | | | (0.04 | ) | | | 0.12 | | | | (0.40 | ) | | | 0.33 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.68 | | | | 0.43 | | | | 0.62 | | | | 0.10 | | | | 0.85 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.44 | ) | | | (0.48 | ) | | | (0.49 | ) | | | (0.50 | ) | | | (0.51 | ) |
Return of capital | | | — | # | | | — | | | | (0.01 | ) | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.44 | ) | | | (0.48 | ) | | | (0.50 | ) | | | (0.50 | ) | | | (0.52 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.25 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.94 | | | $ | 9.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.65 | % | | | 4.98 | % | | | 7.12 | % | | | 1.09 | % | | | 9.58 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 66,473 | | | $ | 42,159 | | | $ | 35,453 | | | $ | 30,386 | | | $ | 30,185 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.80 | % | | | 0.82 | % |
Before waivers and reimbursements (f) | | | 1.18 | % | | | 1.43 | % | | | 1.53 | % | | | 1.52 | % | | | 1.58 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 4.47 | % | | | 5.22 | % | | | 5.50 | % | | | 5.47 | % | | | 5.55 | % |
Before waivers and reimbursements (f) | | | 4.04 | % | | | 4.54 | % | | | 4.71 | % | | | 4.74 | % | | | 4.79 | % |
Portfolio turnover rate^ | | | 39 | % | | | 59 | % | | | 54 | % | | | 45 | % | | | 54 | % |
See Notes to Financial Statements.
61
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.00 | | | $ | 9.05 | | | $ | 8.93 | | | $ | 9.33 | | | $ | 9.01 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.37 | | | | 0.42 | | | | 0.45 | | | | 0.45 | | | | 0.47 | |
Net realized and unrealized gain (loss) | | | 0.25 | | | | (0.03 | ) | | | 0.13 | | | | (0.39 | ) | | | 0.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.62 | | | | 0.39 | | | | 0.58 | | | | 0.06 | | | | 0.79 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.39 | ) | | | (0.44 | ) | | | (0.45 | ) | | | (0.46 | ) | | | (0.46 | ) |
Return of capital | | | — | # | | | — | | | | (0.01 | ) | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.39 | ) | | | (0.44 | ) | | | (0.46 | ) | | | (0.46 | ) | | | (0.47 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.23 | | | $ | 9.00 | | | $ | 9.05 | | | $ | 8.93 | | | $ | 9.33 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.01 | % | | | 4.46 | % | | | 6.59 | % | | | 0.63 | % | | | 8.95 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 708 | | | $ | 638 | | | $ | 307 | | | $ | 287 | | | $ | 218 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % | | | 1.30 | % | | | 1.32 | % |
Before waivers and reimbursements (f) | | | 1.69 | % | | | 1.92 | % | | | 2.03 | % | | | 2.02 | % | | | 2.08 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 3.98 | % | | | 4.69 | % | | | 5.00 | % | | | 4.96 | % | | | 5.05 | % |
Before waivers and reimbursements (f) | | | 3.54 | % | | | 4.01 | % | | | 4.22 | % | | | 4.23 | % | | | 4.28 | % |
Portfolio turnover rate^ | | | 39 | % | | | 59 | % | | | 54 | % | | | 45 | % | | | 54 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | | | $ | 9.33 | | | $ | 9.01 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.42 | | | | 0.47 | | | | 0.50 | | | | 0.50 | | | | 0.52 | |
Net realized and unrealized gain (loss) | | | 0.25 | | | | (0.04 | ) | | | 0.13 | | | | (0.40 | ) | | | 0.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.67 | | | | 0.43 | | | | 0.63 | | | | 0.10 | | | | 0.84 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.44 | ) | | | (0.48 | ) | | | (0.49 | ) | | | (0.50 | ) | | | (0.51 | ) |
Return of capital | | | — | # | | | — | | | | (0.01 | ) | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.44 | ) | | | (0.48 | ) | | | (0.50 | ) | | | (0.50 | ) | | | (0.52 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | | | $ | 9.33 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 7.53 | % | | | 4.98 | % | | | 7.24 | % | | | 1.09 | % | | | 9.46 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 131 | | | $ | 128 | | | $ | 129 | | | $ | 127 | | | $ | 132 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.80 | % | | | 0.82 | % |
Before waivers and reimbursements (f) | | | 1.44 | % | | | 1.68 | % | | | 1.78 | % | | | 1.77 | % | | | 2.08 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 4.49 | % | | | 5.23 | % | | | 5.50 | % | | | 5.46 | % | | | 5.56 | % |
Before waivers and reimbursements (f) | | | 3.80 | % | | | 4.30 | % | | | 4.47 | % | | | 4.49 | % | | | 4.30 | % |
Portfolio turnover rate^ | | | 39 | % | | | 59 | % | | | 54 | % | | | 45 | % | | | 54 | % |
| ** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C Shares. |
| # | Per share amount is less than $0.005. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
See Notes to Financial Statements.
62
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | |
| | | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | 14.24 | % | | | 3.34 | % | | | 2.70 | % |
| | | | with Sales Charge (a) | | | | 7.93 | | | | 2.18 | | | | 1.79 | |
Fund – Class I Shares* | | | | | | | 14.48 | | | | 3.61 | | | | 2.97 | |
Fund – Class R Shares* | | | | | | | 13.95 | | | | 3.07 | | | | 2.44 | |
ICE BofA U.S. 3-Month
Treasury Bill Index | | | | | | | 0.06 | | | | 1.15 | | | | 0.96 | |
| |
* Date of inception 7/6/15. (a) A 5.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Multi-Alternative Strategies Fund and the ICE BofA U.S. 3-Month Treasury Bill Index from 7/6/15 to 10/31/21. The performance of the ICE BofA U.S. 3-Month Treasury Bill Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the ICE BofA U.S. 3-Month Treasury Bill Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of October 1, 2021, the gross expense ratios including acquired fund fees for Class A, I and R shares were 2.43%, 2.17% and 2.69%, respectively. The net expense ratios for Class A, I and R shares were 1.57%, 1.32% and 1.82%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2023. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 14.58% for the year ended October 31, 2021. The Fund’s benchmark, the ICE BofA US 3-Month Treasury Bill Index, returned 0.06% over the same year.
What helped performance during the year*?
| • | | Global real estate was the top contributor to performance with U.S. and Global Real Estate Investment Trusts (REITs) up approximately 52% and 25% for the period, respectively. |
| • | | Convertible securities helped performance, supported by the performance of the underlying equity securities. The asset category was up approximately 29% for the period. |
| • | | Strong performance in energy and agriculture commodities added to positive performance for the period. Commodities were up more than 28%. |
What hurt performance during the year*?
| • | | The long/short equity strategy was the top detractor from performance, mainly driven by poor performance from online retailers within the long online/short stores strategy. The asset category was down about 9% for the period. |
| • | | Event driven, one of the two strategies that had negative performance for the period, was down approximately 1.7%. |
| * | The Fund does not hold a position in any single security directly but has exposure through ETFs. |
63
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) | |
| |
| As of October 31, 2021 | |
Alternatives | | | 38.5 | % |
Fixed Income | | | 28.8 | |
Equity | | | 16.6 | |
Commodity | | | 16.1 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| |
| As of October 31, 2021 | |
WisdomTree Managed Futures Strategy Fund | | | 15.0 | % |
iShares Convertible Bond ETF | | | 14.8 | |
Vanguard Short-Term Inflation-Protected Securities ETF | | | 14.0 | |
IQ Merger Arbitrage ETF | | | 12.3 | |
iShares Core US REIT ETF | | | 8.3 | |
Vanguard Global ex-U.S. Real Estate ETF | | | 8.2 | |
ProShares Long Online/Short Stores ETF | | | 7.8 | |
Invesco DB Gold Fund | | | 5.0 | |
Invesco DB Agriculture Fund | | | 4.1 | |
Invesco DB Energy Fund | | | 4.0 | |
Holdings are subject to change without notice. | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A and Class R shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning Account Value 5/1/21 | | | Ending Account Value 10/31/21 | | | Expenses Paid During Period* 5/1/21 - 10/31/21 | |
Class A | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,010.80 | | | | $5.55 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.69 | | | | 5.57 | |
Class I | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,012.50 | | | | 4.30 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.93 | | | | 4.32 | |
Class R | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 1,009.00 | | | | 6.80 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.44 | | | | 6.83 | |
| |
* Expenses are equal to the Portfolio’s A, I and R shares annualized expense ratio of 1.09%, 0.85% and 1.34%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
64
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Alternatives (38.3%) | | | | | | | | |
IQ Merger Arbitrage ETF | | | 63,000 | | | $ | 2,070,180 | |
ProShares Long Online/Short Stores ETF | | | 19,030 | | | | 1,319,730 | |
ProShares RAFI Long/Short‡ | | | 18,280 | | | | 563,975 | |
WisdomTree Managed Futures Strategy Fund | | | 69,570 | | | | 2,524,000 | |
| | | | | | | | |
Total Alternatives | | | | | | | 6,477,885 | |
| | | | | | | | |
Commodity (16.1%) | | | | | | | | |
Invesco DB Agriculture Fund* | | | 35,590 | | | | 686,531 | |
Invesco DB Energy Fund* | | | 36,680 | | | | 669,043 | |
Invesco DB Gold Fund* | | | 16,480 | | | | 843,020 | |
Invesco DB Precious Metals Fund* | | | 10,690 | | | | 517,211 | |
| | | | | | | | |
Total Commodity | | | | | | | 2,715,805 | |
| | | | | | | | |
Equity (16.5%) | | | | | | | | |
iShares Core US REIT ETF | | | 22,230 | | | | 1,402,046 | |
Vanguard Global ex-U.S. Real Estate ETF | | | 24,100 | | | | 1,385,750 | |
| | | | | | | | |
Total Equity | | | | | | | 2,787,796 | |
| | | | | | | | |
Fixed Income (28.6%) | | | | | | | | |
iShares Convertible Bond ETF | | | 24,230 | | | | 2,481,758 | |
Vanguard Short-Term Inflation-Protected Securities ETF | | | 45,250 | | | | 2,356,167 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 4,837,925 | |
| | | | | | | | |
Total Investments in Securities (99.5%)
(Cost $16,465,409) | | | | | | | 16,819,411 | |
Other Assets Less Liabilities (0.5%) | | | | | | | 91,705 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 16,911,116 | |
| | | | | | | | |
| ‡ | All, or a portion, of the security is an affiliated company as defined under the Investment Company Act of 1940. |
Glossary:
| | REIT | — Real Estate Investment Trust |
Investments in companies which were affiliates for the year ended October 31, 2021, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Security Description | | Shares at
October 31,
2021 | | | Market Value
October 31,
2020 ($) | | | Purchases
at Cost ($) | | | Proceeds
from
Sales ($) | | | Net
Realized
Gain
(Loss) ($) | | | Change
in Unrealized
Appreciation/
(Depreciation)
($) | | | Market
Value
October 31,
2021 ($) | | | Dividend/
Interest
Income
($) | | | Capital Gain
Distributions
($) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Alternatives | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ProShares RAFI Long/Short | | | 18,280 | | | | 653,631 | | | | — | | | | (115,065 | ) | | | (21,285 | ) | | | 46,694 | | | | 563,975 | | | | 7,296 | | | | — | |
Specialty | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Invesco DB G10 Currency Harvest Fund | | | — | | | | 1,380,986 | | | | — | | | | (1,496,836 | ) | | | 67,052 | | | | 48,798 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | 2,034,617 | | | | — | | | | (1,611,901 | ) | | | 45,767 | | | | 95,492 | | | | 563,975 | | | | 7,296 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 16,819,411 | | | $ | — | | | $ | — | | | $ | 16,819,411 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 16,819,411 | | | $ | — | | | $ | — | | | $ | 16,819,411 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 16,819,411 | | | $ | — | | | $ | — | | | $ | 16,819,411 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
65
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 10,957,186 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 10,271,537 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 718,707 | |
Aggregate gross unrealized depreciation | | | (509,782 | ) |
| | | | |
Net unrealized appreciation | | $ | 208,925 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 16,610,486 | |
| | | | |
See Notes to Financial Statements.
66
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value: | | | | |
Affiliated Issuers (Cost $699,664) | | $ | 563,975 | |
Unaffiliated Issuers (Cost $15,765,745) | | | 16,255,436 | |
Cash | | | 176,276 | |
Prepaid registration and filing fees | | | 14,615 | |
Receivable for Fund shares sold | | | 11,907 | |
Dividends, interest and other receivables | | | 3 | |
Other assets | | | 229 | |
| | | | |
Total assets | | | 17,022,441 | |
| | | | |
LIABILITIES | | | | |
Payable for securities purchased | | | 58,390 | |
Administrative fees payable | | | 5,704 | |
Transfer agent fees payable | | | 3,099 | |
Distribution fees payable – Class A | | | 142 | |
Distribution fees payable – Class R | | | 74 | |
Accrued expenses | | | 43,916 | |
| | | | |
Total liabilities | | | 111,325 | |
| | | | |
NET ASSETS | | $ | 16,911,116 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 15,172,631 | |
Total distributable earnings (loss) | | | 1,738,485 | |
| | | | |
Net assets | | $ | 16,911,116 | |
| | | | |
Class A | | | | |
Net asset value, offering and redemption price per share, $670,436 / 59,488 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 11.27 | |
Maximum sales charge (5.50% of offering price) | | | 0.66 | |
| | | | |
Maximum offering price per share | | $ | 11.93 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $16,054,096 / 1,421,691 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 11.29 | |
| | | | |
Class R | | | | |
Net asset value and redemption price per share, $186,584 / 16,643 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 11.21 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends ($7,296 of dividend income received from affiliates) | | $ | 520,713 | |
Interest | | | 39 | |
| | | | |
Total income | | | 520,752 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 77,989 | |
Professional fees | | | 40,647 | |
Registration and filing fees | | | 31,836 | |
Administrative fees | | | 30,048 | |
Transfer agent fees | | | 27,300 | |
Printing and mailing expenses | | | 23,222 | |
Custodian fees | | | 4,625 | |
Distribution fees – Class A | | | 1,530 | |
Distribution fees – Class R | | | 790 | |
Trustees’ fees | | | 747 | |
Miscellaneous | | | 2,984 | |
| | | | |
Gross expenses | | | 241,718 | |
Less: Waiver from investment adviser | | | (101,405 | ) |
| | | | |
Net expenses | | | 140,313 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 380,439 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities ($45,767 realized gain (loss) from affiliates) | | | 1,645,658 | |
Net change in unrealized appreciation (depreciation) on investments in securities ($95,492 of change in unrealized appreciation (depreciation) from affiliates) | | | 24,075 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,669,733 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 2,050,172 | |
| | | | |
See Notes to Financial Statements.
67
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 380,439 | | | $ | 219,722 | |
Net realized gain (loss) | | | 1,645,658 | | | | (373,771 | ) |
Net change in unrealized appreciation (depreciation) | | | 24,075 | | | | (296,652 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 2,050,172 | | | | (450,701 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (3,248 | ) | | | (11,965 | ) |
Class I | | | (113,005 | ) | | | (380,272 | ) |
Class R | | | (470 | ) | | | (1,934 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (116,723 | ) | | | (394,171 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 8,051 and 2,595 shares, respectively ] | | | 89,504 | | | | 26,323 | |
Capital shares issued in reinvestment of dividends [ 254 and 983 shares, respectively ] | | | 2,663 | | | | 9,992 | |
Capital shares repurchased [ (4,808) and (8,344) shares, respectively ] | | | (52,952 | ) | | | (79,600 | ) |
| | | | | | | | |
Total Class A transactions | | | 39,215 | | | | (43,285 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 134,572 and 43,009 shares, respectively ] | | | 1,506,301 | | | | 429,302 | |
Capital shares issued in reinvestment of dividends [ 3,009 and 15,947 shares, respectively ] | | | 31,502 | | | | 162,026 | |
Capital shares repurchased [ (101,764) and (392,851) shares, respectively ] | | | (1,098,711 | ) | | | (3,786,507 | ) |
| | | | | | | | |
Total Class I transactions | | | 439,092 | | | | (3,195,179 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 2,848 and 2,570 shares, respectively ] | | | 31,638 | | | | 25,161 | |
Capital shares issued in reinvestment of dividends [ 13 and 21 shares, respectively ] | | | 131 | | | | 215 | |
Capital shares repurchased [ (40) and (17) shares, respectively ] | | | (442 | ) | | | (169 | ) |
| | | | | | | | |
Total Class R transactions | | | 31,327 | | | | 25,207 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 509,634 | | | | (3,213,257 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 2,443,083 | | | | (4,058,129 | ) |
NET ASSETS: | |
Beginning of year | | | 14,468,033 | | | | 18,526,162 | |
| | | | | | | | |
End of year | | $ | 16,911,116 | | | $ | 14,468,033 | |
| | | | | | | | |
See Notes to Financial Statements.
68
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.92 | | | $ | 10.32 | | | $ | 10.02 | | | $ | 10.21 | | | $ | 9.97 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.26 | | | | 0.10 | | | | 0.11 | | | | 0.04 | | | | 0.02 | |
Net realized and unrealized gain (loss) | | | 1.15 | | | | (0.30 | ) | | | 0.28 | | | | (0.19 | ) | | | 0.26 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.41 | | | | (0.20 | ) | | | 0.39 | | | | (0.15 | ) | | | 0.28 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.06 | ) | | | (0.20 | ) | | | (0.04 | ) | | | — | | | | (0.01 | ) |
Distributions from net realized gains | | | — | | | | — | | | | (0.05 | ) | | | (0.04 | ) | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.06 | ) | | | (0.20 | ) | | | (0.09 | ) | | | (0.04 | ) | | | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.27 | | | $ | 9.92 | | | $ | 10.32 | | | $ | 10.02 | | | $ | 10.21 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 14.24 | % | | | (2.01 | )% | | | 3.98 | % | | | (1.49 | )% | | | 2.78 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 670 | | | $ | 556 | | | $ | 627 | | | $ | 827 | | | $ | 659 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.13 | %(j) | | | 1.06 | %***(m) | | | 1.07 | %**(n) | | | 1.03 | %(o) | | | 1.00 | %(o) |
Before waivers and reimbursements (f) | | | 1.78 | % | | | 1.97 | % | | | 1.89 | % | | | 1.79 | % | | | 2.08 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 2.34 | % | | | 1.03 | % | | | 1.12 | % | | | 0.39 | % | | | 0.20 | % |
Before waivers and reimbursements (f)(x) | | | 1.69 | % | | | 0.12 | % | | | 0.30 | % | | | (0.37 | )% | | | (0.88 | )% |
Portfolio turnover rate^ | | | 66 | % | | | 15 | % | | | 8 | % | | | 5 | % | | | 13 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.94 | | | $ | 10.34 | | | $ | 10.04 | | | $ | 10.23 | | | $ | 9.99 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.27 | | | | 0.13 | | | | 0.13 | | | | 0.07 | | | | 0.05 | |
Net realized and unrealized gain (loss) | | | 1.16 | | | | (0.31 | ) | | | 0.29 | | | | (0.20 | ) | | | 0.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.43 | | | | (0.18 | ) | | | 0.42 | | | | (0.13 | ) | | | 0.30 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.08 | ) | | | (0.22 | ) | | | (0.07 | ) | | | (0.02 | ) | | | (0.03 | ) |
Distributions from net realized gains | | | — | | | | — | | | | (0.05 | ) | | | (0.04 | ) | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.08 | ) | | | (0.22 | ) | | | (0.12 | ) | | | (0.06 | ) | | | (0.06 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.29 | | | $ | 9.94 | | | $ | 10.34 | | | $ | 10.04 | | | $ | 10.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 14.48 | % | | | (1.76 | )% | | | 4.25 | % | | | (1.25 | )% | | | 3.04 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 16,054 | | | $ | 13,776 | | | $ | 17,783 | | | $ | 18,151 | | | $ | 16,358 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.88 | %(j) | | | 0.81 | %***(m) | | | 0.82 | %**(n) | | | 0.78 | %(o) | | | 0.75 | %(o) |
Before waivers and reimbursements (f) | | | 1.53 | % | | | 1.71 | % | | | 1.63 | % | | | 1.54 | % | | | 1.82 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 2.45 | % | | | 1.36 | % | | | 1.32 | % | | | 0.66 | % | | | 0.45 | % |
Before waivers and reimbursements (f)(x) | | | 1.80 | % | | | 0.46 | % | | | 0.50 | % | | | (0.11 | )% | | | (0.62 | )% |
Portfolio turnover rate^ | | | 66 | % | | | 15 | % | | | 8 | % | | | 5 | % | | | 13 | % |
See Notes to Financial Statements.
69
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 9.87 | | | $ | 10.27 | | | $ | 9.97 | | | $ | 10.19 | | | $ | 9.95 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.21 | | | | 0.06 | | | | 0.08 | | | | 0.03 | | | | — | # |
Net realized and unrealized gain (loss) | | | 1.16 | | | | (0.29 | ) | | | 0.29 | | | | (0.21 | ) | | | 0.27 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.37 | | | | (0.23 | ) | | | 0.37 | | | | (0.18 | ) | | | 0.27 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.03 | ) | | | (0.17 | ) | | | (0.02 | ) | | | — | | | | — | |
Distributions from net realized gains | | | — | | | | — | | | | (0.05 | ) | | | (0.04 | ) | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.03 | ) | | | (0.17 | ) | | | (0.07 | ) | | | (0.04 | ) | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.21 | | | $ | 9.87 | | | $ | 10.27 | | | $ | 9.97 | | | $ | 10.19 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 13.95 | % | | | (2.27 | )% | | | 3.74 | % | | | (1.79 | )% | | | 2.53 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 187 | | | $ | 136 | | | $ | 116 | | | $ | 105 | | | $ | 105 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.38 | %(j) | | | 1.31 | %***(m) | | | 1.32 | %**(n) | | | 1.26 | %(o) | | | 1.25 | %(o) |
Before waivers and reimbursements (f) | | | 2.03 | % | | | 2.23 | % | | | 2.13 | % | | | 2.02 | % | | | 2.32 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.96 | % | | | 0.65 | % | | | 0.78 | % | | | 0.27 | % | | | (0.02 | )% |
Before waivers and reimbursements (f)(x) | | | 1.31 | % | | | (0.26 | )% | | | (0.04 | )% | | | (0.49 | )% | | | (1.08 | )% |
Portfolio turnover rate^ | | | 66 | % | | | 15 | % | | | 8 | % | | | 5 | % | | | 13 | % |
| ** | Includes Tax expense of 0.04%. |
| *** | Includes Tax expense of 0.01%. |
| # | Per share amount is less than $0.005. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.60% for Class A, 1.35% for Class I and 1.85% for Class R. |
| (m) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.66% for Class A, 1.41% for Class I and 1.91% for Class R. |
| (n) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.69% for Class A, 1.44% for Class I and 1.94% for Class R. |
| (o) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 1.65% for Class A, 1.40% for Class I and 1.90% for Class R. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
See Notes to Financial Statements.
70
1290 RETIREMENT 2020 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 15.99 | % | | | 7.58 | % |
S&P Target Date 2020 Index | | | 16.81 | | | | 8.21 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2020 Fund and the S&P Target Date 2020 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2020 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2020 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 2.04% The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 15.99% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2020 Index, returned 16.81% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position to domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by size. |
| • | | An overweight to equities relative to the benchmark benefited performance. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance, as it underperformed relative to market cap across U.S. and Developed Markets. |
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
71
1290 RETIREMENT 2020 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| |
| As of October 31, 2021 | |
Fixed Income | | | 50.9 | % |
Equity | | | 48.7 | |
Investment Company | | | 0.4 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| |
| As of October 31, 2021 | |
iShares Core U.S. Aggregate Bond ETF | | | 29.9 | % |
iShares Core S&P Total US Stock Market ETF | | | 17.2 | |
iShares TIPS Bond ETF | | | 7.6 | |
iShares Core MSCI EAFE ETF | | | 5.9 | |
iShares MSCI USA Min Vol Factor ETF | | | 5.6 | |
Invesco S&P 500 Low Volatility ETF | | | 5.6 | |
Vanguard Short-Term Bond ETF | | | 5.6 | |
iShares Broad USD High Yield Corporate Bond ETF | | | 4.0 | |
Vanguard Total International Bond ETF | | | 3.9 | |
Invesco S&P MidCap Low Volatility ETF | | | 3.0 | |
Holdings are subject to change without notice. | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning Account Value 5/1/21 | | | Ending Account Value 10/31/21 | | | Expenses Paid During Period* 5/1/21 - 10/31/21 | |
Class I | |
Actual | | | $1,000.00 | | | | $1,037.00 | | | | $2.77 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.48 | | | | 2.75 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
72
1290 FUNDS
1290 RETIREMENT 2020 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (48.5%) | |
Invesco S&P 500 Low Volatility ETF | | | 11,300 | | | $ | 718,680 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,540 | | | | 88,748 | |
Invesco S&P International Developed Low Volatility ETF | | | 11,880 | | | | 376,715 | |
Invesco S&P MidCap Low Volatility ETF | | | 6,910 | | | | 381,017 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,710 | | | | 182,532 | |
iShares Core MSCI EAFE ETF | | | 9,770 | | | | 747,503 | |
iShares Core MSCI Emerging Markets ETF | | | 2,700 | | | | 168,561 | |
iShares Core S&P Total US Stock Market ETF | | | 20,940 | | | | 2,197,444 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4,860 | | | | 372,811 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,420 | | | | 89,417 | |
iShares MSCI USA Min Vol Factor ETF | | | 9,280 | | | | 719,664 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,500 | | | | 174,796 | |
| | | | | | | | |
Total Equity | | | | | | | 6,217,888 | |
| | | | | | | | |
Fixed Income (50.8%) | | | | | | | | |
iShares Broad USD High Yield Corporate Bond ETF | | | 12,280 | | | | 507,164 | |
iShares Core U.S. Aggregate Bond ETF | | | 33,330 | | | | 3,820,951 | |
iShares TIPS Bond ETF | | | 7,570 | | | | 974,032 | |
Vanguard Short-Term Bond ETF | | | 8,710 | | | | 709,343 | |
Vanguard Total International Bond ETF | | | 8,760 | | | | 496,429 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 6,507,919 | |
| | | | | | | | |
Total Exchange Traded Funds (99.3%)
(Cost $11,124,084) | | | | | | | 12,725,807 | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | | | | | |
Investment Company (0.4%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 45,560 | | | | 45,583 | |
| | | | | | | | |
Total Short-Term Investment (0.4%)
(Cost $45,583) | | | | | | | 45,583 | |
| | | | | | | | |
Total Investments in Securities (99.7%)
(Cost $11,169,667) | | | | | | | 12,771,390 | |
Other Assets Less Liabilities (0.3%) | | | | | | | 38,331 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 12,809,721 | |
| | | | | | | | |
Glossary:
| | TIPS | — Treasury Inflation Protected Security |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in Active Markets for Identical Securities | | | Level 2
Significant Other Observable Inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) | | | Level 3
Significant Unobservable Inputs (including the Fund’s own assumptions in determining the fair value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 12,725,807 | | | $ | — | | | $ | — | | | $ | 12,725,807 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 45,583 | | | | — | | | | — | | | | 45,583 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 12,771,390 | | | $ | — | | | $ | — | | | $ | 12,771,390 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 12,771,390 | | | $ | — | | | $ | — | | | $ | 12,771,390 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 2,105,863 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 3,173,449 | |
See Notes to Financial Statements.
73
1290 FUNDS
1290 RETIREMENT 2020 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,555,159 | |
Aggregate gross unrealized depreciation | | | (5,857 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,549,302 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 11,222,088 | |
| | | | |
See Notes to Financial Statements.
74
1290 FUNDS
1290 RETIREMENT 2020 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value
(Cost $11,169,667) | | $ | 12,771,390 | |
Cash | | | 75,000 | |
Prepaid registration and filing fees | | | 5,270 | |
Receivable from investment adviser | | | 3,289 | |
Receivable for Fund shares sold | | | 258 | |
Dividends, interest and other receivables | | | 2 | |
Other assets | | | 163 | |
| | | | |
Total assets | | | 12,855,372 | |
| | | | |
LIABILITIES | |
Transfer agent fees payable | | | 1,128 | |
Accrued expenses | | | 44,523 | |
| | | | |
Total liabilities | | | 45,651 | |
| | | | |
NET ASSETS | | $ | 12,809,721 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 10,689,021 | |
Total distributable earnings (loss) | | | 2,120,700 | |
| | | | |
Net assets | | $ | 12,809,721 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $12,809,721 / 1,015,754 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.61 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 246,281 | |
Interest | | | 26 | |
| | | | |
Total income | | | 246,307 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 64,314 | |
Professional fees | | | 39,995 | |
Administrative fees | | | 30,035 | |
Printing and mailing expenses | | | 29,581 | |
Registration and filing fees | | | 21,802 | |
Transfer agent fees | | | 12,100 | |
Custodian fees | | | 4,951 | |
Trustees’ fees | | | 606 | |
Miscellaneous | | | 3,125 | |
| | | | |
Gross expenses | | | 206,509 | |
Less: Waiver from investment adviser | | | (94,349 | ) |
Reimbursement from investment adviser | | | (42,904 | ) |
| | | | |
Net expenses | | | 69,256 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 177,051 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 481,981 | |
| | | | |
Net realized gain (loss) | | | 481,981 | |
| | | | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,250,109 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,732,090 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,909,141 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 177,051 | | | $ | 216,675 | |
Net realized gain (loss) | | | 481,981 | | | | 227,081 | |
Net change in unrealized appreciation (depreciation) | | | 1,250,109 | | | | (352,860 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,909,141 | | | | 90,896 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (499,146 | ) | | | (377,438 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 174,043 and 473,233 shares, respectively ] | | | 2,115,871 | | | | 5,300,940 | |
Capital shares issued in reinvestment of dividends [ 33,214 and 24,677 shares, respectively ] | | | 384,946 | | | | 279,838 | |
Capital shares repurchased [ (267,829) and (354,598) shares, respectively ] | | | (3,268,726 | ) | | | (3,917,201 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | (767,909 | ) | | | 1,663,577 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 642,086 | | | | 1,377,035 | |
NET ASSETS: | |
Beginning of year | | | 12,167,635 | | | | 10,790,600 | |
| | | | | | | | |
End of year | | $ | 12,809,721 | | | $ | 12,167,635 | |
| | | | | | | | |
See Notes to Financial Statements.
75
1290 FUNDS
1290 RETIREMENT 2020 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.30 | | | $ | 11.57 | | | $ | 10.49 | | | $ | 10.66 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.17 | | | | 0.22 | | | | 0.23 | | | | 0.20 | | | | 0.12 | |
Net realized and unrealized gain (loss) | | | 1.60 | | | | (0.10 | ) | | | 1.05 | | | | (0.17 | ) | | | 0.54 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 1.77 | | | | 0.12 | | | | 1.28 | | | | 0.03 | | | | 0.66 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.20 | ) | | | (0.24 | ) | | | (0.15 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.26 | ) | | | (0.15 | ) | | | (0.05 | ) | | | (0.02 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.46 | ) | | | (0.39 | ) | | | (0.20 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 12.61 | | | $ | 11.30 | | | $ | 11.57 | | | $ | 10.49 | | | $ | 10.66 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 15.99 | % | | | 1.03 | % | | | 12.37 | % | | | 0.24 | % | | | 6.60 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 12,810 | | | $ | 12,168 | | | $ | 10,791 | | | $ | 7,659 | | | $ | 2,665 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.54 | %(j) | | | 0.53 | %**(j) | | | 0.54 | %(j) | | | 0.53 | %(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (a)(f) | | | 1.60 | % | | | 1.93 | % | | | 2.09 | % | | | 3.93 | % | | | 5.32 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.38 | % | | | 1.95 | % | | | 2.10 | % | | | 1.88 | % | | | 1.66 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | 0.31 | % | | | 0.56 | % | | | 0.55 | % | | | (1.52 | )% | | | (3.13 | )%(l) |
Portfolio turnover rate^ | | | 17 | % | | | 32 | % | | | 18 | % | | | 8 | % | | | 2 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
76
1290 RETIREMENT 2025 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 19.05 | % | | | 8.46 | % |
S&P Target Date 2025 Index | | | 20.73 | | | | 9.24 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2025 Fund and the S&P Target Date 2025 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2025 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2025 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 1.54% The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 19.05% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2025 Index, returned 20.73% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | An overweight to U.S. equities was also beneficial, as domestic large-cap stocks outperformed their international counterparts, both in developed and in emerging markets. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
77
1290 RETIREMENT 2025 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities)
As of October 31, 2021 | |
Equity | | | 58.5 | % |
Fixed Income | | | 40.8 | |
Investment Company | | | 0.7 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities)
As of October 31, 2021 | |
iShares Core U.S. Aggregate Bond ETF | | | 27.4 | % |
iShares Core S&P Total US Stock Market ETF | | | 20.5 | |
iShares Core MSCI EAFE ETF | | | 7.2 | |
iShares MSCI USA Min Vol Factor ETF | | | 6.6 | |
Invesco S&P 500 Low Volatility ETF | | | 6.6 | |
iShares TIPS Bond ETF | | | 6.1 | |
Invesco S&P International Developed Low Volatility ETF | | | 3.6 | |
Invesco S&P MidCap Low Volatility ETF | | | 3.6 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 3.6 | |
Vanguard Short-Term Bond ETF | | | 2.9 | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | |
Actual | | $ | 1,000.00 | | | $ | 1,042.90 | | | $ | 2.78 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.48 | | | | 2.75 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
78
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (58.6%) | |
Invesco S&P 500 Low Volatility ETF | | | 24,440 | | | $ | 1,554,384 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 8,280 | | | | 207,580 | |
Invesco S&P International Developed Low Volatility ETF | | | 27,020 | | | | 856,804 | |
Invesco S&P MidCap Low Volatility ETF | | | 15,510 | | | | 855,221 | |
Invesco S&P SmallCap Low Volatility ETF | | | 8,140 | | | | 400,488 | |
iShares Core MSCI EAFE ETF | | | 22,260 | | | | 1,703,113 | |
iShares Core MSCI Emerging Markets ETF | | | 6,310 | | | | 393,933 | |
iShares Core S&P Total US Stock Market ETF | | | 46,080 | | | | 4,835,635 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 11,080 | | | | 849,947 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 3,090 | | | | 194,577 | |
iShares MSCI USA Min Vol Factor ETF | | | 20,170 | | | | 1,564,184 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 3,390 | | | | 395,040 | |
| | | | | | | | |
Total Equity | | | | | | | 13,810,906 | |
| | | | | | | | |
Fixed Income (40.9%) | | | | | | | | |
iShares Broad USD High Yield Corporate Bond ETF | | | 12,400 | | | | 512,120 | |
iShares Core U.S. Aggregate Bond ETF | | | 56,440 | | | | 6,470,281 | |
iShares TIPS Bond ETF | | | 11,260 | | | | 1,448,824 | |
Vanguard Short-Term Bond ETF | | | 8,260 | | | | 672,694 | |
Vanguard Total International Bond ETF | | | 9,510 | | | | 538,932 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 9,642,851 | |
| | | | | | | | |
Total Exchange Traded
Funds (99.5%)
(Cost $20,202,661) | | | | | | | 23,453,757 | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | | | | | |
Investment Company (0.7%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 161,890 | | | | 161,971 | |
| | | | | | | | |
Total Short-Term Investment (0.7%)
(Cost $161,971) | | | | | | | 161,971 | |
| | | | | | | | |
Total Investments in
Securities (100.2%)
(Cost $20,364,632) | | | | | | | 23,615,728 | |
Other Assets Less Liabilities (-0.2%) | | | | | | | (34,903 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 23,580,825 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 23,453,757 | | | $ | — | | | $ | — | | | $ | 23,453,757 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 161,971 | | | | — | | | | — | | | | 161,971 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 23,615,728 | | | $ | — | | | $ | — | | | $ | 23,615,728 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 23,615,728 | | | $ | — | | | $ | — | | | $ | 23,615,728 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
See Notes to Financial Statements.
79
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 3,885,198 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 4,290,073 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 3,136,591 | |
Aggregate gross unrealized depreciation | | | (8,421 | ) |
| | | | |
Net unrealized appreciation | | $ | 3,128,170 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 20,487,558 | |
| | | | |
See Notes to Financial Statements.
80
1290 FUNDS
1290 RETIREMENT 2025 FUND
STATEMENT OF ASSETS AND LIABILITIES October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value
(Cost $20,364,632) | | $ | 23,615,728 | |
Cash | | | 74,999 | |
Prepaid registration and filing fees | | | 6,845 | |
Receivable for Fund shares sold | | | 2,891 | |
Receivable from investment adviser | | | 758 | |
Dividends, interest and other receivables | | | 8 | |
Other assets | | | 340 | |
| | | | |
Total assets | | | 23,701,569 | |
| | | | |
LIABILITIES | |
Payable for securities purchased | | | 45,867 | |
Payable for Fund shares redeemed | | | 28,146 | |
Transfer agent fees payable | | | 1,041 | |
Accrued expenses | | | 45,690 | |
| | | | |
Total liabilities | | | 120,744 | |
| | | | |
NET ASSETS | | $ | 23,580,825 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 19,407,944 | |
Total distributable earnings (loss) | | | 4,172,881 | |
| | | | |
Net assets | | $ | 23,580,825 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $23,580,825 / 1,796,198 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 13.13 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 434,145 | |
Interest | | | 24 | |
| | | | |
Total income | | | 434,169 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 116,272 | |
Professional fees | | | 42,647 | |
Printing and mailing expenses | | | 37,836 | |
Administrative fees | | | 34,882 | |
Registration and filing fees | | | 22,765 | |
Transfer agent fees | | | 11,600 | |
Custodian fees | | | 4,800 | |
Trustees’ fees | | | 1,094 | |
Miscellaneous | | | 3,832 | |
| | | | |
Gross expenses | | | 275,728 | |
Less: Waiver from investment adviser | | | (150,364 | ) |
| | | | |
Net expenses | | | 125,364 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 308,805 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 859,590 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 2,740,032 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 3,599,622 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 3,908,427 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 308,805 | | | $ | 363,847 | |
Net realized gain (loss) | | | 859,590 | | | | 309,167 | |
Net change in unrealized appreciation (depreciation) | | | 2,740,032 | | | | (691,760 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 3,908,427 | | | | (18,746 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (768,938 | ) | | | (724,697 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 397,992 and 743,738 shares, respectively ] | | | 4,950,241 | | | | 8,393,396 | |
Capital shares issued in reinvestment of dividends [ 64,780 and 62,744 shares, respectively ] | | | 768,938 | | | | 724,697 | |
Capital shares repurchased [ (458,469) and (640,274) shares, respectively ] | | | (5,733,463 | ) | | | (7,121,415 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | (14,284 | ) | | | 1,996,678 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 3,125,205 | | | | 1,253,235 | |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 20,455,620 | | | | 19,202,385 | |
| | | | | | | | |
End of year | | $ | 23,580,825 | | | $ | 20,455,620 | |
| | | | | | | | |
See Notes to Financial Statements.
81
1290 FUNDS
1290 RETIREMENT 2025 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.42 | | | $ | 11.81 | | | $ | 10.62 | | | $ | 10.75 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.17 | | | | 0.21 | | | | 0.22 | | | | 0.21 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 1.96 | | | | (0.15 | ) | | | 1.14 | | | | (0.14 | ) | | | 0.64 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 2.13 | | | | 0.06 | | | | 1.36 | | | | 0.07 | | | | 0.75 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.20 | ) | | | (0.23 | ) | | | (0.14 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.22 | ) | | | (0.22 | ) | | | (0.03 | ) | | | (0.02 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.42 | ) | | | (0.45 | ) | | | (0.17 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 13.13 | | | $ | 11.42 | | | $ | 11.81 | | | $ | 10.62 | | | $ | 10.75 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 19.05 | % | | | 0.47 | % | | | 12.99 | % | | | 0.60 | % | | | 7.50 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 23,581 | | | $ | 20,456 | | | $ | 19,202 | | | $ | 10,286 | | | $ | 2,688 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (a)(f) | | | 1.18 | % | | | 1.43 | % | | | 1.58 | % | | | 3.23 | % | | | 5.30 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.33 | % | | | 1.88 | % | | | 1.99 | % | | | 1.91 | % | | | 1.62 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | 0.68 | % | | | 0.99 | % | | | 0.95 | % | | | (0.79 | )% | | | (3.15 | )%(l) |
Portfolio turnover rate ^ | | | 17 | % | | | 34 | % | | | 23 | % | | | 4 | % | | | 2 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
82
1290 RETIREMENT 2030 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 21.98 | % | | | 9.00 | % |
S&P Target Date 2030 Index | | | 24.57 | | | | 10.17 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2030 Fund and the S&P Target Date 2030 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2030 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2030 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 2.99% The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 21.98% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2030 Index, returned 24.57% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | An overweight to U.S. equities was also beneficial, as domestic large-cap stocks outperformed their international counterparts, both in developed and in emerging markets. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
83
1290 RETIREMENT 2030 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities)
As of October 31, 2021 | |
Equity | | | 69.2 | % |
Fixed Income | | | 30.6 | |
Investment Company | | | 0.2 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities)
As of October 31, 2021 | |
iShares Core U.S. Aggregate Bond ETF | | | 25.2 | % |
iShares Core S&P Total US Stock Market ETF | | | 24.4 | |
iShares Core MSCI EAFE ETF | | | 8.6 | |
iShares MSCI USA Min Vol Factor ETF | | | 7.7 | |
Invesco S&P 500 Low Volatility ETF | | | 7.6 | |
iShares TIPS Bond ETF | | | 4.7 | |
Invesco S&P MidCap Low Volatility ETF | | | 4.5 | |
Invesco S&P International Developed Low Volatility ETF | | | 4.3 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4.3 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2.1 | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses Paid During Period* 5/1/21 -
10/31/21 | |
Class I | |
Actual | | | $1,000.00 | | | | $1,046.40 | | | | $2.80 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.47 | | | | 2.76 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
84
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (69.0%) | |
Invesco S&P 500 Low Volatility ETF | | | 12,740 | | | $ | 810,264 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,860 | | | | 96,770 | |
Invesco S&P International Developed Low Volatility ETF | | | 14,590 | | | | 462,649 | |
Invesco S&P MidCap Low Volatility ETF | | | 8,670 | | | | 478,064 | |
Invesco S&P SmallCap Low Volatility ETF | | | 4,380 | | | | 215,496 | |
iShares Core MSCI EAFE ETF | | | 12,010 | | | | 918,885 | |
iShares Core MSCI Emerging Markets ETF | | | 3,230 | | | | 201,649 | |
iShares Core S&P Total US Stock Market ETF | | | 24,800 | | | | 2,602,512 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5,910 | | | | 453,356 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,630 | | | | 102,641 | |
iShares MSCI USA Min Vol Factor ETF | | | 10,550 | | | | 818,153 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,870 | | | | 217,913 | |
| | | | | | | | |
Total Equity | | | | | | | 7,378,352 | |
| | | | | | | | |
Fixed Income (30.4%) | | | | | | | | |
iShares Broad USD High Yield Corporate Bond ETF | | | 510 | | | | 21,063 | |
iShares Core U.S. Aggregate Bond ETF | | | 23,450 | | | | 2,688,308 | |
iShares TIPS Bond ETF | | | 3,850 | | | | 495,379 | |
Vanguard Short-Term Bond ETF | | | 390 | | | | 31,762 | |
Vanguard Total International Bond ETF | | | 340 | | | | 19,268 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 3,255,780 | |
| | | | | | | | |
Total Exchange Traded Funds (99.4%)
(Cost $9,319,191) | | | | | | | 10,634,132 | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | | | | | |
Investment Company (0.2%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 22,828 | | | | 22,839 | |
| | | | | | | | |
Total Short-Term Investment (0.2%)
(Cost $22,839) | | | | | | | 22,839 | |
| | | | | | | | |
Total Investments in Securities (99.6%)
(Cost $9,342,030) | | | | | | | 10,656,971 | |
Other Assets Less Liabilities (0.4%) | | | | | | | 40,609 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 10,697,580 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 10,634,132 | | | $ | — | | | $ | — | | | $ | 10,634,132 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 22,839 | | | | — | | | | — | | | | 22,839 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 10,656,971 | | | $ | — | | | $ | — | | | $ | 10,656,971 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 10,656,971 | | | $ | — | | | $ | — | | | $ | 10,656,971 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
See Notes to Financial Statements.
85
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 4,254,537 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 650,995 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,302,857 | |
Aggregate gross unrealized depreciation | | | (14,657 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,288,200 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 9,368,771 | |
| | | | |
See Notes to Financial Statements.
86
1290 FUNDS
1290 RETIREMENT 2030 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
|
ASSETS | |
Investments in Securities, at value (Cost $9,342,030) | | $ | 10,656,971 | |
Cash | | | 74,999 | |
Prepaid registration and filing fees | | | 5,067 | |
Receivable for Fund shares sold | | | 3,687 | |
Receivable from investment adviser | | | 1,899 | |
Dividends, interest and other receivables | | | 1 | |
Other assets | | | 88 | |
| | | | |
Total assets | | | 10,742,712 | |
| | | | |
LIABILITIES | |
Transfer agent fees payable | | | 1,305 | |
Accrued expenses | | | 43,827 | |
| | | | |
Total liabilities | | | 45,132 | |
| | | | |
NET ASSETS | | $ | 10,697,580 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 9,216,379 | |
Total distributable earnings (loss) | | | 1,481,201 | |
| | | | |
Net assets | | $ | 10,697,580 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $10,697,580 / 803,825 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 13.31 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 146,204 | |
Interest | | | 26 | |
| | | | |
Total income | | | 146,230 | |
| | | | |
EXPENSES | | | | |
Investment advisory fees | | | 40,926 | |
Professional fees | | | 38,549 | |
Administrative fees | | | 30,017 | |
Printing and mailing expenses | | | 24,659 | |
Registration and filing fees | | | 21,199 | |
Transfer agent fees | | | 12,850 | |
Custodian fees | | | 4,900 | |
Trustees’ fees | | | 386 | |
Miscellaneous | | | 2,169 | |
| | | | |
Gross expenses | | | 175,655 | |
Less: Waiver from investment adviser | | | (70,943 | ) |
Reimbursement from investment adviser | | | (60,446 | ) |
| | | | |
Net expenses | | | 44,266 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 101,964 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 128,738 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,221,403 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,350,141 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,452,105 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 101,964 | | | $ | 119,505 | |
Net realized gain (loss) | | | 128,738 | | | | 265,571 | |
Net change in unrealized appreciation (depreciation) | | | 1,221,403 | | | | (519,309 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,452,105 | | | | (134,233 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (404,614 | ) | | | (136,178 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 380,305 and 192,899 shares, respectively ] | | | 4,839,850 | | | | 2,225,805 | |
Capital shares issued in reinvestment of dividends [ 19,062 and 6,335 shares, respectively ] | | | 225,890 | | | | 75,078 | |
Capital shares repurchased [ (86,543) and (273,913) shares, respectively ] | | | (1,097,669 | ) | | | (3,072,689 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 3,968,071 | | | | (771,806 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 5,015,562 | | | | (1,042,217 | ) |
NET ASSETS: | |
Beginning of year | | | 5,682,018 | | | | 6,724,235 | |
| | | | | | | | |
End of year | | $ | 10,697,580 | | | $ | 5,682,018 | |
| | | | | | | | |
See Notes to Financial Statements.
87
1290 FUNDS
1290 RETIREMENT 2030 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class I | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.57 | | | $ | 11.89 | | | $ | 10.69 | | | $ | 10.80 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.22 | | | | 0.22 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 2.30 | | | | (0.30 | ) | | | 1.20 | | | | (0.12 | ) | | | 0.69 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 2.46 | | | | (0.08 | ) | | | 1.42 | | | | 0.08 | | | | 0.80 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.20 | ) | | | (0.21 | ) | | | (0.18 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.52 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.72 | ) | | | (0.24 | ) | | | (0.22 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 13.31 | | | $ | 11.57 | | | $ | 11.89 | | | $ | 10.69 | | | $ | 10.80 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 21.98 | % | | | (0.68 | )% | | | 13.56 | % | | | 0.70 | % | | | 8.00 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 10,698 | | | $ | 5,682 | | | $ | 6,724 | | | $ | 4,273 | | | $ | 2,701 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (a)(f) | | | 2.14 | % | | | 2.88 | % | | | 3.14 | % | | | 4.74 | % | | | 5.27 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.24 | % | | | 1.95 | % | | | 1.98 | % | | | 1.78 | % | | | 1.59 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (0.36 | )% | | | (0.40 | )% | | | (0.62 | )% | | | (2.41 | )% | | | (3.15 | )%(l) |
Portfolio turnover rate^ | | | 8 | % | | | 38 | % | | | 5 | % | | | 3 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
88
1290 RETIREMENT 2035 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 23.70 | % | | | 9.45 | % |
S&P Target Date 2035 Index | | | 29.02 | | | | 11.17 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2035 Fund and the S&P Target Date 2035 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2035 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2035 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 2.28% The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 23.70% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2035 Index, returned 29.02% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
89
1290 RETIREMENT 2035 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities)
As of October 31, 2021 | |
Equity | | | 74.3 | % |
Fixed Income | | | 25.4 | |
Investment Company | | | 0.3 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities)
As of October 31, 2021 | |
iShares Core S&P Total US Stock Market ETF | | | 26.1 | % |
iShares Core U.S. Aggregate Bond ETF | | | 21.7 | |
iShares Core MSCI EAFE ETF | | | 9.3 | |
iShares MSCI USA Min Vol Factor ETF | | | 8.4 | |
Invesco S&P 500 Low Volatility ETF | | | 8.3 | |
Invesco S&P International Developed Low Volatility ETF | | | 4.7 | |
Invesco S&P MidCap Low Volatility ETF | | | 4.7 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4.5 | |
iShares TIPS Bond ETF | | | 3.7 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.2 | |
Holdings are subject to change without notice. | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | |
Actual | | | $1,000.00 | | | | $1,049.80 | | | | $2.79 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.49 | | | | 2.75 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
90
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (76.9%) | |
Invesco S&P 500 Low Volatility ETF | | | 19,130 | | | $ | 1,216,668 | |
Invesco S&P Emerging Markets
Low Volatility ETF | | | 5,840 | | | | 146,409 | |
Invesco S&P International Developed Low Volatility ETF | | | 21,950 | | | | 696,034 | |
Invesco S&P MidCap Low Volatility ETF | | | 12,520 | | | | 690,353 | |
Invesco S&P SmallCap Low Volatility ETF | | | 6,470 | | | | 318,324 | |
iShares Core MSCI EAFE ETF | | | 17,910 | | | | 1,370,294 | |
iShares Core MSCI Emerging Markets ETF | | | 4,710 | | | | 294,045 | |
iShares Core S&P Total US Stock Market ETF | | | 36,520 | | | | 3,832,409 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 8,640 | | | | 662,774 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 2,390 | | | | 150,498 | |
iShares MSCI USA Min Vol Factor ETF | | | 15,860 | | | | 1,229,943 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2,710 | | | | 315,799 | |
| | | | | | | | |
Total Equity | | | | | | | 10,923,550 | |
| | | | | | | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Fixed Income (26.3%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 27,790 | | | | 3,185,846 | |
iShares TIPS Bond ETF | | | 4,230 | | | | 544,274 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 3,730,120 | |
| | | | | | | | |
Total Exchange Traded Funds (103.2%)
(Cost $12,067,854) | | | | | | | 14,653,670 | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | | | | | |
Investment Company (0.3%) | | | | | |
JPMorgan Prime Money Market Fund, IM Shares | | | 48,465 | | | | 48,490 | |
| | | | | | | | |
Total Short-Term Investment (0.3%)
(Cost $48,490) | | | | | | | 48,490 | |
| | | | | | | | |
Total Investments in Securities (103.5%)
(Cost $12,116,344) | | | | | | | 14,702,160 | |
Other Assets Less Liabilities (-3.5%) | | | | | | | (507,323 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 14,194,837 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 14,653,670 | | | $ | — | | | $ | — | | | $ | 14,653,670 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 48,490 | | | | — | | | | — | | | | 48,490 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 14,702,160 | | | $ | — | | | $ | — | | | $ | 14,702,160 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 14,702,160 | | | $ | — | | | $ | — | | | $ | 14,702,160 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
91
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 3,032,523 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 91,270 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 2,530,112 | |
Aggregate gross unrealized depreciation | | | — | |
| | | | |
Net unrealized appreciation | | $ | 2,530,112 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 12,172,048 | |
| | | | |
See Notes to Financial Statements.
92
1290 FUNDS
1290 RETIREMENT 2035 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value
(Cost $12,116,344) | | $ | 14,702,160 | |
Cash | | | 74,999 | |
Prepaid registration and filing fees | | | 5,231 | |
Receivable from investment adviser | | | 1,582 | |
Dividends, interest and other receivables | | | 3 | |
Other assets | | | 118 | |
| | | | |
Total assets | | | 14,784,093 | |
| | | | |
LIABILITIES | | | | |
Payable for Fund shares redeemed | | | 543,906 | |
Transfer agent fees payable | | | 1,124 | |
Accrued expenses | | | 44,226 | |
| | | | |
Total liabilities | | | 589,256 | |
| | | | |
NET ASSETS | | $ | 14,194,837 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 11,576,637 | |
Total distributable earnings (loss) | | | 2,618,200 | |
| | | | |
Net assets | | $ | 14,194,837 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $14,194,837 / 1,035,208 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 13.71 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 219,295 | |
Interest | | | 34 | |
| | | | |
Total income | | | 219,329 | |
| | | | |
EXPENSES | | | | |
Investment advisory fees | | | 62,011 | |
Professional fees | | | 39,655 | |
Administrative fees | | | 30,030 | |
Printing and mailing expenses | | | 28,300 | |
Registration and filing fees | | | 21,569 | |
Transfer agent fees | | | 12,350 | |
Custodian fees | | | 4,350 | |
Trustees’ fees | | | 585 | |
Miscellaneous | | | 3,152 | |
| | | | |
Gross expenses | | | 202,002 | |
Less: Waiver from investment adviser | | | (92,041 | ) |
Reimbursement from investment adviser | | | (43,255 | ) |
| | | | |
Net expenses | | | 66,706 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 152,623 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | (7,346 | ) |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 2,267,023 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 2,259,677 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 2,412,300 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 152,623 | | | $ | 176,844 | |
Net realized gain (loss) | | | (7,346 | ) | | | 260,773 | |
Net change in unrealized appreciation (depreciation) | | | 2,267,023 | | | | (390,885 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 2,412,300 | | | | 46,732 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (490,540 | ) | | | (225,614 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 259,452 and 500,034 shares, respectively ] | | | 3,366,472 | | | | 5,533,567 | |
Capital shares issued in reinvestment of dividends [ 28,425 and 12,315 shares, respectively ] | | | 343,940 | | | | 147,039 | |
Capital shares repurchased [ (72,337) and (388,587) shares, respectively ] | | | (958,672 | ) | | | (4,349,860 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 2,751,740 | | | | 1,330,746 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 4,673,500 | | | | 1,151,864 | |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 9,521,337 | | | | 8,369,473 | |
| | | | | | | | |
End of year | | $ | 14,194,837 | | | $ | 9,521,337 | |
| | | | | | | | |
See Notes to Financial Statements.
93
1290 FUNDS
1290 RETIREMENT 2035 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.62 | | | $ | 12.03 | | | $ | 10.76 | | | $ | 10.85 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.22 | | | | 0.22 | | | | 0.19 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 2.52 | | | | (0.32 | ) | | | 1.23 | | | | (0.09 | ) | | | 0.74 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 2.68 | | | | (0.10 | ) | | | 1.45 | | | | 0.10 | | | | 0.85 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.21 | ) | | | (0.22 | ) | | | (0.16 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.38 | ) | | | (0.09 | ) | | | (0.02 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.59 | ) | | | (0.31 | ) | | | (0.18 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 13.71 | | | $ | 11.62 | | | $ | 12.03 | | | $ | 10.76 | | | $ | 10.85 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 23.70 | % | | | (0.87 | )% | | | 13.61 | % | | | 0.88 | % | | | 8.50 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s) | | $ | 14,195 | | | $ | 9,521 | | | $ | 8,369 | | | $ | 6,692 | | | $ | 2,712 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) | | | 0.53 | %(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (a)(f) | | | 1.63 | % | | | 2.17 | % | | | 2.50 | % | | | 3.95 | % | | | 5.28 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.23 | % | | | 1.92 | % | | | 1.98 | % | | | 1.73 | % | | | 1.58 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | 0.14 | % | | | 0.28 | % | | | 0.01 | % | | | (1.68 | )% | | | (3.17 | )%(l) |
Portfolio turnover rate^ | | | 1 | % | | | 40 | % | | | 13 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
94
1290 RETIREMENT 2040 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 25.92 | % | | | 10.22 | % |
S&P Target Date 2040 Index | | | 32.14 | | | | 11.86 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2040 Fund and the S&P Target Date 2040 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2040 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2040 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 3.98%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to ontractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 25.92% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2040 Index, returned 32.14% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | An overweight to equities relative to the benchmark benefited performance. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
95
1290 RETIREMENT 2040 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) As of October 31, 2021 | |
Equity | | | 79.5 | % |
Fixed Income | | | 20.5 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) As of October 31, 2021 | |
iShares Core S&P Total US Stock Market ETF | | | 28.5 | % |
iShares Core U.S. Aggregate Bond ETF | | | 17.5 | |
iShares Core MSCI EAFE ETF | | | 9.9 | |
iShares MSCI USA Min Vol Factor ETF | | | 9.1 | |
Invesco S&P 500 Low Volatility ETF | | | 8.8 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.0 | |
Invesco S&P MidCap Low Volatility ETF | | | 4.8 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4.7 | |
iShares TIPS Bond ETF | | | 3.1 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.2 | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | | | | | | | | | | | | |
Actual | | $ | 1,000.00 | | | $ | 1,052.90 | | | $ | 2.77 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.50 | | | | 2.73 | |
| |
* Expensesare equal to the Portfolio’s I shares annualized expense ratio of 0.54%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
96
1290 FUNDS
1290 RETIREMENT 2040 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (79.2%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 7,910 | | | $ | 503,076 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 2,450 | | | | 61,421 | |
Invesco S&P International Developed Low Volatility ETF | | | 8,960 | | | | 284,122 | |
Invesco S&P MidCap Low Volatility ETF | | | 5,000 | | | | 275,700 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2,600 | | | | 127,920 | |
iShares Core MSCI EAFE ETF | | | 7,390 | | | | 565,409 | |
iShares Core MSCI Emerging Markets ETF | | | 1,880 | | | | 117,368 | |
iShares Core S&P Total US Stock Market ETF | | | 15,470 | | | | 1,623,422 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 3,520 | | | | 270,019 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 970 | | | | 61,081 | |
iShares MSCI USA Min Vol Factor ETF | | | 6,680 | | | | 518,034 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,050 | | | | 122,358 | |
| | | | | | | | |
Total Equity | | | | | | | 4,529,930 | |
| | | | | | | | |
Fixed Income (20.5%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 8,690 | | | | 996,222 | |
iShares TIPS Bond ETF | | | 1,350 | | | | 173,704 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 1,169,926 | |
| | | | | | | | |
Total Investments in Securities (99.7%)
(Cost $4,494,335) | | | | 5,699,856 | |
Other Assets Less Liabilities (0.3%) | | | | 15,614 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 5,715,470 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 5,699,856 | | | $ | — | | | $ | — | | | $ | 5,699,856 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 5,699,856 | | | $ | — | | | $ | — | | | $ | 5,699,856 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,699,856 | | | $ | — | | | $ | — | | | $ | 5,699,856 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 708,295 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 219,389 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,195,429 | |
Aggregate gross unrealized depreciation | | | — | |
| | | | |
Net unrealized appreciation | | $ | 1,195,429 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 4,504,427 | |
| | | | |
See Notes to Financial Statements.
97
1290 FUNDS
1290 RETIREMENT 2040 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value (Cost $4,494,335) | | $ | 5,699,856 | |
Cash | | | 50,208 | |
Prepaid registration and filing fees | | | 4,991 | |
Receivable from investment adviser | | | 3,473 | |
Receivable for Fund shares sold | | | 1,243 | |
Other assets | | | 38 | |
| | | | |
Total assets | | | 5,759,809 | |
| | | | |
LIABILITIES | | | | |
Accrued professional fees | | | 34,399 | |
Transfer agent fees payable | | | 1,200 | |
Trustees’ fees payable | | | 6 | |
Accrued expenses | | | 8,734 | |
| | | | |
Total liabilities | | | 44,339 | |
| | | | |
NET ASSETS | | $ | 5,715,470 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 4,426,559 | |
Total distributable earnings (loss) | | | 1,288,911 | |
| | | | |
Net assets | | $ | 5,715,470 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $5,715,470 / 399,180 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.32 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 89,535 | |
Interest | | | 19 | |
| | | | |
Total income | | | 89,554 | |
| | | | |
EXPENSES | | | | |
Professional fees | | | 37,799 | |
Administrative fees | | | 30,011 | |
Investment advisory fees | | | 25,449 | |
Printing and mailing expenses | | | 22,290 | |
Registration and filing fees | | | 20,910 | |
Transfer agent fees | | | 12,150 | |
Custodian fees | | | 4,400 | |
Trustees’ fees | | | 242 | |
Miscellaneous | | | 2,183 | |
| | | | |
Gross expenses | | | 155,434 | |
Less: Waiver from investment adviser | | | (55,460 | ) |
Reimbursement from investment adviser | | | (72,767 | ) |
| | | | |
Net expenses | | | 27,207 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 62,347 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 57,650 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 979,181 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,036,831 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,099,178 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 62,347 | | | $ | 81,461 | |
Net realized gain (loss) | | | 57,650 | | | | 77,816 | |
Net change in unrealized appreciation (depreciation) | | | 979,181 | | | | (283,659 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,099,178 | | | | (124,382 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (166,556 | ) | | | (78,113 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 56,933 and 84,591 shares, respectively ] | | | 763,834 | | | | 1,017,576 | |
Capital shares issued in reinvestment of dividends [ 3,936 and 1,788 shares, respectively ] | | | 49,156 | | | | 21,588 | |
Capital shares repurchased [ (16,517) and (63,918) shares, respectively ] | | | (215,489 | ) | | | (656,757 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 597,501 | | | | 382,407 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,530,123 | | | | 179,912 | |
NET ASSETS: | |
Beginning of year | | | 4,185,347 | | | | 4,005,435 | |
| | | | | | | | |
End of year | | $ | 5,715,470 | | | $ | 4,185,347 | |
| | | | | | | | |
See Notes to Financial Statements.
98
1290 FUNDS
1290 RETIREMENT 2040 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.80 | | | $ | 12.05 | | | $ | 10.84 | | | $ | 10.89 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.17 | | | | 0.23 | | | | 0.22 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 2.82 | | | | (0.26 | ) | | | 1.24 | | | | (0.06 | ) | | | 0.78 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 2.99 | | | | (0.03 | ) | | | 1.46 | | | | 0.14 | | | | 0.89 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.22 | ) | | | (0.21 | ) | | | (0.20 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.25 | ) | | | (0.01 | ) | | | (0.05 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.47 | ) | | | (0.22 | ) | | | (0.25 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 14.32 | | | $ | 11.80 | | | $ | 12.05 | | | $ | 10.84 | | | $ | 10.89 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 25.92 | % | | | (0.24 | )% | | | 13.79 | % | | | 1.26 | % | | | 8.90 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 5,715 | | | $ | 4,185 | | | $ | 4,005 | | | $ | 2,915 | | | $ | 2,722 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (a)(f) | | | 3.05 | % | | | 3.86 | % | | | 4.57 | % | | | 5.31 | % | | | 5.28 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.22 | % | | | 1.93 | % | | | 1.96 | % | | | 1.80 | % | | | 1.57 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (1.29 | )% | | | (1.39 | )% | | | (2.08 | )% | | | (2.99 | )% | | | (3.18 | )%(l) |
Portfolio turnover rate^ | | | 4 | % | | | 20 | % | | | 3 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
99
1290 RETIREMENT 2045 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1 Year | | | Since Incept. | |
Fund – Class I Shares* | | | 27.63 | % | | | 10.50 | % |
S&P Target Date 2045 Index | | | 34.00 | | | | 12.24 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2045 Fund and the S&P Target Date 2045 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2045 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2045 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 2.90%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 27.63% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2045 Index, returned 34.00% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
100
1290 RETIREMENT 2045 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) | |
| | |
| As of October 31, 2021 | | | |
Equity | | | 85.2 | % |
Fixed Income | | | 14.8 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2021 | | | |
iShares Core S&P Total US Stock Market ETF | | | 30.2 | % |
iShares Core U.S. Aggregate Bond ETF | | | 12.6 | |
iShares Core MSCI EAFE ETF | | | 10.4 | |
iShares MSCI USA Min Vol Factor ETF | | | 9.9 | |
Invesco S&P 500 Low Volatility ETF | | | 9.8 | |
Invesco S&P MidCap Low Volatility ETF | | | 5.3 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.2 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5.1 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.4 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2.3 | |
| Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | |
Actual | | | $1,000.00 | | | | $1,056.20 | | | | $2.76 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.52 | | | | 2.71 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
101
1290 FUNDS
1290 RETIREMENT 2045 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (86.1%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 12,660 | | | $ | 805,176 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 4,020 | | | | 100,781 | |
Invesco S&P International Developed Low Volatility ETF | | | 13,420 | | | | 425,548 | |
Invesco S&P MidCap Low Volatility ETF | | | 7,870 | | | | 433,952 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,980 | | | | 195,816 | |
iShares Core MSCI EAFE ETF | | | 11,120 | | | | 850,791 | |
iShares Core MSCI Emerging Markets ETF | | | 3,030 | | | | 189,163 | |
iShares Core S&P Total US Stock Market ETF | | | 23,620 | | | | 2,478,683 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5,480 | | | | 420,371 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,580 | | | | 99,493 | |
iShares MSCI USA Min Vol Factor ETF | | | 10,510 | | | | 815,050 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,640 | | | | 191,111 | |
| | | | | | | | |
Total Equity | | | | | | | 7,005,935 | |
| | | | | | | | |
Fixed Income (14.9%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 9,000 | | | | 1,031,760 | |
iShares TIPS Bond ETF | | | 1,420 | | | | 182,711 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 1,214,471 | |
| | | | | | | | |
Total Investments in Securities (101.0%)
(Cost $6,400,411) | | | | | | | 8,220,406 | |
Other Assets Less Liabilities (-1.0%) | | | | | | | (82,533 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 8,137,873 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 8,220,406 | | | $ | — | | | $ | — | | | $ | 8,220,406 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 8,220,406 | | | $ | — | | | $ | — | | | $ | 8,220,406 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 8,220,406 | | | $ | — | | | $ | — | | | $ | 8,220,406 | |
| | | | | | | | | | | | | | | | |
|
| The Fund held no derivatives contracts during the year ended October 31, 2021. |
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,403,652 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,569,002 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,821,683 | |
Aggregate gross unrealized depreciation | | | (1,688 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,819,995 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 6,400,411 | |
| | | | |
See Notes to Financial Statements.
102
1290 FUNDS
1290 RETIREMENT 2045 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value
(Cost $6,400,411) | | $ | 8,220,406 | |
Cash | | | 51,237 | |
Prepaid registration and filing fees | | | 5,078 | |
Receivable from investment adviser | | | 3,637 | |
Other assets | | | 62 | |
| | | | |
Total assets | | | 8,280,420 | |
| | | | |
LIABILITIES | |
Payable for Fund shares redeemed | | | 97,783 | |
Transfer agent fees payable | | | 1,223 | |
Trustees’ fees payable | | | 3 | |
Accrued expenses | | | 43,538 | |
| | | | |
Total liabilities | | | 142,547 | |
| | | | |
NET ASSETS | | $ | 8,137,873 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 5,882,715 | |
Total distributable earnings (loss) | | | 2,255,158 | |
| | | | |
Net assets | | $ | 8,137,873 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $8,137,873 / 562,885 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.46 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 141,104 | |
Interest | | | 25 | |
| | | | |
Total income | | | 141,129 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 40,417 | |
Professional fees | | | 38,572 | |
Administrative fees | | | 30,017 | |
Printing and mailing expenses | | | 25,202 | |
Registration and filing fees | | | 21,225 | |
Transfer agent fees | | | 12,700 | |
Custodian fees | | | 4,800 | |
Trustees’ fees | | | 384 | |
Miscellaneous | | | 2,746 | |
| | | | |
Gross expenses | | | 176,063 | |
Less: Waiver from investment adviser | | | (70,434 | ) |
Reimbursement from investment adviser | | | (62,703 | ) |
| | | | |
Net expenses | | | 42,926 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 98,203 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 377,152 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,357,551 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,734,703 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,832,906 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 98,203 | | | $ | 124,256 | |
Net realized gain (loss) | | | 377,152 | | | | 177,366 | |
Net change in unrealized appreciation (depreciation) | | | 1,357,551 | | | | (187,202 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,832,906 | | | | 114,420 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (300,773 | ) | | | (106,681 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 137,150 and 222,904 shares, respectively ] | | | 1,838,993 | | | | 2,464,519 | |
Capital shares issued in reinvestment of dividends [ 12,999 and 4,128 shares, respectively ] | | | 162,623 | | | | 50,406 | |
Capital shares repurchased [ (147,416) and (129,465) shares, respectively ] | | | (2,021,175 | ) | | | (1,532,229 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | (19,559 | ) | | | 982,696 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,512,574 | | | | 990,435 | |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 6,625,299 | | | | 5,634,864 | |
| | | | | | | | |
End of year | | $ | 8,137,873 | | | $ | 6,625,299 | |
| | | | | | | | |
See Notes to Financial Statements.
103
1290 FUNDS
1290 RETIREMENT 2045 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.83 | | | $ | 12.18 | | | $ | 10.91 | | | $ | 10.93 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.23 | | | | 0.23 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 3.03 | | | | (0.36 | ) | | | 1.25 | | | | (0.03 | ) | | | 0.82 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 3.19 | | | | (0.13 | ) | | | 1.48 | | | | 0.17 | | | | 0.93 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.23 | ) | | | (0.22 | ) | | | (0.18 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.33 | ) | | | — | # | | | (0.03 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.56 | ) | | | (0.22 | ) | | | (0.21 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 14.46 | | | $ | 11.83 | | | $ | 12.18 | | | $ | 10.91 | | | $ | 10.93 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 27.63 | % | | | (1.08 | )% | | | 13.85 | % | | | 1.53 | % | | | 9.30 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s) | | $ | 8,138 | | | $ | 6,625 | | | $ | 5,635 | | | $ | 3,834 | | | $ | 2,741 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (a)(f) | | | 2.18 | % | | | 2.78 | % | | | 3.51 | % | | | 4.91 | % | | | 5.29 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.21 | % | | | 1.92 | % | | | 1.97 | % | | | 1.76 | % | | | 1.55 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (0.43 | )% | | | (0.33 | )% | | | (1.01 | )% | | | (2.62 | )% | | | (3.22 | )%(l) |
Portfolio turnover rate^ | | | 18 | % | | | 18 | % | | | 1 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| # | Per share amount is less than $0.005. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
104
1290 RETIREMENT 2050 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 29.37 | % | | | 10.79 | % |
S&P Target Date 2050 Index | | | 34.99 | | | | 12.47 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2050 Fund and the S&P Target Date 2050 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2050 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2050 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 3.92% The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 29.37% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2050 Index, returned 34.99% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position in domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by capitalization. |
| • | | An overweight to equities relative to the benchmark benefited performance. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short-term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
105
1290 RETIREMENT 2050 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2021 | | | |
Equity | | | 89.3 | % |
Fixed Income | | | 10.7 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2021 | | | |
iShares Core S&P Total US Stock Market ETF | | | 31.5 | % |
iShares Core MSCI EAFE ETF | | | 10.9 | |
iShares MSCI USA Min Vol Factor ETF | | | 10.5 | |
Invesco S&P 500 Low Volatility ETF | | | 10.3 | |
iShares Core U.S. Aggregate Bond ETF | | | 9.1 | |
Invesco S&P MidCap Low Volatility ETF | | | 5.6 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.5 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5.4 | |
iShares Core MSCI Emerging Markets ETF | | | 2.5 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2.5 | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | |
Actual | | | $1,000.00 | | | | $1,057.80 | | | | $2.74 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.54 | | | | 2.70 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
106
1290 FUNDS
1290 RETIREMENT 2050 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (89.1%) | |
Invesco S&P 500 Low Volatility ETF | | | 10,380 | | | $ | 660,168 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 2,900 | | | | 72,703 | |
Invesco S&P International Developed Low Volatility ETF | | | 11,020 | | | | 349,444 | |
Invesco S&P MidCap Low Volatility ETF | | | 6,480 | | | | 357,307 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,210 | | | | 157,932 | |
iShares Core MSCI EAFE ETF | | | 9,130 | | | | 698,536 | |
iShares Core MSCI Emerging Markets ETF | | | 2,560 | | | | 159,821 | |
iShares Core S&P Total US Stock Market ETF | | | 19,280 | | | | 2,023,243 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4,500 | | | | 345,195 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,210 | | | | 76,194 | |
iShares MSCI USA Min Vol Factor ETF | | | 8,680 | | | | 673,134 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,360 | | | | 158,482 | |
| | | | | | | | |
Total Equity | | | | | | | 5,732,159 | |
| | | | | | | | |
Fixed Income (10.7%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 5,100 | | | | 584,664 | |
iShares TIPS Bond ETF | | | 780 | | | | 100,363 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 685,027 | |
| | | | | | | | |
Total Investments in Securities (99.8%)
(Cost $4,848,562) | | | | | | | 6,417,186 | |
Other Assets Less Liabilities (0.2%) | | | | | | | 14,658 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 6,431,844 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 6,417,186 | | | $ | — | | | $ | — | | | $ | 6,417,186 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 6,417,186 | | | $ | — | | | $ | — | | | $ | 6,417,186 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 6,417,186 | | | $ | — | | | $ | — | | | $ | 6,417,186 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 578,040 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 280,560 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,530,067 | |
Aggregate gross unrealized depreciation | | | (3,321 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,526,746 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 4,890,440 | |
| | | | |
See Notes to Financial Statements.
107
1290 FUNDS
1290 RETIREMENT 2050 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value
(Cost $4,848,562) | | $ | 6,417,186 | |
Cash | | | 59,525 | |
Prepaid registration and filing fees | | | 4,977 | |
Receivable from investment adviser | | | 3,507 | |
Receivable for Fund shares sold | | | 1,026 | |
Other assets | | | 43 | |
| | | | |
Total assets | | | 6,486,264 | |
| | | | |
LIABILITIES | | | | |
Accrued professional fees | | | 34,420 | |
Payable for Fund shares redeemed | | | 10,010 | |
Transfer agent fees payable | | | 1,097 | |
Trustees’ fees payable | | | 14 | |
Accrued expenses | | | 8,879 | |
| | | | |
Total liabilities | | | 54,420 | |
| | | | |
NET ASSETS | | $ | 6,431,844 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 4,800,271 | |
Total distributable earnings (loss) | | | 1,631,573 | |
| | | | |
Net assets | | $ | 6,431,844 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $6,431,844 / 433,955 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.82 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 98,570 | |
Interest | | | 23 | |
| | | | |
Total income | | | 98,593 | |
| | | | |
EXPENSES | | | | |
Professional fees | | | 37,995 | |
Administrative fees | | | 30,014 | |
Investment advisory fees | | | 29,017 | |
Printing and mailing expenses | | | 22,951 | |
Registration and filing fees | | | 20,989 | |
Transfer agent fees | | | 11,450 | |
Custodian fees | | | 4,599 | |
Trustees’ fees | | | 274 | |
Miscellaneous | | | 2,490 | |
| | | | |
Gross expenses | | | 159,779 | |
Less: Waiver from investment adviser | | | (59,031 | ) |
Reimbursement from investment adviser | | | (70,113 | ) |
| | | | |
Net expenses | | | 30,635 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 67,958 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 67,673 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,269,846 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,337,519 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,405,477 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 67,958 | | | $ | 81,081 | |
Net realized gain (loss) | | | 67,673 | | | | 8,725 | |
Net change in unrealized appreciation (depreciation) | | | 1,269,846 | | | | (260,439 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,405,477 | | | | (170,633 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (134,290 | ) | | | (76,047 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 53,658 and 191,933 shares, respectively ] | | | 740,914 | | | | 2,194,147 | |
Capital shares issued in reinvestment of dividends [ 3,904 and 1,323 shares, respectively ] | | | 49,665 | | | | 16,247 | |
Capital shares repurchased [ (28,413) and (94,603) shares, respectively ] | | | (390,949 | ) | | | (949,336 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 399,630 | | | | 1,261,058 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,670,817 | | | | 1,014,378 | |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 4,761,027 | | | | 3,746,649 | |
| | | | | | | | |
End of year | | $ | 6,431,844 | | | $ | 4,761,027 | |
| | | | | | | | |
See Notes to Financial Statements.
108
1290 FUNDS
1290 RETIREMENT 2050 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.76 | | | $ | 12.24 | | | $ | 10.97 | | | $ | 10.98 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.22 | | | | 0.22 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 3.24 | | | | (0.46 | ) | | | 1.30 | | | | (0.02 | ) | | | 0.87 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 3.40 | | | | (0.24 | ) | | | 1.52 | | | | 0.18 | | | | 0.98 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.21 | ) | | | (0.22 | ) | | | (0.20 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.13 | ) | | | (0.02 | ) | | | (0.05 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.34 | ) | | | (0.24 | ) | | | (0.25 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 14.82 | | | $ | 11.76 | | | $ | 12.24 | | | $ | 10.97 | | | $ | 10.98 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 29.37 | % | | | (2.05 | )% | | | 14.18 | % | | | 1.63 | % | | | 9.80 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | |
Net assets, end of period (000’s) | | $ | 6,432 | | | $ | 4,761 | | | $ | 3,747 | | | $ | 3,068 | | | $ | 2,744 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (a)(f) | | | 2.75 | % | | | 3.80 | % | | | 4.52 | % | | | 5.20 | % | | | 5.26 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.17 | % | | | 1.90 | % | | | 1.96 | % | | | 1.77 | % | | | 1.54 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (1.05 | )% | | | (1.37 | )% | | | (2.03 | )% | | | (2.90 | )% | | | (3.20 | )%(l) |
Portfolio turnover rate^ | | | 5 | % | | | 21 | % | | | 2 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes tax expense of less than 0.005%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.65% . |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
109
1290 RETIREMENT 2055 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 31.27 | % | | | 11.09 | % |
S&P Target Date 2055 Index | | | 35.43 | | | | 12.55 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2055 Fund and the S&P Target Date 2055 Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2055 Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2055 Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 4.47%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 31.27% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2055 Index, returned 35.43% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each Funds’ performance will be generated by its holdings in each asset class, and the asset class’s performance. You can find current target and actual allocations, as well as performance, in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position to domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by size. |
| ��� | | An overweight to equities relative to the benchmark benefited performance. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
110
1290 RETIREMENT 2055 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2021 | | | |
Equity | | | 94.4 | % |
Fixed Income | | | 5.6 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2021 | | | |
iShares Core S&P Total US Stock Market ETF | | | 33.3 | % |
iShares Core MSCI EAFE ETF | | | 11.5 | |
Invesco S&P 500 Low Volatility ETF | | | 11.1 | |
iShares MSCI USA Min Vol Factor ETF | | | 11.1 | |
Invesco S&P MidCap Low Volatility ETF | | | 5.8 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.7 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5.6 | |
iShares Core U.S. Aggregate Bond ETF | | | 4.8 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.6 | |
iShares Core MSCI Emerging Markets ETF | | | 2.6 | |
Holdings are subject to change without notice. | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | | | | | |
| | | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses Paid During Period*
5/1/21 -
10/31/21 | | | | |
Class I | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,060.80 | | | | $2.73 | | | | | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.56 | | | | 2.68 | | | | | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.53%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
111
1290 FUNDS
1290 RETIREMENT 2055 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (95.4%) | |
Invesco S&P 500 Low Volatility ETF | | | 9,660 | | | $ | 614,376 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 2,730 | | | | 68,441 | |
Invesco S&P International Developed Low Volatility ETF | | | 9,950 | | | | 315,515 | |
Invesco S&P MidCap Low Volatility ETF | | | 5,810 | | | | 320,363 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2,930 | | | | 144,156 | |
iShares Core MSCI EAFE ETF | | | 8,320 | | | | 636,563 | |
iShares Core MSCI Emerging Markets ETF | | | 2,300 | | | | 143,589 | |
iShares Core S&P Total US Stock Market ETF | | | 17,570 | | | | 1,843,796 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4,060 | | | | 311,443 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,150 | | | | 72,415 | |
iShares MSCI USA Min Vol Factor ETF | | | 7,910 | | | | 613,421 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,220 | | | | 142,168 | |
| | | | | | | | |
Total Equity | | | | | | | 5,226,246 | |
| | | | | | | | |
Fixed Income (5.6%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 2,310 | | | | 264,818 | |
iShares TIPS Bond ETF | | | 340 | | | | 43,748 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 308,566 | |
| | | | | | | | |
Total Investments in Securities (101.0%)
(Cost $3,964,063) | | | | | | | 5,534,812 | |
Other Assets Less Liabilities (-1.0%) | | | | | | | (56,623 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 5,478,189 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 5,534,812 | | | $ | — | | | $ | — | | | $ | 5,534,812 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 5,534,812 | | | $ | — | | | $ | — | | | $ | 5,534,812 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,534,812 | | | $ | — | | | $ | — | | | $ | 5,534,812 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 550,900 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 102,501 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,570,463 | |
Aggregate gross unrealized depreciation | | | — | |
| | | | |
Net unrealized appreciation | | $ | 1,570,463 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 3,964,349 | |
| | | | |
See Notes to Financial Statements.
112
1290 FUNDS
1290 RETIREMENT 2055 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value
(Cost $3,964,063) | | $ | 5,534,812 | |
Cash | | | 14,523 | |
Prepaid registration and filing fees | | | 4,934 | |
Receivable from investment adviser | | | 3,697 | |
Receivable for Fund shares sold | | | 519 | |
Other assets | | | 36 | |
| | | | |
Total assets | | | 5,558,521 | |
| | | | |
LIABILITIES | | | | |
Payable for Fund shares redeemed | | | 36,226 | |
Accrued professional fees | | | 34,370 | |
Transfer agent fees payable | | | 1,130 | |
Trustees’ fees payable | | | 16 | |
Accrued expenses | | | 8,590 | |
| | | | |
Total liabilities | | | 80,332 | |
| | | | |
NET ASSETS | | $ | 5,478,189 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 3,851,755 | |
Total distributable earnings (loss) | | | 1,626,434 | |
| | | | |
Net assets | | $ | 5,478,189 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $5,478,189 / 365,193 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 15.00 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 83,719 | |
Interest | | | 21 | |
| | | | |
Total income | | | 83,740 | |
| | | | |
EXPENSES | |
Professional fees | | | 37,771 | |
Administrative fees | | | 30,013 | |
Investment advisory fees | | | 24,828 | |
Printing and mailing expenses | | | 22,218 | |
Registration and filing fees | | | 20,926 | |
Transfer agent fees | | | 12,100 | |
Custodian fees | | | 4,350 | |
Trustees’ fees | | | 235 | |
Miscellaneous | | | 2,276 | |
| | | | |
Gross expenses | | | 154,717 | |
Less: Waiver from investment adviser | | | (54,841 | ) |
Reimbursement from investment adviser | | | (73,821 | ) |
| | | | |
Net expenses | | | 26,055 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 57,685 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 24,625 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,164,738 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,189,363 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,247,048 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 57,685 | | | $ | 71,731 | |
Net realized gain (loss) | | | 24,625 | | | | 43,160 | |
Net change in unrealized appreciation (depreciation) | | | 1,164,738 | | | | (160,255 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,247,048 | | | | (45,364 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (114,811 | ) | | | (68,507 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 44,363 and 68,876 shares, respectively ] | | | 615,203 | | | | 737,725 | |
Capital shares issued in reinvestment of dividends [ 2,369 and 752 shares, respectively ] | | | 30,211 | | | | 9,307 | |
Capital shares repurchased [ (12,648) and (26,304) shares, respectively ] | | | (182,370 | ) | | | (295,539 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 463,044 | | | | 451,493 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,595,281 | | | | 337,622 | |
NET ASSETS: | |
Beginning of year | | | 3,882,908 | | | | 3,545,286 | |
| | | | | | | | |
End of year | | $ | 5,478,189 | | | $ | 3,882,908 | |
| | | | | | | | |
See Notes to Financial Statements.
113
1290 FUNDS
1290 RETIREMENT 2055 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class I | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.73 | | | $ | 12.32 | | | $ | 11.04 | | | $ | 11.02 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.23 | | | | 0.22 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 3.45 | | | | (0.58 | ) | | | 1.32 | | | | 0.01 | | | | 0.91 | |
| | | | | | | | | | | | | | | �� | | | | | |
Total from investment operations | | | 3.61 | | | | (0.35 | ) | | | 1.54 | | | | 0.21 | | | | 1.02 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.21 | ) | | | (0.23 | ) | | | (0.21 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.13 | ) | | | (0.01 | ) | | | (0.05 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.34 | ) | | | (0.24 | ) | | | (0.26 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 15.00 | | | $ | 11.73 | | | $ | 12.32 | | | $ | 11.04 | | | $ | 11.02 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 31.27 | % | | | (2.97 | )% | | | 14.29 | % | | | 1.90 | % | | | 10.20 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 5,478 | | | $ | 3,883 | | | $ | 3,545 | | | $ | 2,918 | | | $ | 2,755 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.52 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (a)(f) | | | 3.11 | % | | | 4.34 | % | | | 4.74 | % | | | 5.27 | % | | | 5.25 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.16 | % | | | 1.97 | % | | | 1.95 | % | | | 1.73 | % | | | 1.53 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (1.43 | )% | | | (1.84 | )% | | | (2.27 | )% | | | (3.02 | )% | | | (3.21 | )%(l) |
Portfolio turnover rate^ | | | 2 | % | | | 6 | % | | | 2 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes Tax expense of 0.01%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.66% in 2020 and 0.65% in 2021, 2019, 2018 and 2017. |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
114
1290 RETIREMENT 2060 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
PERFORMANCE RESULTS
| | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | |
| | | 1
Year | | | Since
Incept. | |
Fund – Class I Shares* | | | 33.13 | % | | | 11.48 | % |
S&P Target Date 2060+ Index | | | 35.29 | | | | 12.64 | |
| |
* Date of inception 2/27/17. Returns for periods greater than one year are annualized. | |
|
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 Retirement 2060 Fund and the S&P Target Date 2060+ Index from 2/27/17 to 10/31/21. The performance of the S&P Target Date 2060+ Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P Target Date 2060+ Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratio including acquired fund fees for Class I shares was 4.44%. The net expense ratio for Class I shares was 0.65%. The net expense ratio reflects the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 33.13% for the year ended October 31, 2021. The Fund’s benchmark, the S&P Target Date 2060+ Index, returned 35.29% over the same year.
Overview
Each 1290 Retirement Fund’s (as defined in the Notes to the Financial Statements) performance will reflect the performance of the underlying asset classes and depends upon their percentage weighting within the Fund. Here’s why: The 1290 Retirement Funds are managed to target a specific year of planned retirement. The asset mix will become more conservative each year, until about 10 years after the target retirement year, when it will become relatively stable. The 1290 Retirement Funds balance the need for appreciation with the need for income as retirement approaches and focus on supporting an income stream over a long-term retirement withdrawal horizon. To achieve its asset class exposure, each 1290 Retirement Fund invests in exchange-traded funds (ETFs) representing various equity and bond asset classes. Because of this, each of the 1290 Retirement Fund’s performance will be a function of the asset class performance and the percentage weighting of each asset class in the 1290 Retirement Fund. Current target and actual allocations, as well as performance, are available in a separate quarterly Fund Fact Sheet.
What helped performance during the year?
| • | | The Fund had an overweighted position to domestic small-cap equities relative to the benchmark, which benefited performance as it was the best performing asset category by size. |
| • | | An overweight to equities relative to the benchmark benefited performance. |
| • | | The Fund’s overweighted allocation to Treasury Inflation Protected Securities (TIPS) and underweighted allocation to short duration contributed positively, as TIPS were up approximately 6.8% during the period, while short term government/credit was down about 50 basis points. |
What hurt performance during the year?
| • | | Within equities, exposure to low volatility was the top detractor from performance as it underperformed relative to market cap across U.S. and Developed Markets. |
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1290 RETIREMENT 2060 FUND (Unaudited)
| • | | Having no direct exposure to Real Estate Investment Trusts (REITs) detracted from performance as the asset class was up 56.3% for the period. |
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2021 | | | |
Equity | | | 99.3 | % |
Fixed Income | | | 0.7 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2021 | | | |
iShares Core S&P Total US Stock Market ETF | | | 35.1 | % |
iShares Core MSCI EAFE ETF | | | 12.2 | |
iShares MSCI USA Min Vol Factor ETF | | | 11.6 | |
Invesco S&P 500 Low Volatility ETF | | | 11.5 | |
Invesco S&P International Developed Low Volatility ETF | | | 6.1 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 6.1 | |
Invesco S&P MidCap Low Volatility ETF | | | 6.0 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.8 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2.7 | |
iShares Core MSCI Emerging Markets ETF | | | 2.7 | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class I | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,063.60 | | | | $2.72 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.57 | | | | 2.66 | |
| |
* Expenses are equal to the Portfolio’s I shares annualized expense ratio of 0.52%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
116
1290 FUNDS
1290 RETIREMENT 2060 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (99.3%) | |
Invesco S&P 500 Low Volatility ETF | | | 10,220 | | | $ | 649,992 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 2,970 | | | | 74,458 | |
Invesco S&P International Developed Low Volatility ETF | | | 10,840 | | | | 343,736 | |
Invesco S&P MidCap Low Volatility ETF | | | 6,160 | | | | 339,662 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,180 | | | | 156,456 | |
iShares Core MSCI EAFE ETF | | | 8,980 | | | | 687,060 | |
iShares Core MSCI Emerging Markets ETF | | | 2,450 | | | | 152,954 | |
iShares Core S&P Total US Stock Market ETF | | | 18,900 | | | | 1,983,366 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4,470 | | | | 342,894 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,200 | | | | 75,564 | |
iShares MSCI USA Min Vol Factor ETF | | | 8,470 | | | | 656,849 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,330 | | | | 154,986 | |
| | | | | | | | |
Total Equity | | | | | | | 5,617,977 | |
| | | | | | | | |
Fixed Income (0.7%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF | | | 300 | | | | 34,392 | |
iShares TIPS Bond ETF | | | 30 | | | | 3,860 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 38,252 | |
| | | | | | | | |
Total Investments in Securities (100.0%)
(Cost $4,118,551) | | | | | | | 5,656,229 | |
Other Assets Less Liabilities (0.0%) | | | | | | | 1,669 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 5,657,898 | |
| | | | | | | | |
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own
assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | | | | | |
Exchange Traded Funds | | | | | | | | | | | | | | | | |
Exchange Traded Funds | | $ | 5,656,229 | | | $ | — | | | $ | — | | | $ | 5,656,229 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 5,656,229 | | | $ | — | | | $ | — | | | $ | 5,656,229 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,656,229 | | | $ | — | | | $ | — | | | $ | 5,656,229 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 829,667 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 210,515 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 1,531,251 | |
Aggregate gross unrealized depreciation | | | — | |
| | | | |
Net unrealized appreciation | | $ | 1,531,251 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 4,124,978 | |
| | | | |
See Notes to Financial Statements.
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1290 FUNDS
1290 RETIREMENT 2060 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | | | | |
Investments in Securities, at value
(Cost $4,118,551) | | $ | 5,656,229 | |
Cash | | | 56,653 | |
Prepaid registration and filing fees | | | 4,933 | |
Receivable from investment adviser | | | 4,278 | |
Receivable for Fund shares sold | | | 630 | |
Dividends, interest and other receivables | | | 2 | |
Other assets | | | 35 | |
| | | | |
Total assets | | | 5,722,760 | |
| | | | |
LIABILITIES | | | | |
Accrued professional fees | | | 34,381 | |
Payable for Fund shares redeemed | | | 20,715 | |
Transfer agent fees payable | | | 1,174 | |
Trustees’ fees payable | | | 14 | |
Accrued expenses | | | 8,578 | |
| | | | |
Total liabilities | | | 64,862 | |
| | | | |
NET ASSETS | | $ | 5,657,898 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 4,041,474 | |
Total distributable earnings (loss) | | | 1,616,424 | |
| | | | |
Net assets | | $ | 5,657,898 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $5,657,898 / 372,075 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 15.21 | |
| | | | |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 78,980 | |
Interest | | | 21 | |
| | | | |
Total income | | | 79,001 | |
| | | | |
EXPENSES | | | | |
Professional fees | | | 37,727 | |
Administrative fees | | | 30,026 | |
Investment advisory fees | | | 23,880 | |
Printing and mailing expenses | | | 22,089 | |
Registration and filing fees | | | 20,917 | |
Transfer agent fees | | | 13,100 | |
Custodian fees | | | 4,500 | |
Trustees’ fees | | | 227 | |
Miscellaneous | | | 2,272 | |
| | | | |
Gross expenses | | | 154,738 | |
Less: Waiver from investment adviser | | | (53,906 | ) |
Reimbursement from investment adviser | | | (75,932 | ) |
| | | | |
Net expenses | | | 24,900 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 54,101 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 56,769 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,161,954 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 1,218,723 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 1,272,824 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 54,101 | | | $ | 73,751 | |
Net realized gain (loss) | | | 56,769 | | | | 47,380 | |
Net change in unrealized appreciation (depreciation) | | | 1,161,954 | | | | (197,894 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 1,272,824 | | | | (76,763 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (126,805 | ) | | | (69,322 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 60,936 and 73,347 shares, respectively ] | | | 883,287 | | | | 838,258 | |
Capital shares issued in reinvestment of dividends [ 2,338 and 795 shares, respectively ] | | | 29,954 | | | | 9,897 | |
Capital shares repurchased [ (15,498) and (31,794) shares, respectively ] | | | (219,446 | ) | | | (374,142 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 693,795 | | | | 474,013 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,839,814 | | | | 327,928 | |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 3,818,084 | | | | 3,490,156 | |
| | | | | | | | |
End of year | | $ | 5,657,898 | | | $ | 3,818,084 | |
| | | | | | | | |
See Notes to Financial Statements.
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1290 FUNDS
1290 RETIREMENT 2060 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | | | February 27, 2017* to
October 31, 2017 | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | |
Net asset value, beginning of period | | $ | 11.77 | | | $ | 12.38 | | | $ | 11.07 | | | $ | 11.03 | | | $ | 10.00 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.16 | | | | 0.24 | | | | 0.22 | | | | 0.20 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 3.66 | | | | (0.61 | ) | | | 1.34 | | | | 0.03 | | | | 0.92 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 3.82 | | | | (0.37 | ) | | | 1.56 | | | | 0.23 | | | | 1.03 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.22 | ) | | | (0.22 | ) | | | (0.21 | ) | | | (0.18 | ) | | | — | |
Distributions from net realized gains | | | (0.16 | ) | | | (0.02 | ) | | | (0.04 | ) | | | (0.01 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.38 | ) | | | (0.24 | ) | | | (0.25 | ) | | | (0.19 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | $ | 15.21 | | | $ | 11.77 | | | $ | 12.38 | | | $ | 11.07 | | | $ | 11.03 | |
| | | | | | | | | | | | | | | | | | | | |
Total return (b) | | | 33.13 | % | | | (3.11 | )% | | | 14.43 | % | | | 2.09 | % | | | 10.30 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of period (000’s) | | $ | 5,658 | | | $ | 3,818 | | | $ | 3,490 | | | $ | 2,867 | | | $ | 2,758 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.52 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (a)(f) | | | 3.24 | % | | | 4.31 | % | | | 4.83 | % | | | 5.27 | % | | | 5.25 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (a)(f)(x) | | | 1.13 | % | | | 2.01 | % | | | 1.93 | % | | | 1.73 | % | | | 1.52 | %(l) |
Before waivers and reimbursements (a)(f)(x) | | | (1.58 | )% | | | (1.78 | )% | | | (2.39 | )% | | | (3.02 | )% | | | (3.21 | )%(l) |
Portfolio turnover rate^ | | | 4 | % | | | 9 | % | | | 2 | % | | | 2 | % | | | 1 | %(z) |
| * | Commencement of Operations. |
| ** | Includes Tax expense of 0.01%. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (a) | Ratios for periods less than one year are annualized. Certain non-recurring expenses incurred by the Fund are not annualized for periods less than one year. |
| (b) | Total returns for periods less than one year are not annualized. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers and reimbursements would be 0.66% in 2020 and 0.65% in 2021, 2019, 2018 and 2017. |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (x) | Recognition of net investment income is affected by the timing of dividend declarations by the underlying funds in which the Fund invests. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized. |
See Notes to Financial Statements.
119
1290 SMARTBETA EQUITY FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management Group, LLC |
INVESTMENT SUB-ADVISER
| Ø | | AXA Rosenberg Investment Management LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/21 | |
| | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 33.49 | % | | | 14.10 | % | | | 10.60 | % |
| | | with Sales Charge (a) | | | 26.11 | | | | 12.81 | | | | 9.71 | |
Fund – Class I Shares* | | | | | 33.87 | | | | 14.39 | | | | 10.87 | |
Fund – Class R Shares* | | | | | 33.21 | | | | 13.80 | | | | 10.31 | |
Fund – Class T Shares*† | | without Sales Charge | | | 33.79 | | | | 14.37 | | | | 10.87 | |
| | | with Sales Charge (b) | | | 30.47 | | | | 13.80 | | | | 10.46 | |
MSCI World (Net) Index | | | | | 40.42 | | | | 15.45 | | | | 11.25 | |
| |
* Date of inception 11/12/14. † Class T Shares currently are not offered for sale. (a) A 5.50% front-end sales charge was deducted. (b) A 2.50% front-end sales charge was deducted. Returns for periods greater than one year are annualized. | |
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For the most current month-end performance data please call 1-888-310-0416 or visit www.1290Funds.com.
The graph illustrates comparative performance for $10,000 invested in the Class I Shares of the 1290 SmartBeta Equity Fund and the MSCI World (Net) Index from 11/12/14 to 10/31/21. The performance of the MSCI World (Net) Index reflects an initial investment at the end of the month closest to the Fund’s inception. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the MSCI World (Net) Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and has been adjusted to reflect reinvestment of all dividends, capital gain distributions, and interest of the securities included in the benchmark.
As of March 1, 2021, the gross expense ratios for Class A, I, R and T shares were 1.83%, 1.84%, 1.58% and 2.09%, respectively. The net expense ratios for Class A, I, R and T shares were 1.10%, 0.85%, 1.35% and 1.10%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2022. Fund Performance may also reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower.
In addition, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
PERFORMANCE SUMMARY
The Fund’s Class I shares returned 33.87% for the year ended October 31, 2021. The Fund’s benchmark, the MSCI World (Net) Index, returned 40.42% over the same year.
Overview — AXA Rosenberg Investment Management LLC
Global equities made solid gains over the last year, initially buoyed by strong stimulus support from central banks and signs of an improving global economy from re-opening post COVID-19 restrictions. However, during the period markets experienced rotations in factors and sectors as concerns over inflationary pressures leading to central banks moving closer to monetary tightening, bouts of new infection spikes and doubts of recovery led to a degree of volatility.
For the majority of the period, risk appetite among investors was strong, which meant defensive areas of the market and low volatility factors were under significant pressure. For context, the rotation from high quality, low risk companies to low quality, high risk firms seen during the fourth quarter of 2020 (triggered by the announcement of viable COVID-19 vaccines) was the largest since the recovery from the financial crisis low in March 2009. However, as markets progressed into the summer of 2021, rising cases of the Delta variant of coronavirus, supply chain issues and China’s regulatory
120
1290 SMARTBETA EQUITY FUND (Unaudited)
assault on its tech-sector — which broadened to other sectors — dampened sentiment, leading to a visible slowdown in economic growth. Investors gravitated towards quality growth stocks, while low volatility also started to gain traction.
Fund Highlights
The 1290 SmartBeta Equity Fund delivered positive returns in absolute terms but underperformed its benchmark index. The investment strategy has behaved in-line with expectations: participating in rising markets while providing some mitigation during market declines.
What helped performance during the year?
| • | | The Fund’s focus on stocks with high-quality earnings was rewarded as it connects the Fund to companies with robust earnings growth, helping deliver returns when markets are rising. |
| • | | Stock selection was well rewarded over the year, particularly within the information technology sector. For example, an overweight to software companies Oracle Corp. and Intuit Inc. featured among the top contributors to performance at an individual stock level. |
What hurt performance during the year?
| • | | The Fund’s underweight to the energy sector went unrewarded as oil prices rose sharply toward the end of the period. |
| • | | The low beta, defensive profile of the Fund proved challenging in the context of a cyclically focused, strongly rising market. The Fund’s low volatility factor exposure weighed on returns overall as, for the majority of the period, investors’ appetite for risk was buoyed by expectations of an economic reopening. |
| | | | |
| | |
Sector Weightings
as of October 31, 2021 | | % of
Net Assets | |
Information Technology | | | 20.3 | % |
Financials | | | 16.1 | |
Industrials | | | 16.1 | |
Health Care | | | 12.6 | |
Consumer Staples | | | 9.4 | |
Consumer Discretionary | | | 6.9 | |
Communication Services | | | 6.4 | |
Materials | | | 3.4 | |
Utilities | | | 3.1 | |
Real Estate | | | 2.9 | |
Energy | | | 0.8 | |
Investment Company | | | 0.7 | |
Cash and Other | | | 1.3 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
Holdings are subject to change without notice. | | | | |
UNDERSTANDING YOUR EXPENSES:
As a shareholder of the Fund, you incur two types of costs:
(1) transaction costs, including applicable sales charges and redemption fees; and (2) ongoing costs, including investment advisory fees, distribution and/or service (12b-1) fees (in the case of Class A, Class R and Class T shares of the Fund), and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2021 and held for the entire six-month period.
Actual Expenses
The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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1290 SMARTBETA EQUITY FUND (Unaudited)
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/21 | | | Ending
Account
Value
10/31/21 | | | Expenses
Paid
During
Period*
5/1/21 -
10/31/21 | |
Class A | |
Actual | | | $1,000.00 | | | | $1,086.40 | | | | $5.79 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.66 | | | | 5.60 | |
Class I | |
Actual | | | 1,000.00 | | | | 1,087.40 | | | | 4.48 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | |
Class R | |
Actual | | | 1,000.00 | | | | 1,084.60 | | | | 7.10 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.40 | | | | 6.87 | |
Class T** | |
Actual | | | 1,000.00 | | | | 1,087.50 | | | | 4.48 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | |
| |
* Expenses are equal to the Portfolio’s A, I, R and T shares annualized expense ratio of 1.10%, 0.85%, 1.35% and 0.85%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). ** Class T shares currently are not offered for sale. | |
122
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
COMMON STOCKS: | |
Communication Services (6.4%) | |
Diversified Telecommunication Services (1.7%) | |
AT&T, Inc. | | | 15,700 | | | $ | 396,582 | |
BCE, Inc. | | | 2,000 | | | | 102,957 | |
Nippon Telegraph & Telephone Corp. | | | 8,500 | | | | 237,754 | |
Orange SA | | | 6,667 | | | | 72,716 | |
Singapore Telecommunications Ltd. | | | 67,600 | | | | 125,325 | |
Swisscom AG (Registered) | | | 331 | | | | 180,177 | |
Verizon Communications, Inc. | | | 20,100 | | | | 1,065,099 | |
| | | | | | | | |
| | | | | | | 2,180,610 | |
| | | | | | | | |
Entertainment (0.7%) | |
Activision Blizzard, Inc. | | | 2,789 | | | | 218,072 | |
Netflix, Inc.* | | | 971 | | | | 670,291 | |
| | | | | | | | |
| | | | | | | 888,363 | |
| | | | | | | | |
Interactive Media & Services (3.1%) | |
Alphabet, Inc., Class A* | | | 1,000 | | | | 2,960,920 | |
Meta Platforms, Inc., Class A* | | | 3,300 | | | | 1,067,781 | |
REA Group Ltd. | | | 679 | | | | 81,796 | |
| | | | | | | | |
| | | | | | | 4,110,497 | |
| | | | | | | | |
Media (0.6%) | |
Charter Communications, Inc., Class A* | | | 100 | | | | 67,489 | |
Comcast Corp., Class A | | | 7,800 | | | | 401,154 | |
Omnicom Group, Inc. | | | 800 | | | | 54,464 | |
Quebecor, Inc., Class B | | | 8,300 | | | | 211,524 | |
| | | | | | | | |
| | | | | | | 734,631 | |
| | | | | | | | |
Wireless Telecommunication Services (0.3%) | |
KDDI Corp. | | | 7,000 | | | | 216,679 | |
Rogers Communications, Inc., Class B | | | 4,800 | | | | 223,245 | |
| | | | | | | | |
| | | | | | | 439,924 | |
| | | | | | | | |
Total Communication Services | | | | | | | 8,354,025 | |
| | | | | | | | |
Consumer Discretionary (6.9%) | |
Auto Components (0.2%) | |
Bridgestone Corp. | | | 4,800 | | | | 211,373 | |
Cie Generale des Etablissements Michelin SCA | | | 662 | | | | 103,847 | |
| | | | | | | | |
| | | | | | | 315,220 | |
| | | | | | | | |
Automobiles (0.7%) | |
Bayerische Motoren Werke AG | | | 1,098 | | | | 110,733 | |
Daimler AG (Registered) | | | 2,716 | | | | 269,197 | |
Honda Motor Co. Ltd. | | | 6,200 | | | | 182,179 | |
Toyota Motor Corp. | | | 23,300 | | | | 410,190 | |
| | | | | | | | |
| | | | | | | 972,299 | |
| | | | | | | | |
Distributors (0.2%) | |
LKQ Corp.* | | | 2,100 | | | | 115,668 | |
Pool Corp. | | | 200 | | | | 103,032 | |
| | | | | | | | |
| | | | | | | 218,700 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (0.1%) | |
Domino’s Pizza, Inc. | | | 200 | | | | 97,794 | |
Restaurant Brands International, Inc. | | | 1,200 | | | | 67,941 | |
| | | | | | | | |
| | | | | | | 165,735 | |
| | | | | | | | |
Household Durables (0.5%) | |
DR Horton, Inc. | | | 1,200 | | | | 107,124 | |
Garmin Ltd. | | | 700 | | | | 100,520 | |
NVR, Inc.* | | | 20 | | | | 97,896 | |
Panasonic Corp. | | | 8,400 | | | | 102,628 | |
Sekisui House Ltd. | | | 6,000 | | | | 124,317 | |
Sony Group Corp. | | | 1,300 | | | | 149,875 | |
| | | | | | | | |
| | | | | | | 682,360 | |
| | | | | | | | |
Internet & Direct Marketing Retail (1.6%) | |
Amazon.com, Inc.* | | | 600 | | | | 2,023,458 | |
| | | | | | | | |
Multiline Retail (1.0%) | |
Dollar General Corp. | | | 2,000 | | | | 443,040 | |
Target Corp. | | | 1,800 | | | | 467,316 | |
Wesfarmers Ltd. | | | 8,066 | | | | 347,373 | |
| | | | | | | | |
| | | | | | | 1,257,729 | |
| | | | | | | | |
Specialty Retail (1.8%) | |
AutoZone, Inc.* | | | 100 | | | | 178,484 | |
Home Depot, Inc. (The) | | | 2,900 | | | | 1,078,046 | |
Lowe’s Cos., Inc. | | | 2,400 | | | | 561,168 | |
O’Reilly Automotive, Inc.* | | | 200 | | | | 124,464 | |
Ross Stores, Inc. | | | 500 | | | | 56,600 | |
TJX Cos., Inc. (The) | | | 3,100 | | | | 203,019 | |
Tractor Supply Co. | | | 500 | | | | 108,585 | |
| | | | | | | | |
| | | | | | | 2,310,366 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.8%) | |
Kering SA | | | 130 | | | | 97,412 | |
LVMH Moet Hennessy Louis Vuitton SE | | | 622 | | | | 486,928 | |
NIKE, Inc., Class B | | | 2,500 | | | | 418,225 | |
| | | | | | | | |
| | | | | | | 1,002,565 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 8,948,432 | |
| | | | | | | | |
Consumer Staples (9.4%) | |
Beverages (2.6%) | |
Brown-Forman Corp., Class B | | | 1,700 | | | | 115,413 | |
Carlsberg A/S, Class B | | | 1,112 | | | | 183,432 | |
Coca-Cola Co. (The) | | | 19,200 | | | | 1,082,304 | |
Diageo plc | | | 7,117 | | | | 353,756 | |
Heineken NV | | | 1,512 | | | | 167,481 | |
Keurig Dr Pepper, Inc. | | | 5,400 | | | | 194,886 | |
Monster Beverage Corp.* | | | 800 | | | | 68,000 | |
PepsiCo, Inc. | | | 6,891 | | | | 1,113,586 | |
Pernod Ricard SA | | | 493 | | | | 113,241 | |
| | | | | | | | |
| | | | | | | 3,392,099 | |
| | | | | | | | |
Food & Staples Retailing (2.0%) | |
Alimentation Couche-Tard, Inc., Class B | | | 2,700 | | | | 101,272 | |
Costco Wholesale Corp. | | | 1,768 | | | | 869,043 | |
George Weston Ltd. | | | 1,000 | | | | 108,048 | |
Kesko OYJ, Class B | | | 2,323 | | | | 75,432 | |
Koninklijke Ahold Delhaize NV | | | 7,274 | | | | 236,538 | |
See Notes to Financial Statements.
123
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Loblaw Cos. Ltd. | | | 800 | | | $ | 60,168 | |
Metro, Inc. | | | 1,800 | | | | 90,567 | |
Seven & i Holdings Co. Ltd. | | | 2,400 | | | | 100,696 | |
Tesco plc | | | 29,714 | | | | 109,755 | |
Walmart, Inc. | | | 5,800 | | | | 866,636 | |
| | | | | | | | |
| | | | | | | 2,618,155 | |
| | | | | | | | |
Food Products (2.1%) | |
Archer-Daniels-Midland Co. | | | 11,200 | | | | 719,488 | |
Danone SA | | | 1,545 | | | | 100,642 | |
General Mills, Inc. | | | 4,700 | | | | 290,460 | |
Hershey Co. (The) | | | 400 | | | | 70,140 | |
Kellogg Co. | | | 2,700 | | | | 165,510 | |
McCormick & Co., Inc. (Non-Voting) | | | 1,200 | | | | 96,276 | |
Mondelez International, Inc., Class A | | | 8,903 | | | | 540,768 | |
Nestle SA (Registered) | | | 6,253 | | | | 825,129 | |
| | | | | | | | |
| | | | | | | 2,808,413 | |
| | | | | | | | |
Household Products (1.8%) | |
Church & Dwight Co., Inc. | | | 1,500 | | | | 131,040 | |
Clorox Co. (The) | | | 700 | | | | 114,107 | |
Colgate-Palmolive Co. | | | 9,800 | | | | 746,662 | |
Henkel AG & Co. KGaA (Preference)(q) | | | 1,807 | | | | 161,638 | |
Procter & Gamble Co. (The) | | | 8,500 | | | | 1,215,415 | |
| | | | | | | | |
| | | | | | | 2,368,862 | |
| | | | | | | | |
Personal Products (0.9%) | |
Beiersdorf AG | | | 872 | | | | 92,638 | |
Estee Lauder Cos., Inc. (The), Class A | | | 800 | | | | 259,464 | |
Kao Corp. | | | 2,600 | | | | 146,704 | |
L’Oreal SA | | | 776 | | | | 354,292 | |
Unilever plc (Cboe Europe) | | | 4,042 | | | | 216,386 | |
Unilever plc (London Stock Exchange) | | | 1,300 | | | | 69,599 | |
| | | | | | | | |
| | | | | | | 1,139,083 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 12,326,612 | |
| | | | | | | | |
Energy (0.8%) | |
Oil, Gas & Consumable Fuels (0.8%) | |
Enbridge, Inc. | | | 11,300 | | | | 473,329 | |
Equinor ASA | | | 14,304 | | | | 361,922 | |
TC Energy Corp. | | | 2,300 | | | | 124,422 | |
TotalEnergies SE | | | 2,715 | | | | 136,119 | |
| | | | | | | | |
Total Energy | | | | | | | 1,095,792 | |
| | | | | | | | |
Financials (16.1%) | |
Banks (5.2%) | |
Banco Bilbao Vizcaya Argentaria SA | | | 16,776 | | | | 117,561 | |
Bank Hapoalim BM | | | 25,374 | | | | 249,643 | |
Bank Leumi Le-Israel BM | | | 10,549 | | | | 100,649 | |
Bank of Montreal | | | 2,900 | | | | 314,862 | |
Bank of Nova Scotia (The) | | | 12,600 | | | | 826,086 | |
Canadian Imperial Bank of Commerce | | | 3,800 | | | | 461,091 | |
Commonwealth Bank of Australia | | | 1,326 | | | | 104,417 | |
DBS Group Holdings Ltd. | | | 11,000 | | | | 257,197 | |
Hang Seng Bank Ltd. | | | 4,100 | | | | 77,990 | |
Japan Post Bank Co. Ltd. | | | 21,900 | | | | 170,819 | |
JPMorgan Chase & Co. | | | 3,600 | | | | 611,604 | |
Mizrahi Tefahot Bank Ltd. | | | 1,800 | | | | 65,413 | |
Mizuho Financial Group, Inc. | | | 18,760 | | | | 247,719 | |
National Bank of Canada | | | 4,100 | | | | 339,436 | |
Oversea-Chinese Banking Corp. Ltd. | | | 22,500 | | | | 196,885 | |
Royal Bank of Canada | | | 9,700 | | | | 1,009,659 | |
Sumitomo Mitsui Trust Holdings, Inc. | | | 6,000 | | | | 197,622 | |
Svenska Handelsbanken AB, Class A | | | 12,505 | | | | 143,193 | |
Toronto-Dominion Bank (The) | | | 14,300 | | | | 1,038,067 | |
United Overseas Bank Ltd. | | | 9,800 | | | | 194,401 | |
Westpac Banking Corp. | | | 3,771 | | | | 72,819 | |
| | | | | | | | |
| | | | | | | 6,797,133 | |
| | | | | | | | |
Capital Markets (3.4%) | |
ASX Ltd. | | | 2,525 | | | | 157,691 | |
Bank of New York Mellon Corp. (The) | | | 1,800 | | | | 106,560 | |
BlackRock, Inc. | | | 1,100 | | | | 1,037,806 | |
Brookfield Asset Management, Inc., Class A | | | 1,900 | | | | 114,712 | |
Daiwa Securities Group, Inc. | | | 18,900 | | | | 105,913 | |
Deutsche Boerse AG | | | 1,266 | | | | 210,158 | |
Hong Kong Exchanges & Clearing Ltd. | | | 1,500 | | | | 90,765 | |
Moody’s Corp. | | | 1,200 | | | | 484,980 | |
MSCI, Inc. | | | 700 | | | | 465,416 | |
Nasdaq, Inc. | | | 600 | | | | 125,922 | |
Northern Trust Corp. | | | 800 | | | | 98,432 | |
S&P Global, Inc. | | | 2,100 | | | | 995,736 | |
Singapore Exchange Ltd. | | | 13,600 | | | | 97,626 | |
T. Rowe Price Group, Inc. | | | 1,400 | | | | 303,632 | |
TMX Group Ltd. | | | 500 | | | | 54,133 | |
| | | | | | | | |
| | | | | | | 4,449,482 | |
| | | | | | | | |
Consumer Finance (0.4%) | |
American Express Co. | | | 2,200 | | | | 382,316 | |
Capital One Financial Corp. | | | 700 | | | | 105,721 | |
| | | | | | | | |
| | | | | | | 488,037 | |
| | | | | | | | |
Diversified Financial Services (0.9%) | |
Berkshire Hathaway, Inc., Class B* | | | 4,200 | | | | 1,205,442 | |
Industrivarden AB, Class A* | | | 192 | | | | 6,344 | |
| | | | | | | | |
| | | | | | | 1,211,786 | |
| | | | | | | | |
Insurance (6.2%) | |
Admiral Group plc | | | 2,453 | | | | 96,347 | |
Aflac, Inc. | | | 4,600 | | | | 246,882 | |
Ageas SA | | | 1,833 | | | | 89,208 | |
AIA Group Ltd. | | | 6,200 | | | | 70,004 | |
Allianz SE (Registered) | | | 1,885 | | | | 438,318 | |
Allstate Corp. (The) | | | 1,900 | | | | 234,973 | |
American International Group, Inc. | | | 3,400 | | | | 200,906 | |
Aon plc, Class A | | | 1,800 | | | | 575,856 | |
Arthur J Gallagher & Co. | | | 2,000 | | | | 335,340 | |
Assicurazioni Generali SpA | | | 20,746 | | | | 452,068 | |
Brown & Brown, Inc. | | | 1,700 | | | | 107,287 | |
Chubb Ltd. | | | 1,900 | | | | 371,222 | |
Cincinnati Financial Corp. | | | 800 | | | | 97,152 | |
See Notes to Financial Statements.
124
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Fidelity National Financial, Inc. | | | 1,200 | | | $ | 57,492 | |
Gjensidige Forsikring ASA | | | 4,392 | | | | 109,229 | |
Great-West Lifeco, Inc. | | | 2,700 | | | | 79,434 | |
Hannover Rueck SE | | | 376 | | | | 68,676 | |
Hartford Financial Services Group, Inc. (The) | | | 1,300 | | | | 94,809 | |
iA Financial Corp., Inc. | | | 1,900 | | | | 112,394 | |
Intact Financial Corp. | | | 900 | | | | 120,652 | |
Legal & General Group plc | | | 21,533 | | | | 85,136 | |
Loews Corp. | | | 1,700 | | | | 95,319 | |
Manulife Financial Corp. | | | 14,600 | | | | 284,426 | |
Markel Corp.* | | | 80 | | | | 105,050 | |
Marsh & McLennan Cos., Inc. | | | 4,600 | | | | 767,280 | |
MetLife, Inc. | | | 5,500 | | | | 345,400 | |
MS&AD Insurance Group Holdings, Inc. | | | 3,200 | | | | 103,489 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | | | 660 | | | | 195,470 | |
NN Group NV | | | 2,562 | | | | 137,185 | |
Power Corp. of Canada | | | 3,400 | | | | 113,242 | |
Progressive Corp. (The) | | | 2,500 | | | | 237,200 | |
Sampo OYJ, Class A | | | 1,600 | | | | 85,082 | |
Sompo Holdings, Inc. | | | 2,000 | | | | 86,826 | |
Sun Life Financial, Inc. | | | 8,000 | | | | 455,915 | |
Suncorp Group Ltd. | | | 8,528 | | | | 75,186 | |
Tokio Marine Holdings, Inc. | | | 3,500 | | | | 184,190 | |
Travelers Cos., Inc. (The) | | | 2,000 | | | | 321,760 | |
Willis Towers Watson plc | | | 500 | | | | 121,140 | |
Zurich Insurance Group AG | | | 718 | | | | 318,301 | |
| | | | | | | | |
| | | | | | | 8,075,846 | |
| | | | | | | | |
Total Financials | | | | | | | 21,022,284 | |
| | | | | | | | |
Health Care (12.6%) | |
Biotechnology (0.6%) | |
Amgen, Inc. | | | 1,206 | | | | 249,606 | |
CSL Ltd. | | | 795 | | | | 179,705 | |
Gilead Sciences, Inc. | | | 1,700 | | | | 110,296 | |
Regeneron Pharmaceuticals, Inc.* | | | 300 | | | | 191,982 | |
| | | | | | | | |
| | | | | | | 731,589 | |
| | | | | | | | |
Health Care Equipment & Supplies (4.4%) | |
Abbott Laboratories | | | 6,800 | | | | 876,452 | |
Baxter International, Inc. | | | 2,400 | | | | 189,504 | |
Becton Dickinson and Co. | | | 1,300 | | | | 311,467 | |
Boston Scientific Corp.* | | | 2,300 | | | | 99,199 | |
Coloplast A/S, Class B | | | 400 | | | | 65,206 | |
Cooper Cos., Inc. (The) | | | 200 | | | | 83,384 | |
Danaher Corp. | | | 2,800 | | | | 872,956 | |
Edwards Lifesciences Corp.* | | | 3,400 | | | | 407,388 | |
Hoya Corp. | | | 1,000 | | | | 146,743 | |
IDEXX Laboratories, Inc.* | | | 300 | | | | 199,842 | |
Intuitive Surgical, Inc.* | | | 1,218 | | | | 439,856 | |
Koninklijke Philips NV | | | 2,420 | | | | 113,929 | |
Medtronic plc | | | 8,200 | | | | 982,852 | |
ResMed, Inc. | | | 600 | | | | 157,746 | |
Siemens Healthineers AG(m) | | | 1,613 | | | | 107,142 | |
Stryker Corp. | | | 1,700 | | | | 452,319 | |
Terumo Corp. | | | 2,100 | | | | 92,457 | |
West Pharmaceutical Services, Inc. | | | 400 | | | | 171,952 | |
| | | | | | | | |
| | | | | | | 5,770,394 | |
| | | | | | | | |
Health Care Providers & Services (2.2%) | |
Anthem, Inc. | | | 1,100 | | | | 478,643 | |
Cigna Corp. | | | 1,100 | | | | 234,971 | |
HCA Healthcare, Inc. | | | 700 | | | | 175,322 | |
Laboratory Corp. of America Holdings* | | | 300 | | | | 86,106 | |
McKesson Corp. | | | 700 | | | | 145,516 | |
Sonic Healthcare Ltd. | | | 5,021 | | | | 151,195 | |
UnitedHealth Group, Inc. | | | 3,300 | | | | 1,519,551 | |
| | | | | | | | |
| | | | | | | 2,791,304 | |
| | | | | | | | |
Health Care Technology (0.1%) | |
Cerner Corp. | | | 2,300 | | | | 170,867 | |
| | | | | | | | |
Life Sciences Tools & Services (1.3%) | |
Agilent Technologies, Inc. | | | 2,700 | | | | 425,223 | |
Mettler-Toledo International, Inc.* | | | 200 | | | | 296,176 | |
Thermo Fisher Scientific, Inc. | | | 1,400 | | | | 886,298 | |
Waters Corp.* | | | 300 | | | | 110,265 | |
| | | | | | | | |
| | | | | | | 1,717,962 | |
| | | | | | | | |
Pharmaceuticals (4.0%) | |
Eli Lilly and Co. | | | 1,800 | | | | 458,568 | |
GlaxoSmithKline plc | | | 11,219 | | | | 231,627 | |
Johnson & Johnson | | | 7,100 | | | | 1,156,448 | |
Merck & Co., Inc. | | | 10,300 | | | | 906,915 | |
Merck KGaA | | | 924 | | | | 218,115 | |
Novartis AG (Registered) | | | 1,639 | | | | 135,402 | |
Novo Nordisk A/S, Class B | | | 4,065 | | | | 444,907 | |
Pfizer, Inc. | | | 5,100 | | | | 223,074 | |
Roche Holding AG | | | 1,291 | | | | 499,212 | |
Sanofi | | | 1,405 | | | | 140,378 | |
Shionogi & Co. Ltd. | | | 1,800 | | | | 116,978 | |
Zoetis, Inc. | | | 3,100 | | | | 670,220 | |
| | | | | | | | |
| | | | | | | 5,201,844 | |
| | | | | | | | |
Total Health Care | | | | | | | 16,383,960 | |
| | | | | | | | |
Industrials (16.1%) | |
Aerospace & Defense (1.1%) | |
General Dynamics Corp. | | | 3,200 | | | | 648,800 | |
Lockheed Martin Corp. | | | 1,400 | | | | 465,248 | |
Northrop Grumman Corp. | | | 800 | | | | 285,776 | |
| | | | | | | | |
| | | | | | | 1,399,824 | |
| | | | | | | | |
Air Freight & Logistics (1.2%) | |
Deutsche Post AG (Registered) | | | 4,680 | | | | 289,547 | |
Expeditors International of Washington, Inc. | | | 5,600 | | | | 690,256 | |
SG Holdings Co. Ltd. | | | 4,300 | | | | 107,524 | |
United Parcel Service, Inc., Class B | | | 1,900 | | | | 405,593 | |
Yamato Holdings Co. Ltd. | | | 3,000 | | | | 73,621 | |
| | | | | | | | |
| | | | | | | 1,566,541 | |
| | | | | | | | |
Building Products (1.3%) | |
Allegion plc | | | 2,900 | | | | 372,070 | |
Assa Abloy AB, Class B | | | 2,252 | | | | 65,950 | |
Daikin Industries Ltd. | | | 1,000 | | | | 218,381 | |
Geberit AG (Registered) | | | 249 | | | | 194,392 | |
Johnson Controls International plc | | | 3,200 | | | | 234,784 | |
Lennox International, Inc. | | | 300 | | | | 89,784 | |
Trane Technologies plc | | | 2,600 | | | | 470,418 | |
| | | | | | | | |
| | | | | | | 1,645,779 | |
| | | | | | | | |
See Notes to Financial Statements.
125
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Commercial Services & Supplies (0.6%) | |
Brambles Ltd. | | | 14,150 | | | $ | 106,869 | |
Cintas Corp. | | | 500 | | | | 216,550 | |
Copart, Inc.* | | | 800 | | | | 124,232 | |
Waste Management, Inc. | | | 1,700 | | | | 272,391 | |
| | | | | | | | |
| | | | | | | 720,042 | |
| | | | | | | | |
Construction & Engineering (0.1%) | |
Vinci SA | | | 500 | | | | 53,390 | |
WSP Global, Inc. | | | 900 | | | | 122,012 | |
| | | | | | | | |
| | | | | | | 175,402 | |
| | | | | | | | |
Electrical Equipment (2.0%) | |
ABB Ltd. (Registered) | | | 2,891 | | | | 95,640 | |
AMETEK, Inc. | | | 500 | | | | 66,200 | |
Eaton Corp. plc | | | 4,900 | | | | 807,324 | |
Emerson Electric Co. | | | 8,200 | | | | 795,482 | |
Legrand SA | | | 708 | | | | 77,131 | |
Rockwell Automation, Inc. | | | 1,300 | | | | 415,220 | |
Schneider Electric SE | | | 2,328 | | | | 400,715 | |
| | | | | | | | |
| | | | | | | 2,657,712 | |
| | | | | | | | |
Industrial Conglomerates (1.4%) | |
3M Co. | | | 5,300 | | | | 947,004 | |
Hitachi Ltd. | | | 4,000 | | | | 230,015 | |
Honeywell International, Inc. | | | 900 | | | | 196,758 | |
Roper Technologies, Inc. | | | 600 | | | | 292,722 | |
Siemens AG (Registered) | | | 1,279 | | | | 207,408 | |
| | | | | | | | |
| | | | | | | 1,873,907 | |
| | | | | | | | |
Machinery (3.8%) | |
Alfa Laval AB | | | 1,547 | | | | 66,236 | |
Atlas Copco AB, Class A | | | 8,920 | | | | 573,132 | |
Caterpillar, Inc. | | | 1,200 | | | | 244,812 | |
Cummins, Inc. | | | 1,000 | | | | 239,840 | |
Deere & Co. | | | 900 | | | | 308,079 | |
Dover Corp. | | | 3,800 | | | | 642,504 | |
Epiroc AB, Class A | | | 4,626 | | | | 115,111 | |
FANUC Corp. | | | 400 | | | | 78,298 | |
IDEX Corp. | | | 500 | | | | 111,285 | |
Illinois Tool Works, Inc. | | | 4,300 | | | | 979,841 | |
Kone OYJ, Class B | | | 2,205 | | | | 150,288 | |
PACCAR, Inc. | | | 1,100 | | | | 98,582 | |
Parker-Hannifin Corp. | | | 300 | | | | 88,977 | |
Pentair plc | | | 5,900 | | | | 436,423 | |
SMC Corp. | | | 100 | | | | 59,610 | |
Snap-on, Inc. | | | 1,600 | | | | 325,168 | |
Techtronic Industries Co. Ltd. | | | 6,000 | | | | 123,462 | |
Volvo AB, Class B | | | 4,790 | | | | 111,506 | |
Xylem, Inc. | | | 2,000 | | | | 261,180 | |
| | | | | | | | |
| | | | | | | 5,014,334 | |
| | | | | | | | |
Marine (0.1%) | |
Kuehne + Nagel International AG (Registered) | | | 464 | | | | 146,102 | |
| | | | | | | | |
Professional Services (1.2%) | |
Experian plc | | | 2,134 | | | | 97,749 | |
Jacobs Engineering Group, Inc. | | | 500 | | | | 70,210 | |
Recruit Holdings Co. Ltd. | | | 2,100 | | | | 139,515 | |
Robert Half International, Inc. | | | 1,000 | | | | 113,070 | |
SGS SA (Registered) | | | 49 | | | | 144,923 | |
Teleperformance | | | 337 | | | | 140,674 | |
TransUnion | | | 1,000 | | | | 115,290 | |
Verisk Analytics, Inc. | | | 1,600 | | | | 336,432 | |
Wolters Kluwer NV | | | 3,375 | | | | 353,632 | |
| | | | | | | | |
| | | | | | | 1,511,495 | |
| | | | | | | | |
Road & Rail (1.6%) | |
Canadian National Railway Co. | | | 2,400 | | | | 318,966 | |
Canadian Pacific Railway Ltd. | | | 4,100 | | | | 317,339 | |
CSX Corp. | | | 3,400 | | | | 122,978 | |
Norfolk Southern Corp. | | | 400 | | | | 117,220 | |
Old Dominion Freight Line, Inc. | | | 2,100 | | | | 716,835 | |
Union Pacific Corp. | | | 2,100 | | | | 506,940 | |
| | | | | | | | |
| | | | | | | 2,100,278 | |
| | | | | | | | |
Trading Companies & Distributors (1.7%) | |
Brenntag SE | | | 1,977 | | | | 187,952 | |
Fastenal Co. | | | 11,500 | | | | 656,420 | |
Ferguson plc | | | 473 | | | | 71,173 | |
ITOCHU Corp. | | | 13,500 | | | | 384,005 | |
Mitsubishi Corp. | | | 8,500 | | | | 269,375 | |
Mitsui & Co. Ltd. | | | 9,500 | | | | 216,048 | |
Toyota Tsusho Corp. | | | 4,400 | | | | 190,323 | |
WW Grainger, Inc. | | | 400 | | | | 185,244 | |
| | | | | | | | |
| | | | | | | 2,160,540 | |
| | | | | | | | |
Total Industrials | | | | | | | 20,971,956 | |
| | | | | | | | |
Information Technology (20.3%) | |
Communications Equipment (0.7%) | |
Cisco Systems, Inc. | | | 12,694 | | | | 710,483 | |
Motorola Solutions, Inc. | | | 700 | | | | 174,013 | |
| | | | | | | | |
| | | | | | | 884,496 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (1.6%) | |
Amphenol Corp., Class A | | | 8,700 | | | | 667,899 | |
Azbil Corp. | | | 2,000 | | | | 85,107 | |
CDW Corp. | | | 3,400 | | | | 634,610 | |
Corning, Inc. | | | 1,400 | | | | 49,798 | |
Hexagon AB, Class B | | | 4,522 | | | | 72,664 | |
Keyence Corp. | | | 200 | | | | 120,219 | |
Keysight Technologies, Inc.* | | | 600 | | | | 108,012 | |
Kyocera Corp. | | | 900 | | | | 52,551 | |
Murata Manufacturing Co. Ltd. | | | 1,400 | | | | 106,288 | |
Omron Corp. | | | 1,100 | | | | 104,909 | |
Trimble, Inc.* | | | 900 | | | | 78,633 | |
| | | | | | | | |
| | | | | | | 2,080,690 | |
| | | | | | | | |
IT Services (4.4%) | |
Accenture plc, Class A | | | 2,400 | | | | 861,096 | |
Automatic Data Processing, Inc. | | | 5,626 | | | | 1,262,981 | |
Broadridge Financial Solutions, Inc. | | | 700 | | | | 124,887 | |
CGI, Inc.* | | | 1,100 | | | | 98,268 | |
EPAM Systems, Inc.* | | | 200 | | | | 134,648 | |
Fidelity National Information Services, Inc. | | | 900 | | | | 99,666 | |
Fiserv, Inc.* | | | 2,300 | | | | 226,527 | |
Fujitsu Ltd. | | | 400 | | | | 68,875 | |
Gartner, Inc.* | | | 400 | | | | 132,764 | |
International Business Machines Corp. | | | 1,700 | | | | 212,670 | |
Mastercard, Inc., Class A | | | 1,900 | | | | 637,488 | |
See Notes to Financial Statements.
126
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Nomura Research Institute Ltd. | | | 1,700 | | | $ | 67,716 | |
Paychex, Inc. | | | 2,859 | | | | 352,457 | |
PayPal Holdings, Inc.* | | | 1,507 | | | | 350,513 | |
VeriSign, Inc.* | | | 500 | | | | 111,335 | |
Visa, Inc., Class A | | | 4,600 | | | | 974,142 | |
| | | | | | | | |
| | | | | | | 5,716,033 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (2.5%) | |
Applied Materials, Inc. | | | 2,500 | | | | 341,625 | |
ASML Holding NV | | | 835 | | | | 676,165 | |
Broadcom, Inc. | | | 200 | | | | 106,334 | |
Intel Corp. | | | 9,200 | | | | 450,800 | |
KLA Corp. | | | 500 | | | | 186,380 | |
QUALCOMM, Inc. | | | 2,200 | | | | 292,688 | |
Texas Instruments, Inc. | | | 6,467 | | | | 1,212,433 | |
| | | | | | | | |
| | | | | | | 3,266,425 | |
| | | | | | | | |
Software (7.1%) | |
Adobe, Inc.* | | | 1,500 | | | | 975,540 | |
Autodesk, Inc.* | | | 900 | | | | 285,849 | |
Cadence Design Systems, Inc.* | | | 1,400 | | | | 242,354 | |
Constellation Software, Inc. | | | 100 | | | | 175,743 | |
Intuit, Inc. | | | 1,100 | | | | 688,589 | |
Microsoft Corp. | | | 13,510 | | | | 4,480,186 | |
Nice Ltd.* | | | 355 | | | | 99,385 | |
Open Text Corp. | | | 2,300 | | | | 115,855 | |
Oracle Corp. | | | 15,200 | | | | 1,458,288 | |
SAP SE | | | 3,430 | | | | 496,904 | |
Synopsys, Inc.* | | | 1,000 | | | | 333,180 | |
| | | | | | | | |
| | | | | | | 9,351,873 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (4.0%) | |
Apple, Inc. | | | 29,904 | | | | 4,479,619 | |
Canon, Inc. | | | 10,500 | | | | 235,657 | |
FUJIFILM Holdings Corp. | | | 3,700 | | | | 285,709 | |
HP, Inc. | | | 7,000 | | | | 212,310 | |
| | | | | | | | |
| | | | | | | 5,213,295 | |
| | | | | | | | |
Total Information Technology | | | | | | | 26,512,812 | |
| | | | | | | | |
Materials (3.4%) | |
Chemicals (2.6%) | |
Air Liquide SA | | | 287 | | | | 47,855 | |
Air Products and Chemicals, Inc. | | | 400 | | | | 119,924 | |
Akzo Nobel NV | | | 2,173 | | | | 249,742 | |
BASF SE | | | 4,565 | | | | 328,660 | |
Corteva, Inc. | | | 2,900 | | | | 125,135 | |
Ecolab, Inc. | | | 2,900 | | | | 644,438 | |
Givaudan SA (Registered) | | | 84 | | | | 395,321 | |
Koninklijke DSM NV | | | 1,470 | | | | 321,256 | |
Nitto Denko Corp. | | | 900 | | | | 70,121 | |
Nutrien Ltd. | | | 1,700 | | | | 118,819 | |
PPG Industries, Inc. | | | 600 | | | | 96,342 | |
Sherwin-Williams Co. (The) | | | 1,300 | | | | 411,593 | |
Shin-Etsu Chemical Co. Ltd. | | | 300 | | | | 53,314 | |
Sika AG (Registered) | | | 505 | | | | 170,981 | |
Symrise AG | | | 844 | | | | 116,640 | |
Yara International ASA | | | 2,537 | | | | 132,377 | |
| | | | | | | | |
| | | | | | | 3,402,518 | |
| | | | | | | | |
Construction Materials (0.2%) | |
Martin Marietta Materials, Inc. | | | 200 | | | | 78,568 | |
Vulcan Materials Co. | | | 600 | | | | 114,072 | |
| | | | | | | | |
| | | | | | | 192,640 | |
| | | | | | | | |
Containers & Packaging (0.2%) | |
Avery Dennison Corp. | | | 500 | | | | 108,860 | |
Ball Corp. | | | 1,900 | | | | 173,812 | |
| | | | | | | | |
| | | | | | | 282,672 | |
| | | | | | | | |
Metals & Mining (0.4%) | |
BHP Group Ltd. | | | 7,744 | | | | 213,094 | |
Newcrest Mining Ltd. | | | 6,414 | | | | 120,093 | |
Rio Tinto Ltd. | | | 2,153 | | | | 146,233 | |
Rio Tinto plc | | | 1,139 | | | | 71,088 | |
| | | | | | | | |
| | | | | | | 550,508 | |
| | | | | | | | |
Total Materials | | | | | | | 4,428,338 | |
| | | | | | | | |
Real Estate (2.9%) | |
Equity Real Estate Investment Trusts (REITs) (2.6%) | |
American Tower Corp. (REIT) | | | 2,600 | | | | 733,122 | |
AvalonBay Communities, Inc. (REIT) | | | 700 | | | | 165,676 | |
Crown Castle International Corp. (REIT) | | | 1,700 | | | | 306,510 | |
Daiwa House REIT Investment Corp. (REIT) | | | 23 | | | | 65,988 | |
Dexus (REIT)* | | | 25,034 | | | | 204,702 | |
Digital Realty Trust, Inc. (REIT) | | | 600 | | | | 94,686 | |
Duke Realty Corp. (REIT) | | | 3,100 | | | | 174,344 | |
Equity LifeStyle Properties, Inc. (REIT) | | | 1,000 | | | | 84,510 | |
Equity Residential (REIT) | | | 1,400 | | | | 120,960 | |
Essex Property Trust, Inc. (REIT) | | | 200 | | | | 67,986 | |
Goodman Group (REIT) | | | 7,429 | | | | 122,388 | |
Mid-America Apartment Communities, Inc. (REIT) | | | 900 | | | | 183,789 | |
Nippon Building Fund, Inc. (REIT) | | | 17 | | | | 110,375 | |
Nippon Prologis REIT, Inc. (REIT) | | | 27 | | | | 90,138 | |
Nomura Real Estate Master Fund, Inc. (REIT) | | | 62 | | | | 92,857 | |
Prologis, Inc. (REIT) | | | 3,300 | | | | 478,368 | |
Public Storage (REIT) | | | 1,000 | | | | 332,180 | |
| | | | | | | | |
| | | | | | | 3,428,579 | |
| | | | | | | | |
Real Estate Management & Development (0.3%) | |
CBRE Group, Inc., Class A* | | | 1,100 | | | | 114,488 | |
Daiwa House Industry Co. Ltd. | | | 2,200 | | | | 72,404 | |
Mitsubishi Estate Co. Ltd. | | | 4,400 | | | | 66,709 | |
Swiss Prime Site AG (Registered) | | | 583 | | | | 59,217 | |
| | | | | | | | |
| | | | | | | 312,818 | |
| | | | | | | | |
Total Real Estate | | | | | | | 3,741,397 | |
| | | | | | | | |
Utilities (3.1%) | |
Electric Utilities (1.1%) | |
EDP - Energias de Portugal SA | | | 19,174 | | | | 108,255 | |
Enel SpA | | | 46,107 | | | | 385,677 | |
Iberdrola SA | | | 32,488 | | | | 383,636 | |
Power Assets Holdings Ltd. | | | 15,500 | | | | 94,528 | |
Red Electrica Corp. SA | | | 5,446 | | | | 113,383 | |
SSE plc | | | 6,604 | | | | 148,538 | |
Terna - Rete Elettrica Nazionale | | | 28,874 | | | | 215,023 | |
| | | | | | | | |
| | | | | | | 1,449,040 | |
| | | | | | | | |
See Notes to Financial Statements.
127
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Gas Utilities (0.3%) | |
Atmos Energy Corp. | | | 1,600 | | | $ | 147,392 | |
Osaka Gas Co. Ltd. | | | 5,500 | | | | 88,598 | |
Snam SpA | | | 32,906 | | | | 186,279 | |
| | | | | | | | |
| | | | | | | 422,269 | |
| | | | | | | | |
Multi-Utilities (1.4%) | |
CMS Energy Corp. | | | 2,600 | | | | 156,910 | |
Consolidated Edison, Inc. | | | 5,600 | | | | 422,240 | |
E.ON SE | | | 15,141 | | | | 191,938 | |
National Grid plc | | | 11,977 | | | | 153,322 | |
Public Service Enterprise Group, Inc. | | | 5,300 | | | | 338,140 | |
Sempra Energy | | | 3,000 | | | | 382,890 | |
WEC Energy Group, Inc. | | | 1,700 | | | | 153,102 | |
| | | | | | | | |
| | | | | | | 1,798,542 | |
| | | | | | | | |
Water Utilities (0.3%) | |
American Water Works Co., Inc. | | | 2,100 | | | | 365,778 | |
| | | | | | | | |
Total Utilities | | | | | | | 4,035,629 | |
| | | | | | | | |
Total Common Stocks (98.0%)
(Cost $110,383,404) | | | | | | | 127,821,237 | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | |
Investment Company (0.7%) | |
JPMorgan Prime Money Market Fund, IM Shares | | | 936,366 | | | | 936,834 | |
| | | | | | | | |
Total Short-Term Investment (0.7%)
(Cost $936,834) | | | | | | | 936,834 | |
| | | | | | | | |
Total Investments in Securities (98.7%)
(Cost $111,320,238) | | | | | | | 128,758,071 | |
Other Assets Less Liabilities (1.3%) | | | | | | | 1,658,762 | |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 130,416,833 | |
| | | | | | | | |
| (m) | Regulation S is an exemption for securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. Resale restrictions may apply for purposes of the Securities Act of 1933. At October 31, 2021, the market value of these securities amounted to $107,142 or 0.1% of net assets. |
| (q) | Preference Shares are a special type of equity investment that shares in the earnings of the company, has limited voting rights, and receives a greater dividend than applicable Common Shares. |
| | | | |
| | |
Country Diversification As a Percentage of Total Net Assets | | | |
Australia | | | 1.6 | % |
Belgium | | | 0.1 | |
Brazil | | | 0.1 | |
Canada | | | 6.3 | |
Denmark | | | 0.5 | |
Finland | | | 0.2 | |
France | | | 1.5 | |
Germany | | | 2.8 | |
Hong Kong | | | 0.3 | |
Israel | | | 0.4 | |
Italy | | | 0.9 | |
Japan | | | 5.5 | |
Netherlands | | | 1.7 | |
Norway | | | 0.4 | |
Portugal | | | 0.1 | |
Singapore | | | 0.7 | |
Spain | | | 0.5 | |
Sweden | | | 0.9 | |
Switzerland | | | 2.4 | |
United Kingdom | | | 1.2 | |
United States | | | 70.6 | |
Cash and Other | | | 1.3 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
See Notes to Financial Statements.
128
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2021
The following is a summary of the inputs, summarized in three broad levels, used to value the Fund’s assets and liabilities carried at fair value as of October 31, 2021:
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| | | | | | | | | | | | | | | | |
| | | | | |
| Investment Type | | Level 1
Quoted Prices in
Active Markets for
Identical
Securities | | | Level 2
Significant Other
Observable Inputs
(including quoted prices
for similar securities,
interest rates,
prepayment speeds,
credit risk, etc.) | | | Level 3
Significant Unobservable
Inputs (including the
Fund’s own assumptions in
determining the fair
value of investments) | | | Total | |
Assets: | |
Common Stocks | | | | | | | | | | | | | | | | |
Communication Services | | $ | 7,439,578 | | | $ | 914,447 | | | $ | — | | | $ | 8,354,025 | |
Consumer Discretionary | | | 6,352,380 | | | | 2,596,052 | | | | — | | | | 8,948,432 | |
Consumer Staples | | | 9,019,253 | | | | 3,307,359 | | | | — | | | | 12,326,612 | |
Energy | | | 597,751 | | | | 498,041 | | | | — | | | | 1,095,792 | |
Financials | | | 15,562,744 | | | | 5,459,540 | | | | — | | | | 21,022,284 | |
Health Care | | | 13,740,964 | | | | 2,642,996 | | | | — | | | | 16,383,960 | |
Industrials | | | 15,232,259 | | | | 5,739,697 | | | | — | | | | 20,971,956 | |
Information Technology | | | 24,040,663 | | | | 2,472,149 | | | | — | | | | 26,512,812 | |
Materials | | | 1,991,563 | | | | 2,436,775 | | | | — | | | | 4,428,338 | |
Real Estate | | | 2,856,619 | | | | 884,778 | | | | — | | | | 3,741,397 | |
Utilities | | | 1,966,452 | | | | 2,069,177 | | | | — | | | | 4,035,629 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 936,834 | | | | — | | | | — | | | | 936,834 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 99,737,060 | | | $ | 29,021,011 | | | $ | — | | | $ | 128,758,071 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 99,737,060 | | | $ | 29,021,011 | | | $ | — | | | $ | 128,758,071 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2021.
Investment security transactions for the year ended October 31, 2021 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 109,474,478 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 53,095,368 | |
As of October 31, 2021, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments in securities and derivative instruments, if applicable, for Federal income tax purposes was as follows:
| | | | |
Aggregate gross unrealized appreciation | | $ | 18,701,814 | |
Aggregate gross unrealized depreciation | | | (1,538,976 | ) |
| | | | |
Net unrealized appreciation | | | 17,162,838 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 111,595,233 | |
| | | | |
See Notes to Financial Statements.
129
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
| | | | |
ASSETS | |
Investments in Securities, at value
(Cost $111,320,238) | | $ | 128,758,071 | |
Cash | | | 386,599 | |
Foreign cash (Cost $220,822) | | | 222,134 | |
Receivable for Fund shares sold | | | 1,125,823 | |
Dividends, interest and other receivables | | | 194,578 | |
Prepaid registration and filing fees | | | 26,066 | |
Other assets | | | 670 | |
| | | | |
Total assets | | | 130,713,941 | |
| | | | |
LIABILITIES | |
Payable for Fund shares redeemed | | | 160,431 | |
Investment advisory fees payable | | | 28,205 | |
Transfer agent fees payable | | | 22,776 | |
Administrative fees payable | | | 15,819 | |
Distribution fees payable – Class A | | | 1,020 | |
Distribution fees payable – Class R | | | 313 | |
Trustees’ fees payable | | | 9 | |
Accrued expenses | | | 68,535 | |
| | | | |
Total liabilities | | | 297,108 | |
| | | | |
NET ASSETS | | $ | 130,416,833 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 103,514,899 | |
Total distributable earnings (loss) | | | 26,901,934 | |
| | | | |
Net assets | | $ | 130,416,833 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $4,978,418 / 282,722 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.61 | |
Maximum sales charge (5.50% of offering price) | | | 1.02 | |
| | | | |
Maximum offering price per share | | $ | 18.63 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $124,319,722 / 7,040,274 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.66 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $936,305 / 53,314 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.56 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $182,388 / 10,332 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 17.65 | |
Maximum sales charge (2.50% of offering price) | | | 0.45 | |
| | | | |
Maximum offering price per share | | $ | 18.10 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2021
| | | | |
INVESTMENT INCOME | |
Dividends (net of $110,849 foreign withholding tax) | | $ | 1,724,341 | |
Income from non-cash dividends | | | 140,591 | |
| | | | |
Total income | | | 1,864,932 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 649,014 | |
Administrative fees | | | 139,075 | |
Transfer agent fees | | | 130,650 | |
Professional fees | | | 72,094 | |
Registration and filing fees | | | 43,864 | |
Printing and mailing expenses | | | 41,474 | |
Custodian fees | | | 34,352 | |
Distribution fees – Class A | | | 10,723 | |
Trustees’ fees | | | 4,313 | |
Distribution fees – Class R | | | 2,354 | |
Distribution fees – Class T** | | | 414 | |
Miscellaneous | | | 25,336 | |
| | | | |
Gross expenses | | | 1,153,663 | |
Less: Waiver from investment adviser | | | (350,864 | ) |
Waiver from distributor | | | (414 | ) |
| | | | |
Net expenses | | | 802,385 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 1,062,547 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | 8,635,746 | |
Foreign currency transactions | | | (27,305 | ) |
| | | | |
Net realized gain (loss) | | | 8,608,441 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | | | | |
Investments in securities | | | 13,572,862 | |
Foreign currency translations | | | (966 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 13,571,896 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 22,180,337 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 23,242,884 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
130
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2021 | | | 2020 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 1,062,547 | | | $ | 442,219 | |
Net realized gain (loss) | | | 8,608,441 | | | | 254,091 | |
Net change in unrealized appreciation (depreciation) | | | 13,571,896 | | | | (236,824 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 23,242,884 | | | | 459,486 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (40,097 | ) | | | (44,168 | ) |
Class I | | | (773,942 | ) | | | (572,775 | ) |
Class R | | | (2,846 | ) | | | (2,785 | ) |
Class T** | | | (2,027 | ) | | | (3,196 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (818,912 | ) | | | (622,924 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 72,644 and 145,209 shares, respectively ] | | | 1,161,775 | | | | 1,889,452 | |
Capital shares issued in reinvestment of dividends [ 2,635 and 3,024 shares, respectively ] | | | 38,322 | | | | 40,643 | |
Capital shares repurchased [ (38,308) and (53,461) shares, respectively ] | | | (619,414 | ) | | | (718,635 | ) |
| | | | | | | | |
Total Class A transactions | | | 580,683 | | | | 1,211,460 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 5,685,167 and 2,083,058 shares, respectively ] | | | 91,584,341 | | | | 27,872,805 | |
Capital shares issued in reinvestment of dividends [ 40,091 and 20,252 shares, respectively ] | | | 583,327 | | | | 272,391 | |
Capital shares repurchased [ (2,182,924) and (397,169) shares, respectively ] | | | (35,774,883 | ) | | | (5,112,229 | ) |
| | | | | | | | |
Total Class I transactions | | | 56,392,785 | | | | 23,032,967 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 50,673 and 6,415 shares, respectively ] | | | 835,353 | | | | 86,997 | |
Capital shares issued in reinvestment of dividends [ 100 and 10 shares, respectively ] | | | 1,448 | | | | 132 | |
Capital shares repurchased [ (15,174) and (23) shares, respectively ] | | | (246,722 | ) | | | (302 | ) |
| | | | | | | | |
Total Class R transactions | | | 590,079 | | | | 86,827 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 57,563,547 | | | | 24,331,254 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 79,987,519 | | | | 24,167,816 | |
NET ASSETS: | |
Beginning of year | | | 50,429,314 | | | | 26,261,498 | |
| | | | | | | | |
End of year | | $ | 130,416,833 | | | $ | 50,429,314 | |
| | | | | | | | |
** Class T shares currently are not offered for sale. | | | | | | | | |
See Notes to Financial Statements.
131
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 13.34 | | | $ | 13.34 | | | $ | 12.09 | | | $ | 12.23 | | | $ | 10.25 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.14 | | | | 0.14 | | | | 0.15 | | | | 0.15 | | | | 0.13 | |
Net realized and unrealized gain (loss) | | | 4.29 | | | | 0.14 | | | | 1.67 | | | | 0.06 | | | | 1.96 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 4.43 | | | | 0.28 | | | | 1.82 | | | | 0.21 | | | | 2.09 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.08 | ) | | | (0.13 | ) | | | (0.14 | ) | | | (0.15 | ) | | | (0.11 | ) |
Distributions from net realized gains | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.16 | ) | | | (0.28 | ) | | | (0.57 | ) | | | (0.35 | ) | | | (0.11 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.61 | | | $ | 13.34 | | | $ | 13.34 | | | $ | 12.09 | | | $ | 12.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 33.49 | % | | | 2.07 | % | | | 15.81 | % | | | 1.64 | % | | | 20.58 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 4,978 | | | $ | 3,278 | | | $ | 2,014 | | | $ | 1,123 | | | $ | 685 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.10 | % | | | 1.14 | % | | | 1.15 | % | | | 1.15 | % | | | 1.20 | % |
Before waivers and reimbursements (f) | | | 1.48 | % | | | 1.83 | % | | | 2.26 | % | | | 2.42 | % | | | 2.77 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.89 | % | | | 1.04 | % | | | 1.19 | % | | | 1.21 | % | | | 1.17 | % |
Before waivers and reimbursements (f) | | | 0.51 | % | | | 0.35 | % | | | 0.08 | % | | | (0.06 | )% | | | (0.41 | )% |
Portfolio turnover rate^ | | | 59 | % | | | 42 | % | | | 31 | % | | | 49 | % | | | 41 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | | | $ | 12.25 | | | $ | 10.27 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.19 | | | | 0.17 | | | | 0.19 | | | | 0.18 | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | 4.29 | | | | 0.14 | | | | 1.67 | | | | 0.06 | | | | 1.95 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 4.48 | | | | 0.31 | | | | 1.86 | | | | 0.24 | | | | 2.12 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.11 | ) | | | (0.16 | ) | | | (0.17 | ) | | | (0.18 | ) | | | (0.14 | ) |
Distributions from net realized gains | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.19 | ) | | | (0.31 | ) | | | (0.60 | ) | | | (0.38 | ) | | | (0.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.66 | | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | | | $ | 12.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 33.87 | % | | | 2.30 | % | | | 16.16 | % | | | 1.86 | % | | | 20.85 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 124,320 | | | $ | 46,777 | | | $ | 23,959 | | | $ | 16,340 | | | $ | 14,158 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.85 | % | | | 0.89 | % | | | 0.90 | % | | | 0.90 | % | | | 0.96 | % |
Before waivers and reimbursements (f) | | | 1.23 | % | | | 1.58 | % | | | 2.02 | % | | | 2.16 | % | | | 2.49 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.16 | % | | | 1.27 | % | | | 1.49 | % | | | 1.47 | % | | | 1.48 | % |
Before waivers and reimbursements (f) | | | 0.78 | % | | | 0.58 | % | | | 0.37 | % | | | 0.21 | % | | | (0.05 | )% |
Portfolio turnover rate^ | | | 59 | % | | | 42 | % | | | 31 | % | | | 49 | % | | | 41 | % |
See Notes to Financial Statements.
132
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 13.30 | | | $ | 13.31 | | | $ | 12.06 | | | $ | 12.20 | | | $ | 10.23 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.10 | | | | 0.10 | | | | 0.12 | | | | 0.12 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 4.29 | | | | 0.14 | | | | 1.67 | | | | 0.06 | | | | 1.94 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 4.39 | | | | 0.24 | | | | 1.79 | | | | 0.18 | | | | 2.05 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.05 | ) | | | (0.10 | ) | | | (0.11 | ) | | | (0.12 | ) | | | (0.08 | ) |
Distributions from net realized gains | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.13 | ) | | | (0.25 | ) | | | (0.54 | ) | | | (0.32 | ) | | | (0.08 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.56 | | | $ | 13.30 | | | $ | 13.31 | | | $ | 12.06 | | | $ | 12.20 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 33.21 | % | | | 1.75 | % | | | 15.55 | % | | | 1.39 | % | | | 20.21 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 936 | | | $ | 236 | | | $ | 151 | | | $ | 136 | | | $ | 137 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.35 | % | | | 1.39 | % | | | 1.40 | % | | | 1.40 | % | | | 1.46 | % |
Before waivers and reimbursements (f) | | | 1.73 | % | | | 2.09 | % | | | 2.52 | % | | | 2.66 | % | | | 2.98 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.64 | % | | | 0.77 | % | | | 1.00 | % | | | 0.98 | % | | | 0.98 | % |
Before waivers and reimbursements (f) | | | 0.26 | % | | | 0.07 | % | | | (0.12 | )% | | | (0.29 | )% | | | (0.54 | )% |
Portfolio turnover rate^ | | | 59 | % | | | 42 | % | | | 31 | % | | | 49 | % | | | 41 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
Net asset value, beginning of year | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | | | $ | 12.25 | | | $ | 10.27 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.18 | | | | 0.17 | | | | 0.19 | | | | 0.18 | | | | 0.17 | |
Net realized and unrealized gain (loss) | | | 4.29 | | | | 0.14 | | | | 1.67 | | | | 0.06 | | | | 1.95 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 4.47 | | | | 0.31 | | | | 1.86 | | | | 0.24 | | | | 2.12 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.11 | ) | | | (0.16 | ) | | | (0.17 | ) | | | (0.18 | ) | | | (0.14 | ) |
Distributions from net realized gains | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) | | | (0.20 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.19 | ) | | | (0.31 | ) | | | (0.60 | ) | | | (0.38 | ) | | | (0.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 17.65 | | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | | | $ | 12.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 33.79 | % | | | 2.30 | % | | | 16.16 | % | | | 1.86 | % | | | 20.85 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 182 | | | $ | 138 | | | $ | 138 | | | $ | 125 | | | $ | 127 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.85 | % | | | 0.90 | % | | | 0.90 | % | | | 0.90 | % | | | 0.96 | % |
Before waivers and reimbursements (f) | | | 1.48 | % | | | 1.84 | % | | | 2.27 | % | | | 2.41 | % | | | 2.96 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.14 | % | | | 1.28 | % | | | 1.50 | % | | | 1.47 | % | | | 1.48 | % |
Before waivers and reimbursements (f) | | | 0.50 | % | | | 0.33 | % | | | 0.13 | % | | | (0.04 | )% | | | (0.52 | )% |
Portfolio turnover rate^ | | | 59 | % | | | 42 | % | | | 31 | % | | | 49 | % | | | 41 | % |
| ** | Class T shares currently are not offered for sale. Class T shares were formerly known as Class C Shares. |
| ^ | Portfolio turnover rate excludes derivatives, if any. |
| (e) | Net investment income (loss) per share is based on average shares outstanding. |
| (f) | Expenses do not include the expenses of the underlying funds (“indirect expenses”), if applicable. |
See Notes to Financial Statements.
133
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
| Note 1 | Organization and Significant Accounting Policies |
1290 Funds (the “Trust”) was organized as a Delaware statutory trust on March 1, 2013 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open- end management investment company with fifteen diversified funds in operation (each, a “Fund” and collectively, the “Funds”). The investment adviser to each Fund is Equitable Investment Management Group, LLC (“EIM” or the “Adviser”), a wholly-owned subsidiary of Equitable Financial Life Insurance Company (“Equitable Financial”).
Each of the investment sub-advisers (each a “Sub-Adviser”) independently chooses and maintains a portfolio of securities for their respective Fund.
The 1290 Retirement 2020 Fund, 1290 Retirement 2025 Fund, 1290 Retirement 2030 Fund, 1290 Retirement 2035 Fund, 1290 Retirement 2040 Fund, 1290 Retirement 2045 Fund, 1290 Retirement 2050 Fund, 1290 Retirement 2055 Fund and the 1290 Retirement 2060 Fund (each, a “1290 Retirement Fund” and together, the “1290 Retirement Funds”) as well as 1290 Multi- Alternative Strategies Fund are types of mutual funds often described as “fund-of-funds.” These Funds pursue their investment objectives by investing exclusively in other unaffiliated investment companies or exchange-traded funds (“ETFs”). The underlying funds’ financial statements are included in each underlying fund’s annual report, which is filed with the SEC on Form N-CSR and are publicly available through the SEC’s EDGAR database (https://www.sec.gov/edgar/searchedgar/ companysearch.html).
The Trust has authorized four classes of shares, Class A, Class I, Class R and Class T on behalf of each of the fifteen Funds. Class T shares are currently not offered for sale. Additionally, 1290 Retirement Funds currently only offer Class I shares for sale.
The Class A, Class R and Class T shares are subject to distribution fees imposed under distribution plans (“Distribution Plans”) adopted pursuant to Rule 12b-1 under the 1940 Act. Under the Trust’s multiple-class distribution system, all four classes of shares have identical voting, dividend, liquidation and other rights, other than the payment of distribution fees under the applicable Distribution Plan.
Additionally, Class A shares are sold at a maximum front-end sales charge of up to 4.50% for 1290 Diversified Bond Fund and 1290 High Yield Bond Fund, and up to 5.50% for 1290 DoubleLine Dynamic Allocation Fund, 1290 GAMCO Small/ Mid Cap Value Fund, 1290 Multi-Alternative Strategies Fund, 1290 SmartBeta Equity Fund and each 1290 Retirement Fund. Class A shares sold without a front-end sales charge are subject to a contingent deferred sales charge (“CDSC”) of 1% of the lesser of the original net asset value (“NAV”) of the redeemed shares at the time of purchase or the aggregate NAV of the redeemed shares at the time of redemption, if redeemed within 12 months of purchase. Class T shares are subject to a maximum front-end sales charge of up to 2.50%.
The investment objectives of each Fund are as follows:
1290 Diversified Bond Fund (sub-advised by Brandywine Global Investment Management, LLC) — Seeks to maximize total return consisting of income and capital appreciation.
1290 DoubleLine Dynamic Allocation Fund (sub-advised by DoubleLine Capital LP) — Seeks to achieve total return from long-term capital appreciation and income.
1290 GAMCO Small/Mid Cap Value Fund (sub-advised by GAMCO Asset Management Inc.) — Seeks to maximize capital appreciation.
1290 High Yield Bond Fund (sub-advised by AXA Investment Managers, Inc.) — Seeks to maximize current income.
1290 Multi-Alternative Strategies Fund — Seeks long-term growth of capital.
134
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2021
1290 Retirement 2020 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2025 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2030 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2035 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2040 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2045 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2050 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2055 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 Retirement 2060 Fund — Seeks the highest total return over time consistent with its asset mix while managing portfolio volatility. Total return includes capital growth and income.
1290 SmartBeta Equity Fund (sub-advised by AXA Rosenberg Investment Management LLC) — Seeks to achieve long-term capital appreciation.
The following is a summary of the significant accounting policies of the Trust:
The preparation of financial statements in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The Funds are investment companies and, accordingly, follow the Investment Company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 — Investment Companies, which is part of U.S. GAAP.
Valuation:
Equity securities (including securities issued by ETFs) listed on national securities exchanges are generally valued at the last sale price or official closing price on the date of valuation or, if there is no sale or official closing price, at the latest available bid price. Securities listed on the NASDAQ stock market will be valued using the NASDAQ Official Closing Price (“NOCP”). Generally, the NOCP will be the last sale price unless the reported trade for the security is outside the range of the bid/ask price. In such cases, the NOCP will be normalized to the nearer of the bid or ask price. Other unlisted stocks are generally valued at their last sale price or official closing price, or if there is no such price, at a bid price estimated by a broker.
Corporate and municipal bonds and notes are generally valued on the basis of prices provided by a pricing service. The pricing services may utilize many inputs that are observable in making evaluations which may include, but are not limited to, trading activity for similar securities, issuer details, yields, default rates, credit spreads, quoted prices and any developments related to the specific securities. However, when such prices are not available, such bonds and notes are generally valued at a bid price estimated by a broker.
Mortgage-backed and asset-backed securities are generally valued at evaluated prices obtained from a pricing service where available, or at a bid price obtained from one or more of the major dealers in such securities. The pricing service may utilize data such as issuer type, coupon,
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October 31, 2021
cash flows, collateral performance, mortgage prepayment projection tables and Adjustable Rate Mortgage evaluations that incorporate index data, periodic and life caps, the next coupon reset date and the convertibility of the bond in making evaluations. If a quoted price is unavailable, an equivalent yield or yield spread quotes may be obtained from a broker and converted to a price.
Options that are traded on an exchange are generally valued at their last sale price or official closing price on the date of valuation. Options not traded on an exchange or actively traded are valued according to fair value methods. The market value of a put or call option will usually reflect, among other factors, the market price of the underlying security.
U.S. Treasury securities and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, are generally valued at prices obtained from a bond pricing service where available. The pricing service may utilize data received from active market makers and broker- dealers, yield curves and the spread over comparable U.S. Treasury issues in making evaluations.
Foreign securities, including foreign government securities, not traded directly in the U.S., or traded in American Depositary Receipts (“ADR”) or similar form, are generally valued at representative quoted prices from the primary exchange in the currency of the country of origin. Foreign currency is converted into U.S. dollar equivalent at current exchange rates.
Investments in shares of open-end investment companies (other than ETFs) held by a Fund are generally valued at the NAV of the shares of such funds as described in the underlying funds’ prospectuses.
Futures contracts are generally valued at their last settlement price or, if there is no sale, at the latest available bid price.
Forward foreign currency contracts are generally valued by interpolating between the forward and spot currency rates as quoted by a pricing service as of a designated hour on the valuation date. The pricing service may utilize data such as actual trading information and foreign currency rates gathered from leading market makers and foreign currency trading centers throughout the world in making evaluations. Forward foreign currency contracts may be settled with the counterparty in U.S. dollars without the delivery of foreign currency.
Swap agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. Swaps are marked-to-market daily based upon values from third party vendors, which may include a clearing counterparty, registered exchange, or quotations from market makers to the extent available. In the event that market quotes are not readily available and the swap cannot be valued pursuant to one of the valuation methods, the value of the swap will be determined in good faith by the Trust’s Valuation Committee (as discussed below).
If market quotations are not readily available for a security or other financial instrument, such security and instrument shall be referred to the Trust’s Valuation Committee (“Committee”), which will value the asset in good faith pursuant to procedures (“Pricing Procedures”) adopted by the Board of Trustees of the Trust (the “Board”).
The Board is responsible for ensuring that appropriate valuation methods are used to price securities for the Funds. The Board has delegated the responsibility of calculating the NAVs of each of the Funds and classes pursuant to these Pricing Procedures to the Trust’s administrator, Equitable Investment Management, LLC (the “Administrator”). The Administrator has entered into a sub- administration agreement with JPMorgan Chase Bank, N.A. (the “Sub-Administrator”), which assists in performing certain of the duties described herein. The Committee, established by the Board, determines the value of the Trust’s securities and assets for which market quotations are not readily available or for which valuation cannot otherwise be provided in accordance with procedures adopted by the Board. The Committee is comprised of senior employees from EIM.
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October 31, 2021
Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed.
Various inputs are used in determining the value of the Trust’s assets or liabilities carried at fair value. These inputs are summarized in three broad levels below:
| | |
• Level 1 - | | quoted prices in active markets for identical assets |
• Level 2 - | | other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.) |
• Level 3 - | | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
A summary of inputs used to value each Fund’s assets and liabilities carried at fair value as of October 31, 2021, is included in the Portfolio of Investments for each Fund. Changes in valuation techniques may result in transfers in or out of an investment’s assigned level.
Transfers into and transfers out of Level 3 are included in the Level 3 reconciliation following the Portfolio of Investments for each Fund, if any. Transfers between levels may be due to a decline, or an increase, in market activity (e.g., frequency of trades), which may result in a lack of, or increase in, available observable market inputs to determine price.
The inputs or methodology used to value securities are not necessarily an indication of the risk associated with investing in those securities. An investment’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement.
The Committee has the ability to meet and review reports based on the valuation techniques used to value Level 3 securities. As part of a review, the Committee would consider obtaining updates from its pricing vendors and Sub-Advisers for fair valued securities. For example, with respect to model driven prices, the Committee may receive reports regarding a review and recalculation of pricing models and related discounts. For those securities which are valued based on broker quotes, the Committee may evaluate variances between existing broker quotes and any alternative broker quotes provided by a Sub-Adviser or other pricing source.
To substantiate unobservable inputs used in a fair valuation, the Secretary of the Committee may perform an independent verification as well as additional research for fair value notifications received from the pricing agents. Among other factors, particular areas of focus may include: description of security, historical pricing, intra-day price movement, last trade information, corporate actions, related securities, any available company news and announcements, any available trade data or other information. The Committee also notes the materiality of holdings and price changes on a Fund’s NAV.
The Committee reviews and considers changes in value for all fair valued securities that have occurred since the last review.
Pursuant to procedures approved by the Board, events or circumstances affecting the values of Fund securities that occur between the closing of their principal markets and the time the NAV is determined may be reflected in the Trust’s calculation of a NAV for each applicable Fund when the Committee deems that the particular event or circumstance would materially affect such Fund’s NAV.
Security Transactions and Investment Income:
Securities transactions are recorded on the trade date net of brokerage fees, commissions, and transfer fees. Dividend income (net of withholding taxes) and distributions to shareholders are recorded on the ex-dividend date, except that certain dividends from foreign securities, if any, are recognized as soon as the Fund is informed of the ex-dividend date. Non-cash dividends, if any, are
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October 31, 2021
recorded at the fair market value of the asset received. Interest income (including amortization of premium and accretion of discount on long-term securities using the effective yield method) and interest expense are accrued daily. The Trust records paydown gains and losses realized on prepayments received on mortgage-backed securities as an adjustment to interest income.
The Funds record distributions received in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Funds adjust the estimated amounts of components of distributions (and consequently its net investment income) as necessary once the issuers provide information about the actual composition of the distributions.
Realized gains and losses on the sale of investments are computed on the basis of the specific identified cost of the investments sold. Unrealized appreciation (depreciation) on investments and foreign currency denominated assets and liabilities, if any, is presented net of deferred taxes on unrealized appreciation in the Statements of Assets and Liabilities.
Allocation of Expenses and Income:
Expenses attributable to a single Fund or class are charged to that Fund or class. Expenses of the Trust not attributable to a single Fund or class are charged to each Fund or class in proportion to the average net assets of each Fund or other appropriate allocation methods.
All income earned and expenses incurred by each Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the daily net assets of such class, except for distribution fees which are charged on a class-specific basis.
Foreign Currency Valuation:
The books and records of the Trust are kept in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at current exchange rates at the following dates:
(i) Market value of investment securities, other assets and liabilities — at the valuation date.
(ii) Purchases and sales of investment securities, income and expenses — at the date of such transactions.
The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Reported realized foreign currency gains and losses arise from the disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on each Fund’s books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. These reported realized foreign currency gains and losses are included in Net realized gain (loss) on foreign currency transactions on the Statements of Operations. Unrealized foreign currency gains and losses arise from changes (due to changes in exchange rates) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end and are included in Change in net unrealized appreciation/depreciation on foreign currency translations on the Statements of Operations.
Taxes:
Each Fund intends to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies (“RICs”) and to distribute substantially all of its net investment income and net realized capital gains to shareholders of each Fund. Therefore, no Federal, State and local income tax provisions are required.
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October 31, 2021
The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, the Funds’ conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statements of Operations. During the year ended October 31, 2021, the Funds did not incur any interest or penalties. Each of the tax years in the four year period ended October 31, 2021 remains subject to examination by the Internal Revenue Service, state and local taxing authorities.
Dividends from net investment income, if any, are declared and distributed at least annually for all Funds (1290 Diversified Bond Fund and 1290 High Yield Bond Fund declare and distribute monthly). Dividends to shareholders of a Fund to which such gains are attributable from net realized short-term and long-term capital gains are declared and distributed at least annually. All distributions are calculated on a tax basis and, as such, the amounts may differ from financial statement investment income and realized gains. Short-term capital gains and foreign currency gains are treated as capital gains for U.S. GAAP purposes but are considered ordinary income for tax purposes. The tax character of distributions for the years ended October 31, 2021 and October 31, 2020 and the tax composition of undistributed ordinary income and undistributed long term gains at October 31, 2021 are presented in the following table. For the Funds, the cumulative timing differences related to the tax composition of undistributed ordinary income and long term gains are primarily due to capital loss carryforwards (1290 High Yield Bond), partnership basis adjustments (1290 Multi-Alternative Strategies), and wash sale loss deferrals (1290 DoubleLine Dynamic Allocation, 1290 GAMCO Small/Mid Cap Value, 1290 Retirement 2025 and 1290 Retirement 2050).
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, 2021 | | | As of October 31, 2021 | | | Year Ended October 31, 2020 | |
Funds: | | Distributed
Ordinary
Income | | | Distributed
Long Term
Gains | | | Accumulated
Undistributed
Ordinary
Income | | | Accumulated
Undistributed
Long Term
Gains | | | Distributed
Ordinary
Income | | | Distributed
Long Term
Gains | |
1290 Diversified Bond | | $ | 22,199,718 | | | | 1,259,904 | | | | — | | | | — | | | | 3,422,102 | | | | 1,135,916 | |
1290 DoubleLine Dynamic Allocation | | | 3,435,284 | | | | 1,965,664 | | | | 4,997,740 | | | | 1,902,826 | | | | 2,459,180 | | | | 932,015 | |
1290 GAMCO Small/Mid Cap Value | | | 547,954 | | | | — | | | | 2,015,553 | | | | 6,538,607 | | | | 1,124,418 | | | | 682,834 | |
1290 High Yield Bond | | | 2,721,245 | | | | — | | | | — | | | | — | | | | 2,116,287 | | | | — | |
1290 Multi-Alternative Strategies | | | 116,723 | | | | — | | | | 285,773 | | | | 1,243,789 | | | | 394,171 | | | | — | |
1290 Retirement 2020 | | | 218,431 | | | | 280,715 | | | | 108,514 | | | | 462,884 | | | | 230,001 | | | | 147,437 | |
1290 Retirement 2025 | | | 361,068 | | | | 407,870 | | | | 184,459 | | | | 860,251 | | | | 376,997 | | | | 347,700 | |
1290 Retirement 2030 | | | 112,968 | | | | 291,646 | | | | 64,798 | | | | 128,203 | | | | 117,233 | | | | 18,945 | |
1290 Retirement 2035 | | | 175,930 | | | | 314,610 | | | | 95,648 | | | | — | | | | 160,866 | | | | 64,748 | |
1290 Retirement 2040 | | | 78,809 | | | | 87,747 | | | | 36,366 | | | | 57,116 | | | | 73,000 | | | | 5,113 | |
1290 Retirement 2045 | | | 123,390 | | | | 177,383 | | | | 58,996 | | | | 376,167 | | | | 105,828 | | | | 853 | |
1290 Retirement 2050 | | | 83,748 | | | | 50,542 | | | | 37,675 | | | | 67,152 | | | | 71,246 | | | | 4,801 | |
1290 Retirement 2055 | | | 71,655 | | | | 43,156 | | | | 31,862 | | | | 24,109 | | | | 65,440 | | | | 3,067 | |
1290 Retirement 2060 | | | 72,993 | | | | 53,812 | | | | 28,933 | | | | 56,240 | | | | 64,568 | | | | 4,754 | |
1290 SmartBeta Equity | | | 466,820 | | | | 352,092 | | | | 3,681,999 | | | | 6,056,713 | | | | 324,944 | | | | 297,980 | |
Ordinary losses incurred after December 31st and within the taxable year are deemed to arise on the first business day of a Fund’s next taxable year. For the year ended October 31, 2020, the Fund elected to defer late year losses, in the amount listed below:
| | | | |
Fund: | | Deferred Late Year Losses | |
1290 Multi-Alternative Strategies | | $ | 37,322 | |
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October 31, 2021
The following Fund had a Return of Capital during the year ended October 31, 2021:
| | | | |
Fund: | | Return of Capital | |
1290 Diversified Bond | | $ | 846,864 | |
1290 High Yield Bond | | | 20,164 | |
Permanent book and tax differences relating to shareholder distributions resulted into undistributed (overdistributed) net investment income (loss), accumulated net realized gain (loss) and paid-in-capital at October 31, 2021 as follows:
| | | | | | | | | | | | |
Funds: | | Undistributed
Net Investment
Income (Loss) (a) | | | Accumulated
Net Realized
Gain (Loss) (a) | | | Paid In
Capital | |
1290 Diversified Bond | | $ | 5,225,659 | | | $ | (5,225,659 | ) | | $ | — | |
1290 DoubleLine Dynamic Allocation | | | 70,334 | | | | (70,334 | ) | | | — | |
1290 GAMCO Small/Mid Cap Value | | | (30,742 | ) | | | 35,084 | | | | (4,342 | ) |
1290 High Yield Bond | | | 91,528 | | | | (91,528 | ) | | | — | |
1290 Multi-Alternative Strategies | | | (117,898 | ) | | | 117,898 | | | | — | |
1290 Retirement 2020 | | | (261 | ) | | | 261 | | | | — | |
1290 Retirement 2025 | | | (349 | ) | | | 349 | | | | — | |
1290 Retirement 2030 | | | — | | | | — | | | | — | |
1290 Retirement 2035 | | | (1,090 | ) | | | 1,090 | | | | — | |
1290 Retirement 2040 | | | (525 | ) | | | 525 | | | | — | |
1290 Retirement 2045 | | | — | | | | — | | | | — | |
1290 Retirement 2050 | | | (528 | ) | | | 528 | | | | — | |
1290 Retirement 2055 | | | (506 | ) | | | 506 | | | | — | |
1290 Retirement 2060 | | | — | | | | — | | | | — | |
1290 SmartBeta Equity | | | 33,437 | | | | (33,437 | ) | | | — | |
| (a) | These components of net assets are included in Total Distributable Earnings (Loss) in the Statement of Assets and Liabilities. |
The significant permanent book and tax differences related to the adjustments above are partnership basis adjustment (1290 Multi-Alternative Strategies).
Net capital losses recognized by the Funds may get carried forward indefinitely, and retain their character as short-term and/or long-term losses. The following Funds utilized net capital loss carry forwards during the year and/or have capital losses incurred that will be carried forward:
| | | | | | | | | | | | | | | | |
| | | Utilized | | | Losses Carried Forward | |
Funds: | | Short Term | | | Long Term | | | Short Term | | | Long Term | |
1290 GAMCO Small/Mid Cap Value | | $ | 285,840 | | | $ | 3,645,837 | | | $ | — | | | $ | — | |
1290 High Yield Bond | | | 270,397 | | | | 63,558 | | | | 490,878 | | | | 2,463,890 | |
1290 Multi-Alternative Strategies | | | 156,700 | | | | 276,770 | | | | — | | | | — | |
1290 Retirement 2035 | | | — | | | | — | | | | 7,561 | | | | — | |
Accounting for Derivative Instruments:
Following is a description of how and why the Funds use derivative instruments, the type of derivatives utilized by the Funds during the reporting period, as well as the primary underlying risk exposures related to each instrument type. Derivatives accounted for as hedging instruments must be disclosed separately from those that do not qualify for hedge accounting. Even though the Funds may use derivatives in an attempt to achieve an economic hedge, the Fund’s derivatives are not accounted for as hedging instruments because the Funds account for their derivatives at fair value
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October 31, 2021
and record any changes in fair value in current period earnings in the Statements of Operations. All open derivative positions at period end are reflected on each respective Fund’s Portfolio of Investments. The volume of derivative activity, based on month-end notional amounts during the period is also noted in each respective Fund’s Portfolio of Investments. Portfolio securities are reserved and/or pledged with the custodian as collateral for current or potential derivative holdings as necessary throughout the year.
Options:
Certain Funds may write (sell) covered options as a hedge to provide protection against adverse movements in the price of securities in the Fund or to enhance investment performance. Certain Funds purchase and sell exchange traded options on foreign currencies. When a Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted on a daily basis to the current market price of the option written. Premiums received from writing options that expire unexercised are recognized as gains on the expiration date. Premiums received from writing options that are exercised or are cancelled in closing purchase transactions are offset against the cost of any securities purchased or added to the proceeds or netted against the amount paid on the transaction to determine the realized gain or loss. In writing options, a Fund must assume that the option may be exercised at any time prior to the expiration of its obligation as a writer, and that in such circumstances the net proceeds of the sale (or cost of) purchase of the underlying securities and currencies pursuant to the call or put option may be substantially below or above the prevailing market price. A Fund also has the additional risk of not being able to enter into a closing purchase transaction if a liquid secondary market does not exist and bears the risk of unfavorable changes in the price of the financial instruments underlying the options.
Certain Funds may purchase put options on securities to increase the Fund’s total investment return or to protect its holdings against a substantial decline in market value. The purchase of put options on securities will enable a Fund to preserve, at least partially, unrealized gains in an appreciated security in its Fund without actually selling the security. In addition, the Funds will continue to receive interest or dividend income on the security. The Funds may also purchase call options on securities to protect against substantial increases in prices of securities that Funds intend to purchase pending their ability to invest in an orderly manner in those securities. The Funds may sell put or call options they have previously purchased, which could result in a net gain or loss depending on whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put or call option which was bought.
Futures Contracts, Options on Futures Contracts and Foreign Currency Contracts:
The futures contracts used by the Funds are agreements to buy or sell a financial instrument for a set price in the future. Options on futures contracts used by the Funds are rights to buy, or sell a futures contract for a set price in the future. Certain Funds buy or sell futures contracts for the purpose of protecting their Fund securities against future changes in interest rates and indices which might adversely affect the value of the Funds’ securities or the price of securities that they intend to purchase at a later date. Initial margin deposits are made upon entering into futures contracts and can be in cash, certain money market instruments, treasury securities or other liquid, high grade debt securities. During the period the futures contracts are open, changes in the market price of the contracts are recognized as unrealized gains or losses by “marking-to-market” at the end of each trading day. Variation margin payments on futures contracts are received or made, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from or cost of the closing transactions and the Fund’s basis in the contract. The Funds enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, a Fund’s credit risk is limited to failure of the exchange or board of trade.
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October 31, 2021
The Funds may be exposed to foreign currency risks associated with Fund investments. Certain Funds may purchase foreign currency on a spot (or cash) basis. In addition, certain Funds enter into contracts to purchase or sell foreign currencies at a future date (“forward contracts”). A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Daily fluctuations in the value of such contracts are recognized as unrealized appreciation or depreciation by “marking-to-market”. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions in the Statements of Operations of the Funds. The Funds may engage in these forward contracts to protect against uncertainty in the level of future rates in connection with the purchase and sale of Fund securities (“transaction hedging”) and to protect the value of specific Fund positions (“position hedging”). The Funds also buy forward foreign currency contracts to gain exposure to currencies.
Swap Agreements:
Changes in market value, if any, are reflected as a component of net changes in unrealized appreciation (depreciation) on the Statements of Operations. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statements of Assets and Liabilities. Over-the-counter (“OTC”) swap payments received or made at the beginning of the measurement period are reflected as such on the Statements of Assets and Liabilities and represent premiums paid or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront premiums are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statement of Operations. Net periodic payments received or paid by a Fund are included as part of realized gains or losses on the Statement of Operations.
Total return swap agreements involve commitments where cash flows are exchanged based on the price of an underlying reference and based on a fixed or variable rate. Total return swap agreements may involve commitments to pay interest in exchange for a market-linked return. One counterparty pays out the total return of a specific reference asset, which may include an underlying equity, index, or bond, and in return receives a fixed or variable rate. At the maturity date, a net cash flow is exchanged where the total return is equivalent to the return of the underlying reference less a financing rate, if any. As a receiver, the Fund would receive payments based on any positive total return and would owe payments in the event of a negative total return. As the payer, the Fund would owe payments on any net positive total return, and would receive payment in the event of a negative total return. In connection with total return swap agreements, securities or cash may be identified as collateral or margin in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
Interest rate swaps involve the exchange between two parties of payments calculated by reference to specified interest rates (e.g., an exchange of floating rate payments for fixed rate payments). The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. Caps and floors may be less liquid than swaps. In addition, the value of interest rate transactions will fluctuate based on changes in interest rates.
Credit default swap agreements involve greater risks than if a Fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap
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October 31, 2021
agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A Fund’s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the Fund). In connection with credit default swaps in which a Fund is the buyer, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into certain offsetting positions, with a value at least equal to the Fund’s exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a marked-to-market basis. In connection with credit default swaps in which a Fund is the seller, the Fund will segregate or “earmark” cash or assets determined to be liquid, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or “earmarking” is intended to ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and limit any potential leveraging of the Fund. Such segregation or “earmarking” will not limit the Fund’s exposure to loss. To the extent that credit default swaps are entered into for hedging purposes or are covered as described above, the Adviser believes such obligations do not constitute “senior securities” under the 1940 Act and, accordingly, will not treat them as being subject to the Fund’s senior security and borrowing restrictions.
An option on a swap agreement, also called a “swaption,” is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium.” A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return of a specified asset, reference rate, or index. A purchaser of a swaption risks losing only the amount of the premium they have paid should they decide to let the option expire, whereas the seller of a swaption is subject to the risk that they will become obligated if the option is exercised. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.
Forward Settling Transactions:
Certain Funds make contracts to purchase or sell securities for a fixed price at a future date beyond customary settlement time (“forward settling transactions”). Funds may designate the segregation, either on their records or with the Trust’s custodian, of cash or other liquid securities in an amount sufficient to meet the purchase price, or may enter into offsetting contracts for the forward sale of other securities they own. These commitments are reported at market value in the financial statements. Forward settling transactions may be considered securities in themselves and involve a risk of loss if the value of the security to be purchased declines or if the value of the security to be sold increases prior to the settlement date, which is a risk in addition to the risk of decline in the value of the Funds’ other assets. Where such purchases or sales are made through dealers, a Fund relies on the dealer to consummate the sale. The dealer’s failure to do so may result in the loss to a Fund of an advantageous yield or price. Market risk exists on these commitments to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends.
Certain Funds may enter into to-be-announced purchase or sale commitments (“TBA transactions”), pursuant to which it agrees to purchase or sell, respectively, mortgage backed securities for a fixed unit price, with payment and delivery at a scheduled future date beyond the customary settlement period for such securities. With TBA transactions, the particular securities to be received or delivered by a Fund are not identified at the trade date; however, the securities must meet specified terms, including issuer, rate, and mortgage term, and be within industry accepted “good delivery” standards. Funds may enter into TBA transactions with the intention of taking possession of or relinquishing the underlying securities, may elect to extend the settlement by
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“rolling” the transaction, and/or may use TBA transactions to gain or reduce interim exposure to underlying securities. Until settlement, a Fund maintains liquid assets sufficient to settle its commitment to purchase a TBA or, in the case of a sale commitment, a Fund maintains an entitlement to the security to be sold.
Master netting arrangements and collateral:
International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) govern bilateral OTC derivative transactions entered into by the Sub-Advisers on behalf of the Funds with select counterparties. ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral posting and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. In limited circumstances, the ISDA Master Agreement may contain additional provisions that add counterparty protection beyond coverage of existing daily exposure if the counterparty has a decline in credit quality below a predefined level. These amounts, if any, may be segregated with a third- party custodian. The market value of OTC financial derivative instruments, collateral received or pledged, and net exposure by counterparty as of period end are disclosed in the Portfolio of Investments.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern certain forward settling transactions, such as TBA transactions, delayed-delivery or sale buybacks by and between the Sub-Advisers on behalf of the Funds and select counterparties. The Master Forward Agreements maintain provisions for, among other things, transaction initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral. The market value of forward settling transactions, collateral pledged and/or received, and the net exposure by counterparty as of period end is disclosed in the Portfolio of Investments.
ISDA Master Agreements and Master Forward Agreements are intended to reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that is intended to improve legal certainty. Under most ISDA Master Agreements and Master Forward Agreements, collateral is routinely pledged if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant master agreement with a counterparty in a given account exceeds a specified threshold, which typically ranges from zero to $250,000 (on a per counterparty basis) depending on the counterparty and the type of master agreement.
Collateral on OTC derivatives and centrally cleared derivatives may be in the form of cash or debt securities issued by the U.S. government or related agencies or foreign governments. Cash pledged as collateral by a Fund is reflected as cash held as collateral at the broker in the accompanying financial statements and generally is restricted from withdrawal by the Fund; securities pledged by a Fund are so noted in the accompanying Portfolio of Investments; both remain in the Fund’s assets. Securities received as collateral by counterparties are not included in the Fund’s assets because the Fund does not obtain effective control over those securities. The obligation to return cash collateral received from counterparties is included as a liability in the accompanying financial statements. Collateral posted or received by the Fund may be held in a segregated account at the respective counterparty or Fund’s custodian. As of October 31, 2021, collateral pledged by counterparties to 1290 DoubleLine Dynamic Allocation for OTC derivatives consisted of $534,000 in the form of a U.S. Treasury Note.
On October 28, 2020, the SEC adopted Rule 18f-4 (the “Derivatives Rule” or “Rule 18f-4”) under the 1940 Act which, following a transition period, will replace existing SEC and staff guidance with an updated, comprehensive framework for registered funds’ use of derivatives. Among other changes, the Derivatives Rule will require a Fund to trade derivatives and certain other instruments that create future payment or delivery obligations subject to a value-at-risk (“VaR”) leverage limit, develop and
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implement a derivatives risk management program and new testing requirements, and comply with new requirements related to board and SEC reporting. These new requirements will apply unless a Fund qualifies as a “limited derivatives user,” as defined in the Derivatives Rule. In connection with the final rule, the SEC and its staff will rescind and withdraw applicable guidance and relief regarding asset segregation and coverage transactions reflected in the Funds’ asset segregation and cover practices discussed herein. The full impact of Rule 18f-4 on the Funds remains uncertain. The Funds intend to comply with Rule 18f-4 on or before August 19, 2022.
Market, Credit and Other Risk:
A Fund’s investments in financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign currency, foreign securities, forward settling transactions and equity risks.
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. When nominal interest rates decline, the value of certain fixed-income securities held by a Fund generally rises. Conversely, when nominal interest rates rise, the value of certain fixed income securities held by a Fund generally decreases. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Interest rate changes can be sudden and unpredictable, and a Fund may lose money if these changes are not anticipated by Fund management. A Fund may not be able to hedge against changes in interest rates or may choose not to do so for cost or other reasons. In addition, any hedges may not work as intended. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is useful primarily as a measure of the sensitivity of a security’s market price to interest rate (i.e., yield) movements. As of October 31, 2021, interest rates are near historic lows in the United States, and below zero in other parts of the world, including certain European countries and Japan. A Fund is subject to greater risk of rising interest rates due to these market conditions. A significant or rapid rise in interest rates could result in losses to the Fund.
Many debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. The publication of most LIBOR settings will be discontinued at the end of 2021, except for the overnight, 1-month, 3-month, 6-month and 12-month U.S. dollar-denominated LIBOR settings, which will continue through June 30, 2023. The Secured Overnight Financing Rate (“SOFR”) has been selected by a committee established by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York to replace LIBOR as a reference or benchmark rate in the United States. Other countries have undertaken similar initiatives to identify replacement reference or benchmark rates in their respective markets. However, there are obstacles to converting certain existing investments and transactions to a new reference or benchmark rate, as well as risks associated with using a new reference or benchmark rate with respect to new investments and transactions. The transition process, or a failure to transition properly, might lead to increased volatility and illiquidity in markets that currently rely on LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Fund’s performance or net asset value. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Fund.
If a Fund invests directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in financial derivatives that provide exposure to foreign currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political
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developments in the United States or abroad. As a result, a Fund’s investments in foreign currency denominated securities may reduce the Fund’s returns. The Funds are subject to off-balance sheet risk to the extent of the value of the contracts for purchase of foreign currency and in an unlimited amount for sales of foreign currency.
Foreign (non-U.S.) securities in this report are classified by the country of risk of a holding. Investments in foreign securities, including depositary receipts, involve risks not associated with investment in U.S. securities. Foreign markets may be less liquid, more volatile and subject to less government supervision and regulation than U.S. markets. Differences between U.S. and foreign legal, political and economic systems, regulatory regimes and market practices also may impact security values, and it may take more time to clear and settle trades involving foreign securities. In addition, foreign operations or holding can involve risks relating to conditions in foreign countries.
Forward settling transactions and forward foreign currency contracts involve elements of both market and credit risk in excess of the amounts reflected in the Statements of Assets and Liabilities. They are executed directly with the counterparty and not through an exchange and can be terminated only by agreement of both parties to such contracts. With respect to such transactions there is no daily margin settlement. There is also the risk that the security will not be issued or that the other party to the transaction will not meet its obligations. If this occurs, the Fund may lose both the investment opportunity for its assets if set aside to pay for the security and any gain in the security. The use of forward settling transaction may result in market risk to the Funds that is greater than if the Funds had engaged solely in transactions that settle in the customary time.
Should interest rates or indices move unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may incur a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. Use of long futures contracts subjects the Funds to risk of loss in excess of the amounts shown on the Statements of Assets and Liabilities, up to the notional value of the futures contracts. Use of short futures contracts subjects the Funds to unlimited risk of loss.
The market values of the Fund’s investments may decline due to general market conditions which are not specifically related to a particular company or issuer, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities, although under certain market conditions fixed income securities may have comparable or greater price volatility. Credit ratings downgrades may also negatively affect securities held by a Fund. Even when markets perform well, there is no assurance that the investments held by a Fund will increase in value along with the broader market. In addition, market risk includes the risk that geopolitical events will disrupt the economy on a national or global level.
A Fund will be exposed to credit risk to parties with whom it trades and will also bear the risk of settlement default. The Fund is subject to the risk that the issuer or guarantor of a fixed income security, or the counterparty to a transaction, is unable or unwilling or is perceived as unable or unwilling to make timely interest or principal payments or otherwise honor its obligations, which may cause the Fund’s holding to lose value. The downgrade of a security’s credit rating may decrease its value. Lower credit quality also may lead to greater volatility in the price of a security and may negatively affect a security’s liquidity. The credit quality of a security can deteriorate suddenly and rapidly.
Certain Funds may invest in below investment grade high-yield securities (commonly known as “junk bonds”). These securities are considered to be high risk investments. Securities rated below investment grade are speculative in nature, involve greater risk of default by the issuing entity and may be subject to greater market fluctuations than higher rated fixed income securities because
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October 31, 2021
such securities are generally unsecured and subordinated to other creditors’ claims. The retail secondary market for these “junk bonds” may be less liquid than that of higher rated securities and adverse economic conditions could make it difficult to sell certain securities or could result in lower prices than those used in calculating the Fund’s NAV.
Because certain Funds invest in affiliated mutual funds, unaffiliated mutual funds and ETFs, the Funds indirectly bear a portion of the expenses incurred by the underlying funds and ETFs. As a result, the cost of investing in the Funds may be higher than the cost of investing in a Fund that exclusively invests directly in individual securities and financial instruments. The Funds are also subject to certain risks related to the underlying funds’ and ETFs’ investments in securities and financial instruments (such as fixed income securities, including high yield, asset-backed and mortgage- related securities, equity securities, foreign and emerging markets securities, commodities and real estate securities) and the ability of the Fund to meet its investment objective will directly depend on the ability of the underlying fund or ETF to meet its investment objective. With respect to the Fund’s investments in ETFs, there is also the risk that an ETF’s performance may not match that of the relevant index. It is also possible that an active trading market for an ETF may not develop or be maintained, in which case the liquidity and value of the Fund’s investments in the ETF could be substantially and adversely affected. The extent to which the investment performance and risks associated with the Fund correlate to those of a particular underlying fund or ETF will depend upon the extent to which the Fund’s assets are allocated from time to time for investment in the underlying fund or ETF, which will vary.
Offsetting Assets and Liabilities:
The Funds may be subject to various netting arrangements with select counterparties (“Master Agreements”). Master Agreements govern the terms of certain transactions, and are intended to reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that is intended to improve legal certainty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to close out and net its total exposure to counterparty in the event of a default with respect to all the transactions governed under a single Master Agreement with a counterparty. For financial reporting purposes the Statement of Assets and Liabilities generally show derivative assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting.
The Trust, on behalf of each Fund, has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Adviser is responsible for (i) providing a continuous investment program for the Funds; (ii) monitoring the implementation of the investment program for each Fund; (iii) assessing the investment objectives and policies, composition, investment style and investment process for each Fund; (iv) effecting transactions for each Fund and selecting brokers or dealers to execute such transactions; (v) developing and evaluating strategic initiatives with respect to the Funds; (vi) making recommendations to the Board regarding the investment programs of the Funds, including any changes to the investment objectives and policies of a Fund; (vii) coordinating and/or implementing strategic initiatives approved by the Board; and (viii) preparing and providing reports to the Board on the impact of such strategic initiatives. The Adviser is paid a fee for these services. The fee is accrued daily and paid monthly based on the Fund’s average daily net assets, at an annual rate of:
| | |
Funds: | | Investment Advisory Fees |
1290 Retirement 2020 | | 0.500% of average daily net assets |
1290 Retirement 2025 | | 0.500% of average daily net assets |
1290 Retirement 2030 | | 0.500% of average daily net assets |
1290 Retirement 2035 | | 0.500% of average daily net assets |
1290 Retirement 2040 | | 0.500% of average daily net assets |
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| | |
Funds: | | Investment Advisory Fees |
1290 Retirement 2045 | | 0.500% of average daily net assets |
1290 Retirement 2050 | | 0.500% of average daily net assets |
1290 Retirement 2055 | | 0.500% of average daily net assets |
1290 Retirement 2060 | | 0.500% of average daily net assets |
| | | | | | | | | | | | | | | | | | | | |
| | | (as a percentage of average daily net assets) | |
Funds: | | First
$1 Billion | | | Next
$1 Billion | | | Next
$3 Billion | | | Next
$5 Billion | | | Thereafter | |
1290 DoubleLine Dynamic Allocation | | | 0.750 | % | | | 0.700 | % | | | 0.675 | % | | | 0.650 | % | | | 0.625 | % |
1290 GAMCO Small/Mid Cap Value | | | 0.750 | | | | 0.700 | | | | 0.675 | | | | 0.650 | | | | 0.625 | |
1290 SmartBeta Equity | | | 0.700 | | | | 0.650 | | | | 0.625 | | | | 0.600 | | | | 0.575 | |
| | | | | | | | | | | | | | | | |
| | | (as a percentage of average daily net assets) | |
Fund: | | First
$4 Billion | | | Next
$4 Billion | | | Next
$2 Billion | | | Thereafter | |
1290 Multi-Alternative Strategies | | | 0.500 | % | | | 0.490 | % | | | 0.480 | % | | | 0.470 | % |
| | | | | | | | | | | | |
| | | (as a percentage of average daily net assets) | |
Funds: | | First
$4 Billion | | | Next
$4 Billion | | | Thereafter | |
1290 Diversified Bond | | | 0.600 | % | | | 0.580 | % | | | 0.560 | % |
1290 High Yield Bond | | | 0.600 | | | | 0.580 | | | | 0.560 | |
On behalf of the Trust, the Adviser has entered into an investment sub-advisory agreement (“Sub-Advisory Agreements”) with each of the Sub-Advisers. Each of the Sub-Advisory Agreements obligates the Sub-Advisers for the respective Funds to: (i) continuously furnish investment programs for the Funds; (ii) place all orders for the purchase and sale of investments for the Funds with brokers or dealers selected by the Adviser or the respective Sub-Advisers; and (iii) perform certain limited related administrative functions in connection therewith. The Adviser pays the expenses of providing investment sub-advisory services to the Funds, including the fees of the Sub-Advisers of each Fund.
For administrative services, each Fund pays the Administrator an asset-based administration fee of 0.15% of the average daily net assets of the Fund. The asset-based administration fee is calculated and billed monthly, and subject to an annual minimum of $30,000 per Fund or $30,000 for each allocated portion (or sleeve) of a Fund, as applicable. The Administrator has contracted with the Sub-Administrator to provide, pursuant to a sub-administration agreement, the Funds with certain administrative services, including monitoring of Fund compliance and Fund accounting services.
The Trust, on behalf of the Funds, has entered into a distribution agreement (the “Distribution Agreement”) with ALPS Distributors, Inc. (“ALPS” or the “Distributor”), under which ALPS serves as Distributor for each Fund’s Class A, Class I, Class R and Class T shares. The Board has approved Distribution Plans pursuant to Rule 12b-1 under the 1940 Act for Class A, Class R and Class T shares for each Fund. Pursuant to the Distribution Plans, the Funds will pay the Distributor annual fees at the following rates:
| | | | |
Share Class: | | Distribution Fee and/or Service Fee
(as a % of average daily net assets
attributable to the class) | |
Class A | | | 0.25 | % |
Class R | | | 0.50 | |
Class T* | | | 0.25 | |
| * | The Distribution Fees for Class T shares are currently being waived. This waiver is voluntary and could be eliminated at any time at the discretion of the Distributor. The amounts waived for the year ended October 31, 2021 are included in waiver from distributor on the Statement of Operations for each Fund and are not eligible for recoupment. |
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October 31, 2021
The Trust, on behalf of the Funds, has entered into a transfer agency and service agreement (the “Transfer Agency Agreement”) with DST Asset Manager Solutions, Inc. (“DST”). Pursuant to the Transfer Agency Agreement, DST is responsible for, among other things, the issuance, transfer and redemption of shares, the opening and maintenance of shareholder accounts, the handling of certain communications between shareholders and the Trust, and the payment of dividends and distributions payable by the Funds. Under the Transfer Agency Agreement, DST receives a monthly fee comprised of a fixed base fee plus a fee computed on the basis of the number of shareholder accounts it maintains for the Trust during the month.
The Trust, on behalf of the Funds, has entered into a custody agreement (the “Custody Agreement”) with JPMorgan Chase Bank, N.A. (in this capacity, the “Custodian”). The custody agreement provides for an annual fee based on the amount of assets under custody plus transaction charges. The Custodian serves as custodian of the Trust’s Fund securities and other assets. Under the terms of the Custody Agreement between the Trust and the Custodian, the Custodian maintains and deposits in each Fund’s account, cash, securities and other assets of the Funds. The Custodian is also required, upon the order of the Trust, to deliver securities held by the Custodian, and to make payments for securities purchased by the Trust. The Custodian has also entered into sub-custodian agreements with a number of foreign banks and clearing agencies, pursuant to which Fund securities purchased outside the United States are maintained in the custody of these entities. At period end, certain of the Funds maintain significant cash balances with the Custodian or its affiliates. These balances are presented as cash on each Fund’s Statement of Assets and Liabilities.
The Adviser has contractually agreed to limit the expenses of certain Funds (exclusive of taxes, interest, brokerage commissions, dividend and interest expenses on securities sold short, capitalized expenses (other than offering costs), fees and expenses of other investment companies in which a Fund may invest (except as noted in the table below), 12b-1 fees and extraordinary expenses not incurred in the ordinary course of such Fund’s business) through April 30, 2022 (unless the Board consents to an earlier revision or termination of this arrangement) (“Expense Limitation Agreement”), pursuant to which the Adviser has agreed to make payments or waive or limit its fees so that the total annual operating expenses do not exceed the following annual rates:
| | | | |
Funds: | | Total Expense Limited
For All Share Classes to
(% of daily net assets) | |
1290 Diversified Bond | | | 0.50 | % |
1290 DoubleLine Dynamic Allocation* | | | 0.95 | |
1290 GAMCO Small/Mid Cap Value* | | | 1.00 | |
1290 High Yield Bond | | | 0.75 | |
1290 Multi-Alternative Strategies | | | 0.85 | |
1290 Retirement 2020* | | | 0.65 | |
1290 Retirement 2025* | | | 0.65 | |
1290 Retirement 2030* | | | 0.65 | |
1290 Retirement 2035* | | | 0.65 | |
1290 Retirement 2040* | | | 0.65 | |
1290 Retirement 2045* | | | 0.65 | |
1290 Retirement 2050* | | | 0.65 | |
1290 Retirement 2055* | | | 0.65 | |
1290 Retirement 2060* | | | 0.65 | |
1290 SmartBeta Equity | | | 0.85 | |
| * | Includes fees and expenses of other investment companies in which the Fund invests. |
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October 31, 2021
Prior to October 1, 2021 the expense limitation was as follows:
| | | | |
Fund: | | Total Expense Limited
For All Share Classes to
(% of daily net assets) | |
1290 Multi-Alternative Strategies* | | | 1.40 | % |
| * | Includes fees and expenses of other investment companies in which the Fund invests. |
The Adviser first waives its advisory fees, then waives its administration fees, and then reimburses the Fund’s expenses out of its own resources. Each Fund may at a later date reimburse to the Adviser the advisory fees waived or other expenses assumed and paid for by the Adviser pursuant to the Expense Limitation Agreement within three years of payments or waivers being recorded, provided such Fund has reached a sufficient asset size to permit such reimbursement to be made without causing the total annual expense ratio of each Fund to exceed the percentage limits mentioned above for the respective period. Consequently, no reimbursement by a Fund will be made unless the Fund’s total annual expense ratio is less than the respective percentages stated above for the respective period. Any reimbursement, called recoupment fees on the Statement of Operations of the Fund, will be based on the earliest fees waived or assumed by the Adviser. During the year ended October 31, 2021, the Funds did not incur recoupment fees. At October 31, 2021, under the Expense Limitation Agreement, the amount that would be recoverable from each Fund is as follows:
| | | | | | | | | | | | | | | | |
| | | Amount Eligible Through | | | Total Eligible
For
Reimbursement | |
Funds: | | 2022 | | | 2023 | | | 2024 | |
1290 Diversified Bond | | $ | 436,563 | | | $ | 809,448 | | | $ | 2,190,751 | | | $ | 3,436,762 | |
1290 DoubleLine Dynamic Allocation | | | 229,925 | | | | 262,989 | | | | 200,745 | | | | 693,659 | |
1290 GAMCO Small/Mid Cap Value | | | 407,167 | | | | 294,675 | | | | 251,731 | | | | 953,573 | |
1290 High Yield Bond | | | 227,837 | | | | 264,144 | | | | 248,164 | | | | 740,145 | |
1290 Multi-Alternative Strategies | | | 152,126 | | | | 147,303 | | | | 101,405 | | | | 400,834 | |
1290 Retirement 2020 | | | 148,122 | | | | 154,847 | | | | 137,253 | | | | 440,222 | |
1290 Retirement 2025 | | | 164,119 | | | | 172,097 | | | | 150,364 | | | | 486,580 | |
1290 Retirement 2030 | | | 137,980 | | | | 143,990 | | | | 131,389 | | | | 413,359 | |
1290 Retirement 2035 | | | 143,164 | | | | 150,885 | | | | 135,296 | | | | 429,345 | |
1290 Retirement 2040 | | | 133,015 | | | | 140,231 | | | | 128,227 | | | | 401,473 | |
1290 Retirement 2045 | | | 137,163 | | | | 145,551 | | | | 133,137 | | | | 415,851 | |
1290 Retirement 2050 | | | 133,264 | | | | 139,420 | | | | 129,144 | | | | 401,828 | |
1290 Retirement 2055 | | | 132,927 | | | | 138,525 | | | | 128,662 | | | | 400,114 | |
1290 Retirement 2060 | | | 133,636 | | | | 139,205 | | | | 129,838 | | | | 402,679 | |
1290 SmartBeta Equity | | | 236,252 | | | | 243,147 | | | | 350,864 | | | | 830,263 | |
Under the Trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business, the Trust enters into contracts with vendors and others that provide for general indemnifications. A Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund. However, based on experience, the Trust and management expect the risk of loss to be remote.
The Distributor receives sales charges on the Funds’ Class A and Class T shares and the proceeds of contingent deferred sales charges paid by the investor in connection with certain
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October 31, 2021
redemptions of the Funds’ Class A shares. The Distributor has advised the Funds that for the year ended October 31, 2021, the proceeds retained from sales and redemptions are as follows:
| | | | | | | | | | | | |
| | | Class A | | | Class T | |
Funds: | | Front End
Sales
Charge | | | Contingent
Deferred
Sales Charge | | | Front End
Sales
Charge | |
1290 Diversified Bond | | $ | 74,835 | | | $ | — | | | $ | — | |
1290 DoubleLine Dynamic Allocation | | | 42,411 | | | | — | | | | — | |
1290 GAMCO Small/Mid Cap Value | | | 38,367 | | | | — | | | | — | |
1290 High Yield Bond | | | 6,308 | | | | — | | | | — | |
1290 Multi-Alternative Strategies | | | 1,048 | | | | — | | | | — | |
1290 SmartBeta Equity | | | 47,630 | | | | — | | | | — | |
Sales loads and contingent deferred sales charges imposed on purchases and redemptions of Fund shares are retained by the Trust’s Distributors and do not represent expenses or income of the Funds.
| Note 4 | Compensation of Officers |
Each officer of the Trust is an employee of Equitable Financial, the Adviser and/or Equitable Distributors, LLC. No officer of the Trust, other than the Chief Compliance Officer, receives compensation paid by the Trust. During the year ended October 31, 2021, the three trusts in the fund complex reimbursed EIM for $216,000 of the Chief Compliance Officer’s compensation, including $867 reimbursed by the Trust.
| Note 5 | Percentage of Ownership by Affiliates |
At October 31, 2021, the Adviser and Equitable Financial held investments in each of the Funds as follows:
| | | | |
Funds: | | Percentage of
Ownership | |
1290 Doubleline Dynamic Allocation | | | 83 | % |
1290 GAMCO Small/ Mid Cap Value | | | 17 | |
1290 High Yield Bond | | | 40 | |
1290 Multi-Alternative Strategies | | | 67 | |
1290 Retirement 2020 | | | 99 | |
1290 Retirement 2025 | | | 97 | |
1290 Retirement 2030 | | | 99 | |
1290 Retirement 2035 | | | 99 | |
1290 Retirement 2040 | | | 99 | |
1290 Retirement 2045 | | | 98 | |
1290 Retirement 2050 | | | 100 | |
1290 Retirement 2055 | | | 100 | |
1290 Retirement 2060 | | | 99 | |
Shares of 1290 Diversified Bond Fund may be held as an underlying investment by certain series of the EQ Advisors Trust (EQ/All Asset Growth Allocation Portfolio and EQ/Ultra Conservative Strategy Portfolio, EQ/Conservative Strategy Portfolio, EQ/Conservative Growth Strategy Portfolio, EQ/Balanced Strategy Portfolio, EQ/Moderate Growth Strategy Portfolio, EQ/Growth Strategy Portfolio and EQ/Aggressive Growth Strategy Portfolio (each, a “Strategic Allocation Series Portfolio” and together, the “Strategic Allocation Series Portfolios”)) and certain series of the EQ/Premier VIP Trust (EQ/Conservative Allocation Portfolio, EQ/Conservative-Plus Allocation Portfolio, EQ/Moderate Allocation Portfolio, EQ/Moderate-Plus Allocation Portfolio and EQ/Aggressive Allocation Portfolio (each, an “EQ Allocation Portfolio” and together, the “EQ Allocation Portfolios”) and the Target 2015 Allocation Portfolio, Target
151
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2021
2025 Allocation Portfolio, Target 2035 Allocation Portfolio, Target 2045 Allocation Portfolio and Target 2055 Allocation Portfolio (each, a “Target Allocation Portfolio” and together, the “Target Allocation Portfolios”)). The following table represents the percentage of ownership that each of the EQ/All Asset Growth Allocation, Strategic Allocation Series Portfolios, EQ Allocation Portfolios and Target Allocation Portfolios has in 1290 Diversified Bond Fund’s net assets as of October 31, 2021.
| | | | |
Portfolios: | | 1290 Diversified
Bond | |
EQ/All Asset Growth Allocation | | | 0.40 | % |
EQ/Conservative Allocation | | | 4.06 | |
EQ/Conservative-Plus Allocation | | | 3.48 | |
EQ/Moderate Allocation | | | 17.53 | |
EQ/Moderate-Plus Allocation | | | 12.35 | |
EQ/Aggressive Allocation | | | 1.62 | |
Target 2015 Allocation | | | 0.54 | |
Target 2025 Allocation | | | 1.30 | |
Target 2035 Allocation | | | 0.79 | |
Target 2045 Allocation | | | 0.35 | |
Target 2055 Allocation | | | 0.04 | |
Note 6 - COVID-19 Impact
The novel coronavirus (COVID-19) pandemic and efforts to contain its spread have resulted, and may continue to result, in significant disruptions to business operations, supply chains and customer activity, widespread business closures and layoffs, travel restrictions, international, national and local border closings, extended quarantines and stay-at-home orders, event cancellations, service cancellations, reductions and other changes, labor shortages, and significant challenges in healthcare service preparation and delivery, as well as general concern, uncertainty and social unrest. Global financial markets have experienced, and may continue to experience, significant volatility and severe losses, and the pandemic has resulted in an economic slowdown, which may continue for an extended period of time. The pandemic has accelerated trends toward working remotely and shopping on-line, which may negatively affect the value of office and commercial real estate and the value of investments in other companies and industries that historically have relied on higher concentrations of people working in traditional office and commercial environments. The travel, hospitality, and public transit industries, among others, may suffer long-term negative effects from the pandemic and resulting changes to public behavior. Public health crises caused by outbreaks of infectious diseases or other public health issues, such as the COVID-19 pandemic, may exacerbate other pre-existing political, social, and economic tensions and risks and disrupt market conditions and operations. The ongoing impact of the COVID-19 pandemic on the financial performance of the Trust’s investments cannot be predicted and could have a materially adverse effect on the Trust’s investments.
Note 7 - Subsequent Events
The Adviser evaluated subsequent events from October 31, 2021, the date of these financial statements, through the date these financial statements were issued. There are no subsequent events that require recognition or disclosure in the financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of 1290 Funds and Shareholders of each of the fifteen funds listed in the table below
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of each of the funds listed in the table below (constituting 1290 Funds, hereafter collectively referred to as the “Funds”) as of October 31, 2021, the related statements of operations for the year ended October 31, 2021, the statements of changes in net assets for each of the two years in the period ended October 31, 2021, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2021, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended October 31, 2021 and each of the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
| | |
| 1290 Diversified Bond Fund | | 1290 Retirement 2035 Fund |
| 1290 DoubleLine Dynamic Allocation Fund | | 1290 Retirement 2040 Fund |
| 1290 GAMCO Small/Mid Cap Value Fund | | 1290 Retirement 2045 Fund |
| 1290 High Yield Bond Fund | | 1290 Retirement 2050 Fund |
| 1290 Multi-Alternative Strategies Fund | | 1290 Retirement 2055 Fund |
| 1290 Retirement 2020 Fund | | 1290 Retirement 2060 Fund |
| 1290 Retirement 2025 Fund | | 1290 SmartBeta Equity Fund |
| 1290 Retirement 2030 Fund | | |
Basis for Opinions
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of October 31, 2021 by correspondence with the custodian, transfer agents and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
/s/ PricewaterhouseCoopers LLP
New York, New York
December 15, 2021
We have served as the auditor of one or more investment companies in the EIM LLC — advised mutual fund complex since 1997.
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1290 FUNDS
DISCLOSURE REGARDING ADVISORY CONTRACT APPROVALS
APPROVALS OF INVESTMENT ADVISORY AND INVESTMENT SUB-ADVISORY AGREEMENTS DURING THE SIX-MONTH PERIOD ENDED OCTOBER 31, 2021 (UNAUDITED)
At a meeting held on July 20-22, 2021,1 the Board of Trustees (the “Board”) of 1290 Funds (the “Trust”), including those Trustees who are not parties to any Agreement (as defined below) or “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of such parties or the Trust (the “Independent Trustees”), considered and unanimously approved the renewal of the Investment Advisory Agreement (the “Advisory Agreement”) between the Trust and Equitable Investment Management Group, LLC (“EIM” or the “Adviser”) and, as applicable, the renewal of the Investment Sub-Advisory Agreement (each, a “Sub-Advisory Agreement” and together with the Advisory Agreement, the “Agreements”) between the Adviser and each investment sub-adviser (each, a “Sub-Adviser” and together, the “Sub-Advisers”), as shown in the table below with respect to the series of the Trust (each, a “Fund” and together, the “Funds”) listed below, for an additional one-year term.
| | |
| Funds | | Agreement(s) Renewed by the Trust’s Board
with respect to the Funds |
1290 Multi-Alternative Strategies Fund 1290 Retirement 2020 Fund 1290 Retirement 2025 Fund 1290 Retirement 2030 Fund 1290 Retirement 2035 Fund 1290 Retirement 2040 Fund 1290 Retirement 2045 Fund 1290 Retirement 2050 Fund 1290 Retirement 2055 Fund 1290 Retirement 2060 Fund (collectively, the “1290 Retirement Funds”) | | Advisory Agreement with EIM |
1290 Diversified Bond Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with Brandywine Global Investment Management LLC |
1290 DoubleLine Dynamic Allocation Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with DoubleLine Capital LP and DoubleLine Equity LP |
1290 GAMCO Small/Mid Cap Value Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with GAMCO Asset Management, Inc. |
1290 High Yield Bond Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with AXA Investment Managers, Inc. (“AXA IM”) |
1290 SmartBeta Equity Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with AXA Rosenberg Investment Management LLC (“AXA Rosenberg”) |
In reaching its decision to renew the Agreement(s) with respect to each Fund, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the Fund and its
| 1 | The meeting was held by videoconference in reliance on an exemptive order issued by the Securities and Exchange Commission (the “SEC”). Reliance on the exemptive order was necessary and appropriate due to circumstances related to the effects of COVID-19. All Trustees participating in the videoconference meeting were able to hear each other simultaneously during the meeting. Reliance on the exemptive order requires the Trustees, including a majority of the Independent Trustees, to ratify actions taken pursuant to the exemptive order by vote cast at the next in-person meeting. |
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shareholders. The Board further considered all factors it deemed relevant with respect to each Fund, including: (1) the nature, quality and extent of the overall services to be provided to the Fund by the Adviser, the relevant Sub-Adviser and, where applicable, their respective affiliates, including the investment performance of the Fund; (2) the level of the Fund’s advisory fee and, where applicable, sub-advisory fee, and the Fund’s expense ratios relative to those of peer funds; (3) the costs of the services to be provided by, and the profits to be realized by, the Adviser and its affiliates from their relationships with the Fund; (4) the anticipated effect of growth and size on the Fund’s performance and expenses, including any potential economies of scale and, if so, whether any such economies of scale are equitably shared with shareholders; and (5) “fall-out” benefits that may accrue to the Adviser, the relevant Sub-Adviser, and their respective affiliates (that is, indirect benefits that they would not receive but for their relationships with the Fund). In considering each Agreement, the Board members did not identify any particular factor or information that was all-important or controlling, and each Trustee may have given different weights to different factors and, thus, each Trustee may have had a different basis for his or her decision.
In connection with its deliberations, the Board took into account a broad range of information (both written and oral) provided to the Board, including its various committees, throughout the year, as well as information provided specifically in connection with the annual renewal process. The Trustees also recognized that the contractual arrangements for the Funds have been reviewed by the Trustees and discussed with the Adviser in prior years and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.
Information provided and discussed throughout the year included investment performance reports and related financial and general market outlook information for each Fund, as well as periodic reports on, among other matters, brokerage allocation and execution; pricing and valuation; legal and compliance matters; shareholder and other services and support provided to the Funds by the Adviser, the relevant Sub-Adviser and their respective affiliates; actual and potential conflicts of interest that could impact the business operations and relationships of the Adviser and the Trust or affect the Adviser’s recommendations about Sub-Advisers; sales and marketing activity; and risk management. In addition, the sub-groups of the Board’s Investment Committee, composed of Independent Trustees, met individually with, and engaged in extensive discussions along with management representatives and outside legal counsel with, Sub-Advisers during presentations made at regularly scheduled Investment Committee meetings during the year.
Information provided and discussed specifically in connection with the annual renewal process included a report prepared by Broadridge Financial Solutions Inc. (“Broadridge”), an independent provider of mutual fund industry data, as well as additional substantial material prepared by management. Broadridge provided its report directly to the Independent Trustees and included in its report comparative fee, expense, and investment performance information for each Fund. The materials provided by Broadridge in connection with the July 2021 annual renewal process reflected certain enhancements to the presentation and format of the materials provided by Broadridge in connection with the July 2020 annual renewal process. The enhancements were based on a review of the materials by the Independent Trustees, in consultation with their independent legal counsel, intended to ensure that the Independent Trustees continue to receive comparative fee, expense, and investment performance information in a format that enhances their review of the Funds’ investment advisory arrangements. The additional material prepared by management generally included Fund-by-Fund information showing each Fund’s average net assets; advisory fees and, where applicable, sub-advisory fees; expense ratios; expense limitation arrangements; investment performance (in addition to the performance information prepared by Broadridge); and profitability information, including information regarding the profitability of the Adviser’s operations on an overall Trust basis, as well as on a Fund-by-Fund basis. In addition, for each Fund, the Adviser and, where applicable, the relevant Sub-Adviser provided separate materials describing the Fund’s investment performance over various time periods and the services provided and the fees charged with respect to the Fund, and discussing whether the Fund had performed as expected over time and other matters.
The annual renewal process extends over at least two regular meetings of the Board in June and July, although the Independent Trustees believe that in fact the process extends year-round, to ensure that the Adviser and the Sub-Advisers have time to respond to any questions the Independent Trustees may have on their initial review of the materials and that the Independent Trustees have time to consider those responses. The Independent Trustees also held a conference call in advance of the meeting at which the Board approved the renewal of the Agreements to review the information provided and communicated follow-up questions for management to address at the renewal meeting. The Independent Trustees also met in executive sessions during the meeting to discuss the Agreements and the information provided. When invited, management representatives
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attended portions of the executive sessions to review and discuss matters relating to the Agreements and to provide additional information requested by the Independent Trustees. At the meeting and during the portions of the executive sessions attended by management, the Independent Trustees and management engaged in extensive discussions and negotiations regarding the Agreements. The Independent Trustees were assisted by independent legal counsel prior to and during the meeting and during their deliberations regarding the Agreements and also received from legal counsel materials addressing, among other things, the legal standards applicable to their consideration of the proposed renewal of the Agreements. In addition, the Independent Trustees reviewed information and met during the year to discuss information relevant to their annual consideration of the Agreements.
The Board also noted that the Trust is an affiliated investment company of EQ Advisors Trust and EQ Premier VIP Trust, which are also managed by the Adviser, and that all of the Board members also currently serve on the Boards of Trustees of EQ Advisors Trust and EQ Premier VIP Trust. The Board also noted that each Sub-Adviser currently serves as investment sub-adviser for one or more series, or allocated portion(s) of series, of EQ Advisors Trust and EQ Premier VIP Trust (such Sub-Advisers together, the “EQ Sub-Advisers”). The Trustees took into account information relating to the Adviser and the EQ Sub-Advisers provided to the Trustees, in their capacities as Trustees of EQ Advisors Trust and EQ Premier VIP Trust, at prior meetings of the Boards of Trustees of EQ Advisors Trust and EQ Premier VIP Trust, and the Trustees noted their experience and familiarity with the Adviser, the EQ Sub-Advisers, and the series of EQ Advisors Trust and EQ Premier VIP Trust gained from their service on the Boards of Trustees of EQ Advisors Trust, EQ Premier VIP Trust, and the Trust.
Although the Board approved the renewal of the Agreements for all of the Funds at the same Board meeting, the Board considered each Fund separately. In approving the renewal of the relevant Agreement(s) with respect to each Fund, each Trustee, including the Independent Trustees, on the basis of their business judgment after review of the information provided, determined that the advisory fee and, where applicable, sub-advisory fee were fair and reasonable and that the renewal of the Agreement(s) was in the best interests of the applicable Fund and its shareholders. Although the Board gave attention to all information provided, the following discusses some of the primary factors it deemed relevant to its decision to renew the Agreements.
Nature, Quality and Extent of Services
The Board evaluated the nature, quality and extent of the overall services to be provided to each Fund and its shareholders by the Adviser, the relevant Sub-Adviser and, where applicable, their respective affiliates. In addition to the investment performance and expense information discussed below, the Board considered the Adviser’s and each relevant Sub-Adviser’s responsibilities with respect to each Fund and the Adviser’s and each relevant Sub-Adviser’s experience in serving as an investment adviser for the Fund(s) and for funds and accounts similar to the Fund(s) each advises, including, as applicable, series (or allocated portion(s) of series) of EQ Advisors Trust and EQ Premier VIP Trust.
With respect to the Adviser, the Board considered that the Adviser is responsible for, among other things, developing investment strategies for the Funds (and the portions thereof); researching, selecting and hiring Sub-Advisers, conducting ongoing “due diligence” on and monitoring Sub-Advisers, and, when necessary or advisable, terminating or replacing Sub-Advisers; allocating and rebalancing Fund assets among Sub-Advisers; overseeing the selection of investments for the Funds (or the portions thereof) that the Sub-Advisers sub-advise; making investment decisions for the Funds (or the portions thereof) that it manages directly; monitoring and evaluating the performance of the Funds (or the portions thereof); monitoring the investment operations and composition of the Funds (or the portions thereof) and, in connection therewith, monitoring compliance with the Funds’ investment objectives, policies and restrictions, as well as the Funds’ compliance with applicable law and the Trust’s compliance policies and procedures; monitoring brokerage selection, commission and other trading costs, quality of execution, and other brokerage matters; coordinating and managing the flow of information and communications relating to the Funds among the Sub-Advisers and other applicable parties; coordinating responses to regulatory agency inquiries relating to the operations of the Trust and coordinating litigation matters involving the Adviser and the Trust; and implementing Board directives as they relate to the Funds. The Board also considered information regarding the Adviser’s process for selecting and monitoring the Sub-Advisers and the other service providers to the Funds and its process for making investment decisions for the Funds (or the portions thereof) that it manages directly, as well as information regarding the qualifications and experience of, and resources available to, the personnel who perform those functions with respect to the Funds. The Board further considered that the Adviser also provides the Trust with personnel, including Trust officers, in connection with
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carrying out its responsibilities and is responsible for coordinating the development of new initiatives and evaluating the impact of proposed products and services on the Trust and its assets. The Board also considered that the Adviser has assumed significant entrepreneurial risk in sponsoring the Funds and that the Adviser also bears and assumes significant ongoing risks, including investment, operational, enterprise, litigation, regulatory and compliance risks, with respect to the Funds. The Board also noted that some funds have been liquidated without ever having been profitable to the Adviser. The Board considered that the Adviser’s responsibilities include daily monitoring of investment, operational, enterprise, litigation, regulatory and compliance risks as they relate to the Funds. The Board also considered information regarding, and met regularly with the Trust’s Director of Risk to discuss, the Adviser’s ongoing risk management activities and reporting.
With respect to the Sub-Advisers, the Board considered that each Sub-Adviser, subject to the oversight of the Adviser, is responsible for making investment decisions for the Fund (or the portion thereof) that it sub-advises; placing with brokers or dealers orders for the purchase and sale of investments for the Fund (or the portion thereof) that it sub-advises; and performing certain related administrative functions. The Board also reviewed information regarding each Sub-Adviser’s process for selecting investments for the Fund (or the portion thereof) that it sub-advises, as well as information regarding the qualifications and experience of the Sub-Adviser’s portfolio managers who provide services to the Fund that it sub-advises. The Board also considered information regarding each Sub-Adviser’s policies for executing portfolio transactions for the Fund (or the portion thereof) that it sub-advises and, where applicable, information regarding a Sub-Adviser’s policies for obtaining research from brokers and dealers.
In addition, the Board considered the allocation of Fund brokerage, including any allocations to broker-dealers affiliated with the Adviser or a Sub-Adviser. The Board also considered the use of “soft” commission dollars to pay for research services, as applicable. In this regard, the Board also considered the Adviser’s and each Sub-Adviser’s trading experience and received information regarding how the Adviser and each Sub-Adviser seek to achieve “best execution” on behalf of a Fund (or portion thereof), including a report by an independent portfolio trading analytical firm.
The Board also considered the Trust’s Chief Compliance Officer’s evaluation of the Adviser’s and each Sub-Adviser’s compliance programs, policies and procedures, including those relating to cybersecurity and business continuity, and any compliance matters involving the Adviser and any applicable Sub-Adviser that had been brought to the Board’s attention during the year. In addition, the Board considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving the Adviser and the Sub-Advisers and reviewed information regarding the Adviser’s and each Sub-Adviser’s financial condition and history of operations and potential conflicts of interest in managing the Funds. The Board also considered information as to the overall amount of assets sub-advised by each Sub-Adviser and noted the largest Sub-Adviser relationships, both in terms of aggregate net assets sub-advised and, for smaller Sub-Advisers, net assets sub-advised as a percentage of the Sub-Adviser’s total assets under management. In addition to periodic reports throughout the year, the Independent Trustees received information about business relationships that the Adviser and/or its affiliates, including Equitable Financial Life Insurance Company, have with Sub-Advisers and/or their affiliates in addition to the relationships involving the Funds. In this regard, the Board also received materials regarding the practices, policies and procedures adopted by the Adviser and the Trust to identify and mitigate actual and potential conflicts of interest, including conflicts that may arise in connection with those additional business relationships.
The Board also considered periodic reports provided to the Board regarding the services provided by the Adviser, the Sub-Advisers and, where applicable, their affiliates. The Board also considered actions taken by the Adviser and the Sub-Advisers in response to recent market conditions and considered the overall performance of the Adviser and the Sub-Advisers in this context. In this regard, among other things, the Board considered information about the impact of the ongoing COVID-19 pandemic on the Adviser’s and each Sub-Adviser’s operations and the Adviser’s and each Sub-Adviser’s ability to continue to provide the same scope and quality of services to its respective Fund(s). The Board noted that, at the Independent Trustees’ request, the Adviser had continued to provide the Board with regular updates on market volatility, the operation of the Trust and the Funds, developments related to the Adviser’s business, and the Adviser’s ongoing oversight of the Funds’ Sub-Advisers, including enhanced supervisory measures taken, in light of the widespread market and business disruptions resulting from the COVID-19 pandemic and responses to the pandemic. The Board also noted that, at the Independent Trustees’ request, the Adviser had continued to provide the Board with periodically updated EIM
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assets under management and Fund average net assets information, as well as updated investment performance information.
The Board also considered strategic and other actions taken by the Adviser in response to recent events within the mutual fund industry, including actions taken in response to legal and regulatory developments, including new SEC rulemaking, affecting the mutual fund industry. The Board also requested and received throughout the past year information from the Adviser and various service providers on various topics impacting mutual funds generally, including the ongoing COVID-19 pandemic; pricing and valuation of portfolio securities; liquidity risk management; cybersecurity; trustee independence; mutual fund board governance “best practices”; environmental, social and governance (“ESG”) investing; and the transition away from London Interbank Offered Rate (LIBOR). The Board noted that certain of these topics may present significant ongoing challenges for mutual funds and result in an increase in the responsibilities and costs of mutual fund service providers, including the Adviser.
The Board also considered the benefits to shareholders from participation in a Fund sponsored by the Adviser, including the Adviser’s experience operating a large fund complex that offers a wide range of portfolios, sub-advisers and investment styles. The Board likewise considered that shareholders have chosen to invest in mutual funds sponsored by the Adviser. In addition, the Board considered the nature, quality and extent of the administrative, shareholder servicing and distribution support services that the Adviser and its affiliates provide to the Funds and their shareholders. In this regard, the Board also noted that it had recently approved the appointment of an affiliate of the Adviser as the new administrator of the Trust, as well as certain related actions to implement the transfer of administration services from the Adviser to its affiliate, effective on or about August 1, 2021, and noted that the transfer was not expected to reduce the quality or level of services provided to the Trust. The Board also noted that, throughout the past year, the Adviser and its affiliates had continued or undertaken initiatives intended to enhance various aspects of the Trust’s and the Board’s operations and shareholders’ experience with the mutual funds sponsored by the Adviser. The Board also noted strategic and other actions and initiatives that the Adviser had identified, including actions and initiatives that are part of a broader effort to coordinate and enhance the collective efficiency of the governance and oversight of the fund complex and provide for potential cost savings to shareholders that may result from such efficiencies. In this regard, the Board also noted that the Adviser continually reviews the overall line-up of investment options and conducts in-depth analysis of its entire fund complex to provide recommendations to the Board to streamline and strengthen the fund complex’s line-up. The Board also recognized that certain of these strategic and other actions and initiatives may also have a positive impact on the profitability and financial position of the Adviser and its affiliates.
The Board also considered that, since the July 2020 annual renewal process, the Adviser and its affiliates had continued to update the Board on matters relating to the sale by AXA S.A. (“AXA”) of its remaining ownership interest in Equitable Holdings, Inc. (“Equitable Holdings”), the Adviser’s parent company, through a series of sales of Equitable Holding’s common stock (the “Sell-Down Plan”). The Board noted that, as a result of the Sell-Down Plan, as of May 20, 2021, AXA is no longer considered an affiliate of the Adviser or the Trust. The Board also noted that it had received from the Adviser and its affiliates representations that their separation from AXA as contemplated by the Sell-Down Plan would not lead to a reduction in the quality or scope of portfolio management, administrative, regulatory compliance and other services provided by those firms to the Funds.
For purposes of evaluating the nature, quality and extent of the overall services provided to each Fund, the Board also took into account discussions with the Adviser and, where applicable, the relevant Sub-Adviser about Fund investment performance that occur at Board and Investment Committee meetings throughout the year. In this regard, the Board noted that, as part of regularly scheduled Fund reviews and other detailed reports to the Board on Fund performance, the Board periodically considered information regarding each Fund’s performance over various time periods on both an absolute basis and relative to an appropriate broad-based securities market index (“benchmark”) and/or a custom blended index developed by the Adviser that comprises broad-based indexes (“blended benchmark”), and a peer group of other mutual funds deemed by Broadridge to be comparable to the Fund (“peer group”). The performance information generally included, among other information, annual total returns, average annual total returns, cumulative returns and/or rolling period total returns. The Board also reviewed performance in relation to certain measures of the degree of investment risk undertaken by the portfolio managers. The Board also considered certain information, reflected in Appendix A, provided to the Board regarding each Fund’s performance relative to a benchmark and/or a blended benchmark and a peer group for the one-, three- and five-year periods, as applicable, and since inception periods ended March 31, 2021. The Board noted that this information supplemented other performance information provided to the Board throughout
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the year and in connection with the annual renewal process. The Board also considered information, provided directly to the Board by Broadridge, regarding each Fund’s performance over various time periods relative to a benchmark and/or a blended benchmark and Broadridge’s “performance universe” consisting of a peer group of funds. The Board also took note of the relatively small size of each Fund and the likely impact that a Fund’s size has on its relative expenses and performance.
The Board received a description of, and factored into its evaluation of each Fund’s performance the limitations inherent in, Broadridge’s methodology for developing and constructing peer groups and determining, from year to year, which mutual funds should be included in which peer groups, among other things. The Board also noted that the number of mutual funds included in a peer group may be relatively small and may differ significantly from peer group to peer group and from year to year and that the constituent mutual funds included in a peer group also may differ from year to year, which, among other factors, can limit the relevance of the comparisons. While recognizing these inherent limitations, the Board believed the independent analysis conducted by Broadridge provided a useful measure of comparative performance.
In evaluating the Funds’ performance, the Board generally considered longer-term performance to be more important than short-term performance and also took into account factors including general market conditions (including the amount of volatility in the market over the past year); the “style” in which the Funds are managed, as applicable, and whether that style is in or out of favor in the market; issuer-specific information; and fund cash flows. In this regard, the Board also noted how changes in time periods for performance calculations (for example, whether a one-year period is from December to December or March to March) can significantly impact a Fund’s returns and peer ranking on a relative basis. The Board also considered that variations in performance among a Fund’s operating classes reflect variations in class expenses, which result in lower performance for higher expense classes.
Allocation Funds
With respect to the performance of the 1290 DoubleLine Dynamic Allocation Fund, the Board considered that the Fund allocates its assets between equity and fixed income investments and is advised by a single Sub-Adviser.
With respect to the performance of each of the 1290 Retirement Funds, the Board considered that each Fund operates as a fund-of-funds and invests in exchange traded securities of other investment companies or investment vehicles (“ETFs”) and recognized, therefore, that each Fund’s performance is based, in part, on the total returns of the ETFs in which it invests. The Board also considered that each of the 1290 Retirement Funds allocates its assets between equity and fixed income investments through its investments in ETFs.
The Board also factored into its evaluation of each Fund’s performance the limitations inherent in comparing the performance of asset allocation funds, such as the Funds, which may invest in equity and fixed income investments, to the performance of a peer group that includes funds that may allocate their assets between equity and fixed income investments in different percentages over time than the Funds and among other asset classes. The Board also factored into its evaluation of each 1290 Retirement Fund’s performance that, although the Fund’s benchmark may correspond to a particular target retirement date, it may have levels of exposure to equity and fixed income investments that vary from the Fund’s asset allocation over time.
Active Funds
With respect to the performance of the 1290 Diversified Bond, 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond and 1290 SmartBeta Equity Funds, the Board considered that each Fund is actively managed and advised by a single Sub-Adviser. In evaluating the performance of the 1290 Diversified Bond Fund, the Board also noted that, in connection with a restructuring of the Fund on or about June 15, 2018, the Fund had replaced its two former sub-advisers with a new Sub-Adviser, and changed its investment objective, policies and strategy, performance benchmark, and fee and expense structure and, therefore, the Board focused on the Fund’s performance since that time. The Board also noted that, prior to January 1, 2018, the 1290 SmartBeta Equity Fund did not integrate ESG filters into its portfolio construction process.
With respect to the performance of the 1290 Multi-Alternative Strategies Fund, the Board considered that the Fund operates as a fund-of-funds and invests in ETFs and recognized, therefore, that the Fund’s performance is based, in part, on the total returns of the ETFs in which it invests.
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All Funds
The Board and the Adviser discussed the performance of each Fund, including whether each Fund had performed as expected over time. The Board and the Adviser also discussed, where applicable, the reasons for a Fund’s underperformance for certain periods relative to its peer group and/or benchmark and/or blended benchmark, as applicable, and efforts to improve the Fund’s performance. Where applicable, the Board also considered steps that the Adviser and, where applicable, the relevant Sub-Adviser had taken to address a Fund’s performance, including any changes or additions to the Sub-Advisers or portfolio managers advising a Fund and any changes to the investment strategies of a Fund. In this regard, the Board noted that performance, especially short-term performance, is only one of the factors that it deems relevant to its consideration of a Fund’s Agreement(s) and that, after considering all relevant factors, it can reach a decision to renew an Agreement notwithstanding a Fund’s relative underperformance.
Based on its review and the explanations provided by the Adviser and, where applicable, the relevant Sub-Adviser regarding the performance of each Fund, the Board determined, with respect to each Fund, that (i) the Fund and its shareholders would benefit from the Adviser’s and, where applicable, the relevant Sub-Adviser’s continued management of the Fund, and (ii) the nature, quality and extent of the overall services provided by the Adviser, the relevant Sub-Adviser and, where applicable, their respective affiliates were appropriate for the Fund in light of its investment objective(s) and, thus, supported a decision to approve the renewal of the Agreement(s).
Expenses
The Board considered each Fund’s advisory fee and, where applicable, sub-advisory fee in light of the nature, quality and extent of the overall services provided by the Adviser and, where applicable, the relevant Sub-Adviser. The Board also reviewed comparative fee and expense information for each Fund provided directly to the Board by Broadridge. The information provided by Broadridge included an analysis of how each Fund’s contractual advisory fee, actual advisory fee, other expense components, and total expense ratio compared with those of peer groups of other mutual funds selected by Broadridge as constituting an appropriate expense comparison for the Fund (typically, both a smaller expense “group” of funds selected for similarity in terms of asset size as well as other factors, and a broader expense “universe” consisting of a larger group of funds more broadly comparable to the Fund) (a Fund’s “Broadridge category”). For each Fund, Broadridge provided information on the Fund’s contractual advisory fee in comparison with the contractual advisory fee that would have been charged by other funds within a Broadridge category assuming the other funds were similar in size to the Fund, as well as information on the Fund’s actual advisory fee and total expense ratio in comparison with those of other funds within a Broadridge category. The advisory fee analysis includes within such fee any separate administrative fee paid by a fund, including the administrative fee a Fund paid to the Adviser in its capacity as administrator2 for the Fund. The contractual advisory fee analysis does not take into account any fee reimbursements or waivers, whereas the actual advisory fee analysis does take into account any advisory (including any administrative) fee reimbursements or waivers that benefit a fund. The total expense ratio represents a fund’s total net operating expenses and takes into account any expense reimbursements or fee waivers that benefit a fund. Broadridge provided, and the Board considered, total expense ratio comparisons including and excluding any 12b-1 or non 12b-1 service fees and, as applicable, including fees and expenses of any underlying funds in which a fund invests.
The Broadridge expense data was based upon historical information taken from each Fund’s audited annual report for the period ended October 31, 2020. Broadridge provided expense data for Class I shares of each Fund. The Board reviewed the expense data for Class I shares as a proxy for all of a Fund’s share classes. In this regard, the Board noted that the expenses for a Fund’s Class I shares are generally lower than the expenses for a Fund’s other share classes and that the expense comparisons may differ for different classes. Fund-specific contractual advisory fee and total expense ratio comparisons are provided below. The total expense ratio comparisons exclude any 12b-1 or non 12b-1 service fees. For the funds-of-funds and certain other Funds as noted below, the total expense ratio comparisons include fees and expenses of any underlying funds in which a fund invests. The Board also took note of the relatively small size of each Fund and the likely impact that a Fund’s size has on its relative expenses.
The Board received a description of, and factored into its evaluation of each Fund’s fees and expenses the limitations inherent in, Broadridge’s methodology for developing and constructing Broadridge categories and for determining, from year to year, which mutual funds should be included in which Broadridge categories, among
| 2 | The Adviser served as the administrator for the Trust and its Funds prior to August 1, 2021. Effective August 1, 2021, an affiliate of the Adviser serves as the administrator for the Trust and its Funds. |
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other things. The Board recognized these inherent limitations and, taking into account commentary and supporting data presented by management, also recognized that comparisons between a Fund and other mutual funds in a Broadridge category may not be as relevant in certain circumstances, given that in some cases a Fund may exhibit notable differences (for example, in its objective(s), management techniques, and relative size) when compared to other mutual funds in a Broadridge category. The Board also noted that the number of mutual funds included in a Broadridge category may be relatively small and may differ significantly from category to category and from year to year and that the constituent mutual funds included in a Broadridge category (as well as their respective advisory/administrative fees and total expense ratios) also may differ from year to year, which can limit the relevance of the comparisons. The Board noted that it generally considered the more-narrow expense “group” comparisons to be more important in the first instance than the broader expense “universe” comparisons, but took into account the broader expense universe comparisons as well, including, among other circumstances, when the number of funds in the more-narrow expense group was small or other aspects of the Fund differed appreciably from those of the funds in the more-narrow expense group. For uniformity, this disclosure includes comparisons against the broader expense universe. The Board also noted that there is no standard definition of advisory and administrative services, meaning that different mutual funds may receive different services, rendering fee and expense comparisons more difficult. Nonetheless, the Board believed that the independent analysis conducted by Broadridge assisted the Board in evaluating the reasonableness of each Fund’s advisory fee and total expense ratio.
In addition, with respect to each sub-advised Fund, the Board further considered the relative levels of the sub-advisory fee paid to the relevant Sub-Adviser and the advisory fee retained by the Adviser in light of, among other factors, the nature and extent of responsibilities retained and risks assumed by the Adviser and not delegated to or assumed by the relevant Sub-Adviser, and the information prepared by management regarding the level of profits realized by the Adviser in connection with its operation of the Fund. The Board also considered the sub-advisory fee paid to each Sub-Adviser in light of fees charged by the Sub-Adviser to similar funds advised or sub-advised by the Sub-Adviser.
Allocation Funds
The Board considered that the contractual advisory fee for the 1290 DoubleLine Dynamic Allocation Fund and each of the 1290 Retirement Funds was above the median for the Fund’s respective Broadridge category. The Board also considered that the total expense ratio for the Class I shares of each of these Funds was above the median for the Fund’s respective Broadridge category. For each Fund, the total expense ratio included the fees and expenses of the underlying funds in which the Fund invests.
The Board also considered each 1290 Retirement Fund’s advisory fee rate relative to the advisory fee rates of other portfolios managed by the Adviser that, like the Funds, are structured as funds-of-funds, and noted that differences in the level of the fees reflected differences between a Fund and other funds-of-funds managed by the Adviser.
Active Funds
The Board considered that the contractual advisory fee for the 1290 Multi-Alternative Strategies Fund was below the median for the Fund’s Broadridge category. The Board also considered that the total expense ratio for the Class I shares of the Fund was at the median for the Fund’s Broadridge category. The total expense ratio included the fees and expenses of the underlying funds in which the Fund invests.
The Board considered that the contractual advisory fee for each of the 1290 Diversified Bond, 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond and 1290 SmartBeta Equity Funds was above (but, in the case of the 1290 SmartBeta Equity Fund, within five basis points of) the median for the Fund’s respective Broadridge category. The Board also considered that the total expense ratio for the Class I shares of the 1290 Diversified Bond Fund was below the median for the Fund’s Broadridge category, and the total expense ratio for the Class I shares of each of the 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond and 1290 SmartBeta Equity Funds was above (but, in the case of the 1290 SmartBeta Equity Fund, within five basis points of) the median for the Fund’s respective Broadridge category. For the 1290 GAMCO Small/Mid Cap Value Fund, the total expense ratio included the fees and expenses of underlying funds in which the Fund may invest.
The Board also considered the 1290 Multi-Alternative Strategies Fund’s advisory fee rate relative to the advisory fee rates of other portfolios managed by the Adviser that, like the Fund, are structured as funds-of-funds, and noted that differences in the level of the fees reflected differences between the Fund and other funds-of-funds managed by the Adviser.
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All Funds
The Board further considered that the advisory fee rate schedules for all Funds other than the 1290 Retirement Funds include breakpoints that reduce the fee rate as a Fund’s assets increase above certain levels. The Board noted that any such reduction in a Fund’s effective advisory fee would result in corresponding reductions in the Fund’s total expense ratios. In addition, the Board considered that the Adviser had contractually agreed to make payments or waive all or a portion of its advisory, administrative and other fees so that each Fund’s total expense ratios do not exceed certain levels as set forth in its prospectus. In this regard, the Board also noted that the expense limitation arrangements for each of the 1290 DoubleLine Dynamic Allocation, 1290 GAMCO Small/Mid Cap Value and 1290 Multi-Alternative Strategies Funds and each of the 1290 Retirement Funds include the fees and expenses of any underlying funds in which a Fund invests and, thus, such fees and expenses would not cause a Fund’s annual operating expenses to exceed its expense limitation. The Board noted that, as a result of these expense limitation arrangements, each Fund’s actual advisory fee was lower than its contractual advisory fee and was either at or below the median for the Fund’s respective Broadridge category. The Board also considered that the full effects of a reduction in the expense limitation arrangement for the 1290 SmartBeta Equity Fund that the Adviser had agreed to implement during 2020 were not reflected in the Broadridge expense data, but that all current fees and expenses of each Fund are explicitly disclosed in Fund offering documents.
Based on its review, the Board determined, with respect to each Fund, that the Adviser’s advisory fee is fair and reasonable, and the Board determined, with respect to each sub-advised Fund, that the Sub-Adviser’s sub-advisory fee is fair and reasonable.
Profitability and Costs
The Board also considered the level of profits realized by the Adviser and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed profitability information setting forth the overall profitability of the Trust to the Adviser and its affiliates, as well as the Adviser’s and its affiliates’ profits in providing management and other services to each of the individual Funds during the 12-month period ended December 31, 2020, which was the most recent fiscal year for the Adviser. The Board also considered a year-over-year comparison of profitability information for the one-year periods ended December 31, 2020, 2019, and 2018. The Board noted that the Adviser was heavily subsidizing the Funds’ expenses and that the Funds were not profitable.
In reviewing the Adviser’s profitability analysis, attention was given to the methodology the Adviser followed in determining and allocating costs to each Fund. The Board recognized that cost allocation methodologies are inherently subjective and various cost allocation methodologies may each be reasonable while producing different results. In this regard, the Board noted that the cost allocation methodology was consistent with the redesigned cost allocation methodology followed in the profitability report presentations for the Funds beginning with the July 2018 annual renewal process. The Board also noted that, in consultation with and through independent legal counsel, the Board’s Audit Committee had engaged an outside consultant to conduct an assessment of the redesigned cost allocation methodology prior to its being integrated into the Adviser’s profitability analysis in connection with the July 2018 annual renewal process. At that time, the Board took into account the consultant’s reported findings that, among other things, the redesigned cost allocation methodology includes expense categories that are reasonable and consistent to the services the Adviser provides to the Funds, the expense categories reviewed are consistent with industry practices and related cost allocation methods, and the allocation of those expenses and associated logic for the allocation to management and administration related revenue categories appear reasonable and consistent with observed industry practices and other established standards. The Board further noted that, in connection with the July 2019 and July 2021 annual renewal processes, the Audit Committee had requested that the consultant review and update its prior report(s) in light of certain adjustments that had been made to the redesigned cost allocation methodology and that, following each such review, the consultant’s aforementioned reported findings remained unchanged. The Board also took into account management’s ongoing costs and expenditures in providing and improving services for the Funds, as well as the need to meet additional regulatory and compliance requirements resulting from changes in rules and other regulations and to adapt to other challenges impacting the mutual fund industry. In addition, the Board considered information prepared by management and from third party sources comparing the profitability of the Adviser on an overall basis to the profitability of other publicly held asset managers (including asset managers similar to the Adviser) over various time periods.
In addition, with respect to the sub-advised Funds, the Board also noted that the Board and the Adviser generally are aware of the fees charged by the Sub-Advisers to other clients (this information having been
162
provided to the Board and the Adviser by the Sub-Advisers in conjunction with the proposed renewal of the Sub-Advisory Agreements) and that the Adviser believes that the fees agreed upon with the Sub-Advisers are reasonable in light of the nature, quality and extent of the investment sub-advisory services provided. The Adviser advised the Board that it does not regard Sub-Adviser profitability as meaningful to its evaluation of the Sub-Advisory Agreements. The Board acknowledged the Adviser’s view of Sub-Adviser profitability, noting the Board’s findings as to the reasonableness of the sub-advisory fees and that the fees paid to the Sub-Advisers are the product of negotiations with the Adviser and reflect levels of profitability acceptable to the Adviser and the Sub-Advisers based on the particular circumstances for each of them. The Board further noted that each Sub-Adviser’s fee is paid by the Adviser and not the sub-advised Fund and that many responsibilities related to the advisory function are retained by the Adviser.
Based on its consideration of the factors above, the Board determined that the level of profits realized by the Adviser and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of the services provided and the risks assumed.
Economies of Scale
The Board also considered whether economies of scale or efficiencies are realized by the Adviser as the Funds grow larger, the extent to which this is reflected in the level of advisory and administrative fees charged, and whether there is potential for realization of any further economies of scale or efficiencies. While recognizing that any precise determination is inherently subject to assumptions and subjective assessments, the Board considered that any realized economies of scale or efficiencies may be shared with funds and their shareholders in a variety of ways, including: (i) breakpoints in the advisory fee or other fees so that a fund’s effective fee rate declines as the fund grows in size, (ii) subsidizing a fund’s expenses by making payments or waiving all or a portion of the advisory fee or other fees so that the fund’s total expense ratio does not exceed certain levels, (iii) setting the advisory fee or other fees so that a fund is priced to scale, which assumes that the fund has sufficient assets from inception to operate at a competitive fee rate without any fee waiver or expense reimbursement from the manager, and (iv) reinvestment in, and enhancements to, the services that the manager and its affiliates provide to a fund and its shareholders. The Board noted that the advisory fee rate schedules for all Funds other than the 1290 Retirement Funds include breakpoints that reduce the fee rate as Fund assets increase above certain levels. The Board also noted that, although the advisory fees for the 1290 Retirement Funds do not include breakpoints, the Adviser was subsidizing all of the Funds’ expenses by making payments or waiving all or a portion of its advisory, administrative and other fees so that each Fund’s total expense ratios do not exceed certain contractual levels as set forth in its prospectus. The Board recognized that expense limitation arrangements can have an effect similar to breakpoints in sharing economies of scale with shareholders and provide protection from an increase in expenses if a Fund’s assets decline. In addition, the Board considered that the Adviser shares any realized economies of scale with the Funds in other ways, which may include setting a Fund’s fees so that they are priced to scale. The Board considered that the effect of this pricing strategy is that the Adviser could lose money in the early stages of a Fund’s operation (and bear the risk that the Fund will never become profitable), while shareholders of the Fund receive the benefit of economies of scale that the Adviser expects the Fund will achieve as it grows. The Board further considered that the Adviser shares any realized economies of scale with the Funds through reinvestment in, and enhancements to, the services that the Adviser and its affiliates provide to the Funds and their shareholders, such as hiring additional personnel, providing additional resources in areas relating to management and administration of the Funds, and investing in technology (including cybersecurity improvements).
In addition, the Board noted that the sub-advisory fee schedules for certain Sub-Advisers aggregate the assets managed by the Sub-Adviser in a Fund and in one or more other mutual funds for which the Sub-Adviser serves as investment sub-adviser and the Adviser serves as investment adviser. The Board also noted that the sub-advisory fee schedules for certain Sub-Advisers include breakpoints that reduce the sub-advisory fee rate as applicable Fund assets under the Sub-Adviser’s management increase above certain levels. In this regard, the Board acknowledged that, at some levels, the breakpoints in a sub-advisory fee schedule may result in savings to the Adviser and not to shareholders. The Board also noted that the aggregation of assets may result in the affected Fund(s) reaching a breakpoint sooner than if the sub-advisory fee schedule did not aggregate assets, which also has the potential to benefit the Adviser. With respect to the sub-advisory fee that does not include breakpoints, the Board considered the Sub-Adviser’s explanation that the sub-advisory fee is priced at a competitive level.
Based on its consideration of the factors above and recognizing that the Funds have relatively low asset levels to date, the Board determined that there was a reasonable sharing of any realized economies of scale or efficiencies under the advisory, administrative and, as applicable, sub-advisory fee schedules at the present time.
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Fall-Out and Other Benefits
The Board also considered the extent to which fall-out benefits may accrue to the Adviser and its affiliates. In this connection, the Board considered several possible fall-out benefits and other types of benefits, including the following. The Board noted that the Adviser also currently serves as the administrator for the Funds and receives compensation for acting in this capacity.3 The Board also noted that Equitable Distributors, LLC, an affiliate of the Adviser, provides distribution support services for the Trust pursuant to an agreement with the Trust’s distributor, ALPS Distributors, Inc. Equitable Distributors, LLC may receive from the Funds compensation (which may include payments pursuant to Rule 12b-1 plans with respect to their Class A, Class T, and Class R shares) for providing shareholder services and selling activities, which could lead to growth in the Trust’s assets and corresponding benefits from such growth, including economies of scale. The Board also recognized that other broker-dealers that are affiliated with the Adviser may sell, and earn sales commissions and/or other compensation with respect to, shares of the Funds. Further, the Board considered that Sanford C. Bernstein & Co., LLC, a registered broker-dealer, is an affiliate of the Adviser and may, from time to time, receive brokerage commissions from the Funds in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, are consistent with seeking best execution. Based on its review, the Board determined that any “fall-out” benefits and other types of benefits that may accrue to the Adviser are fair and reasonable.
The Board also considered possible fall-out benefits and other types of benefits that may accrue to a Sub-Adviser, including the following. The Board considered that a Sub-Adviser, through its position as a Sub-Adviser to its respective Fund, may engage in soft dollar transactions. In addition, the Board considered that a Sub-Adviser may be affiliated with registered broker-dealers who may, from time to time, receive brokerage commissions from a Fund in connection with the purchase and sale of portfolio securities; provided, however, that those transactions, among other things, are consistent with seeking best execution. In cases where a Sub-Adviser’s affiliate executed a substantial portion of its respective Fund’s trades, the Board also considered the Sub-Adviser’s trading experience and discussed with the Adviser its monitoring of the Sub-Adviser’s brokerage selection, commission and other trading costs, and quality of execution. The Board also noted that each Sub-Adviser currently serves as investment sub-adviser for other funds advised by the Adviser and receives sub-advisory fees with respect to those funds. The Board also recognized that a Sub-Adviser and its affiliates may sell, and earn sales commissions and/or other compensation with respect to, the Funds and other investment products issued by the Adviser or its affiliates. In addition, the Board noted that a Sub-Adviser may benefit from greater exposure in the marketplace with respect to the Sub-Adviser’s investment process and from expanding its level of assets under management, and a Sub-Adviser may derive benefits from its association with the Adviser. Based on its review, the Board determined that any “fall-out” benefits and other types of benefits that may accrue to the Sub-Advisers are fair and reasonable.
| 3 | In this regard, the Board also noted that following the transfer of administration services from the Adviser to its affiliate, effective on or about August 1, 2021, the affiliate would serve as the administrator for the Funds and receive compensation for acting in this capacity. |
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Appendix A
The Board noted that the following information regarding each Fund’s performance relative to a benchmark and/or a blended benchmark and a peer group for the one-, three- and five-year periods, as applicable, and since inception periods ended March 31, 2021, supplemented other performance information (including performance based on rolling time periods) provided to the Board throughout the year and in connection with the annual renewal process. The performance results may differ from the performance results for more recent periods, including those shown elsewhere in this report.
1290 Funds Investment Performance
For periods ended March 31, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 1 Year | | | 3 Year | | | 5 Year | | | Since Inception | |
| | | Inception
Date | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | |
1290 GAMCO Small/Mid Cap Value Fund - Class A | | | 11/12/2014 | | | | 97.52 | | | | 86.56 | | | | 10.97 | | | | 8.88 | | | | 12.25 | | | | 11.00 | | | | 10.15 | | | | 9.19 | |
1290 GAMCO Small/Mid Cap Value Fund - Class T | | | 11/12/2014 | | | | 98.03 | | | | 93.05 | | | | 11.27 | | | | 10.35 | | | | 12.56 | | | | 11.99 | | | | 10.44 | | | | 10.00 | |
1290 GAMCO Small/Mid Cap Value Fund - Class I | | | 11/12/2014 | | | | 97.92 | | | | n/a | | | | 11.25 | | | | n/a | | | | 12.55 | | | | n/a | | | | 10.43 | | | | n/a | |
1290 GAMCO Small/Mid Cap Value Fund - Class R | | | 11/12/2014 | | | | 96.99 | | | | n/a | | | | 10.72 | | | | n/a | | | | 11.98 | | | | n/a | | | | 9.89 | | | | n/a | |
Lipper Small-Cap Core Funds | | | | | | | 89.09 | | | | n/a | | | | 11.39 | | | | n/a | | | | 12.95 | | | | n/a | | | | 9.84 | | | | n/a | |
Russell 2500 Value Index | | | | | | | 87.47 | | | | n/a | | | | 10.88 | | | | n/a | | | | 12.15 | | | | n/a | | | | 9.11 | | | | n/a | |
| | | | | | | | | |
1290 Multi-Alternative Strategies Fund - Class A | | | 7/6/2015 | | | | 21.43 | | | | 14.80 | | | | 3.42 | | | | 1.49 | | | | 3.20 | | | | 2.05 | | | | 2.35 | | | | 1.35 | |
1290 Multi-Alternative Strategies Fund - Class I | | | 7/6/2015 | | | | 21.83 | | | | n/a | | | | 3.67 | | | | n/a | | | | 3.46 | | | | n/a | | | | 2.61 | | | | n/a | |
1290 Multi-Alternative Strategies Fund - Class R | | | 7/6/2015 | | | | 21.10 | | | | n/a | | | | 3.14 | | | | n/a | | | | 2.95 | | | | n/a | | | | 2.09 | | | | n/a | |
Lipper Alternative Multi-Strategy Funds | | | | | | | 16.17 | | | | n/a | | | | 3.16 | | | | n/a | | | | 3.21 | | | | n/a | | | | 2.14 | | | | n/a | |
ICE BofA US 3-Month Treasury Bill Index | | | | | | | 0.12 | | | | n/a | | | | 1.49 | | | | n/a | | | | 1.19 | | | | n/a | | | | 1.06 | | | | n/a | |
| | | | | | | | | |
1290 SmartBeta Equity Fund - Class A | | | 11/12/2014 | | | | 41.59 | | | | 33.77 | | | | 11.80 | | | | 9.72 | | | | 11.52 | | | | 10.27 | | | | 9.49 | | | | 8.53 | |
1290 SmartBeta Equity Fund - Class T | | | 11/12/2014 | | | | 41.96 | | | | 38.36 | | | | 12.08 | | | | 11.14 | | | | 11.79 | | | | 11.22 | | | | 9.77 | | | | 9.33 | |
1290 SmartBeta Equity Fund - Class I | | | 11/12/2014 | | | | 41.96 | | | | n/a | | | | 12.08 | | | | n/a | | | | 11.79 | | | | n/a | | | | 9.77 | | | | n/a | |
1290 SmartBeta Equity Fund - Class R | | | 11/12/2014 | | | | 41.21 | | | | n/a | | | | 11.52 | | | | n/a | | | | 11.22 | | | | n/a | | | | 9.21 | | | | n/a | |
Lipper Global Large-Cap Core Funds | | | | | | | 50.70 | | | | n/a | | | | 11.64 | | | | n/a | | | | 12.51 | | | | n/a | | | | 9.10 | | | | n/a | |
MSCI World (Net) Index | | | | | | | 54.03 | | | | n/a | | | | 12.81 | | | | n/a | | | | 13.36 | | | | n/a | | | | 10.09 | | | | n/a | |
| | | | | | | | | |
1290 High Yield Bond Fund - Class A | | | 11/12/2014 | | | | 19.90 | | | | 14.55 | | | | 5.94 | | | | 4.32 | | | | 7.23 | | | | 6.25 | | | | 4.69 | | | | 3.94 | |
1290 High Yield Bond Fund - Class T | | | 11/12/2014 | | | | 20.05 | | | | 17.03 | | | | 6.20 | | | | 5.32 | | | | 7.49 | | | | 6.94 | | | | 4.95 | | | | 4.52 | |
1290 High Yield Bond Fund - Class I | | | 11/12/2014 | | | | 20.18 | | | | n/a | | | | 6.20 | | | | n/a | | | | 7.51 | | | | n/a | | | | 4.96 | | | | n/a | |
1290 High Yield Bond Fund - Class R | | | 11/12/2014 | | | | 19.48 | | | | n/a | | | | 5.64 | | | | n/a | | | | 6.95 | | | | n/a | | | | 4.42 | | | | n/a | |
Lipper High Yield Funds | | | | | | | 22.34 | | | | n/a | | | | 5.82 | | | | n/a | | | | 6.86 | | | | n/a | | | | 4.76 | | | | n/a | |
ICE BofA US High Yield Index | | | | | | | 23.31 | | | | n/a | | | | 6.53 | | | | n/a | | | | 7.94 | | | | n/a | | | | 5.56 | | | | n/a | |
| | | | | | | | | |
1290 Diversified Bond Fund - Class A | | | 7/6/2015 | | | | 21.56 | | | | 16.04 | | | | 9.09 | | | | 7.44 | | | | 7.00 | | | | 6.02 | | | | 5.75 | | | | 4.91 | |
1290 Diversified Bond Fund - Class I | | | 7/6/2015 | | | | 21.50 | | | | n/a | | | | 9.29 | | | | n/a | | | | 7.22 | | | | n/a | | | | 5.98 | | | | n/a | |
1290 Diversified Bond Fund - Class R | | | 7/6/2015 | | | | 21.06 | | | | n/a | | | | 8.79 | | | | n/a | | | | 6.71 | | | | n/a | | | | 5.47 | | | | n/a | |
Lipper General Bond Funds | | | | | | | 8.41 | | | | n/a | | | | 5.01 | | | | n/a | | | | 4.94 | | | | n/a | | | | 4.53 | | | | n/a | |
Bloomberg U.S. Aggregate Bond Index | | | | | | | 0.71 | | | | n/a | | | | 4.65 | | | | n/a | | | | 3.10 | | | | n/a | | | | 3.30 | | | | n/a | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 1 Year | | | 3 Year | | | 5 Year | | | Since Inception | |
| | | Inception
Date | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | | | Without
Sales
Charge | | | With
Sales
Charge | |
| | | | | | | | | |
1290 DoubleLine Dynamic Allocation Fund - Class A | | | 3/7/2016 | | | | 29.12 | | | | 22.02 | | | | 9.66 | | | | 7.59 | | | | 8.52 | | | | 7.31 | | | | 8.79 | | | | 7.58 | |
1290 DoubleLine Dynamic Allocation Fund - Class I | | | 3/7/2016 | | | | 29.40 | | | | n/a | | | | 9.92 | | | | n/a | | | | 8.79 | | | | n/a | | | | 9.06 | | | | n/a | |
1290 DoubleLine Dynamic Allocation Fund - Class R | | | 3/7/2016 | | | | 28.85 | | | | n/a | | | | 9.40 | | | | n/a | | | | 8.25 | | | | n/a | | | | 8.52 | | | | n/a | |
Lipper Mixed-Asset Target Allocation Moderate Funds | | | | | | | 31.57 | | | | n/a | | | | 8.35 | | | | n/a | | | | 8.47 | | | | n/a | | | | 8.47 | | | | n/a | |
60% S&P 500 Index / 40% Bloomberg U.S. Aggregate Bond Index | | | | | | | 31.71 | | | | n/a | | | | 12.24 | | | | n/a | | | | 11.15 | | | | n/a | | | | 11.50 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2020 Fund - Class I | | | 2/27/2017 | | | | 22.08 | | | | n/a | | | | 7.27 | | | | n/a | | | | | | | | | | | | 7.21 | | | | n/a | |
Lipper Mixed-Asset Target 2020 Funds | | | | | | | 25.99 | | | | n/a | | | | 7.96 | | | | n/a | | | | | | | | | | | | 7.84 | | | | n/a | |
S&P Target Date 2020 Index | | | | | | | 25.04 | | | | n/a | | | | 8.03 | | | | n/a | | | | | | | | | | | | 7.86 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2025 Fund - Class I | | | 2/27/2017 | | | | 25.99 | | | | n/a | | | | 7.91 | | | | n/a | | | | | | | | | | | | 7.97 | | | | n/a | |
Lipper Mixed-Asset Target 2025 Funds | | | | | | | 28.84 | | | | n/a | | | | 8.43 | | | | n/a | | | | | | | | | | | | 8.39 | | | | n/a | |
S&P Target Date 2025 Index | | | | | | | 30.77 | | | | n/a | | | | 8.92 | | | | n/a | | | | | | | | | | | | 8.83 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2030 Fund - Class I | | | 2/27/2017 | | | | 29.33 | | | | n/a | | | | 8.26 | | | | n/a | | | | | | | | | | | | 8.42 | | | | n/a | |
Lipper Mixed-Asset Target 2030 Funds | | | | | | | 35.10 | | | | n/a | | | | 9.41 | | | | n/a | | | | | | | | | | | | 9.62 | | | | n/a | |
S&P Target Date 2030 Index | | | | | | | 36.53 | | | | n/a | | | | 9.69 | | | | n/a | | | | | | | | | | | | 9.69 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2035 Fund - Class I | | | 2/27/2017 | | | | 31.84 | | | | n/a | | | | 8.61 | | | | n/a | | | | | | | | | | | | 8.82 | | | | n/a | |
Lipper Mixed-Asset Target 2035 Funds | | | | | | | 42.13 | | | | n/a | | | | 10.41 | | | | n/a | | | | | | | | | | | | 10.73 | | | | n/a | |
S&P Target Date 2035 Index | | | | | | | 42.83 | | | | n/a | | | | 10.53 | | | | n/a | | | | | | | | | | | | 10.59 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2040 Fund - Class I | | | 2/27/2017 | | | | 34.41 | | | | n/a | | | | 9.43 | | | | n/a | | | | | | | | | | | | 9.57 | | | | n/a | |
Lipper Mixed-Asset Target 2040 Funds | | | | | | | 47.20 | | | | n/a | | | | 11.02 | | | | n/a | | | | | | | | | | | | 11.41 | | | | n/a | |
S&P Target Date 2040 Index | | | | | | | 47.29 | | | | n/a | | | | 11.11 | | | | n/a | | | | | | | | | | | | 11.21 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2045 Fund - Class I | | | 2/27/2017 | | | | 36.35 | | | | n/a | | | | 9.53 | | | | n/a | | | | | | | | | | | | 9.79 | | | | n/a | |
Lipper Mixed-Asset Target 2045 Funds | | | | | | | 50.69 | | | | n/a | | | | 11.46 | | | | n/a | | | | | | | | | | | | 11.86 | | | | n/a | |
S&P Target Date 2045 Index | | | | | | | 49.94 | | | | n/a | | | | 11.41 | | | | n/a | | | | | | | | | | | | 11.54 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2050 Fund - Class I | | | 2/27/2017 | | | | 38.52 | | | | n/a | | | | 9.64 | | | | n/a | | | | | | | | | | | | 10.02 | | | | n/a | |
Lipper Mixed-Asset Target 2050 Funds | | | | | | | 51.94 | | | | n/a | | | | 11.62 | | | | n/a | | | | | | | | | | | | 12.01 | | | | n/a | |
S&P Target Date 2050 Index | | | | | | | 51.32 | | | | n/a | | | | 11.58 | | | | n/a | | | | | | | | | | | | 11.76 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2055 Fund - Class I | | | 2/27/2017 | | | | 40.89 | | | | n/a | | | | 9.72 | | | | n/a | | | | | | | | | | | | 10.24 | | | | n/a | |
Lipper Mixed-Asset Target 2055 Funds | | | | | | | 52.55 | | | | n/a | | | | 11.69 | | | | n/a | | | | | | | | | | | | 12.12 | | | | n/a | |
S&P Target Date 2055 Index | | | | | | | 51.99 | | | | n/a | | | | 11.63 | | | | n/a | | | | | | | | | | | | 11.84 | | | | n/a | |
| | | | | | | | | |
1290 Retirement 2060 Fund - Class I | | | 2/27/2017 | | | | 42.99 | | | | n/a | | | | 10.15 | | | | n/a | | | | | | | | | | | | 10.59 | | | | n/a | |
Lipper Mixed-Asset Target 2060 Funds | | | | | | | 53.02 | | | | n/a | | | | 11.78 | | | | n/a | | | | | | | | | | | | 12.21 | | | | n/a | |
S&P Target Date 2060+ Index | | | | | | | 52.11 | | | | n/a | | | | 11.73 | | | | n/a | | | | | | | | | | | | 11.96 | | | | n/a | |
166
Federal Income Tax Information (Unaudited)
| | | | | | | | | | | | | | | | |
Funds: | | 70% Dividend
Received
Deduction | | | Foreign
Taxes | | | Foreign
Source Income | | | Long Term
Capital Gain | |
1290 Diversified Bond | | | 0.00 | % | | $ | — | | | $ | — | | | $ | 1,259,904 | |
1290 DoubleLine Dynamic Allocation | | | 8.68 | | | | — | | | | 16,994 | | | | 1,965,664 | |
1290 GAMCO Small/Mid Cap Value | | | 100.00 | | | | — | | | | — | | | | — | |
1290 High Yield Bond | | | 0.00 | | | | — | | | | — | | | | — | |
1290 Multi-Alternative Strategies | | | 7.13 | | | | — | | | | — | | | | — | |
1290 Retirement 2020 | | | 29.47 | | | | 896 | | | | 47,198 | | | | 280,715 | |
1290 Retirement 2025 | | | 36.89 | | | | 1,752 | | | | — | | | | 407,870 | |
1290 Retirement 2030 | | | 44.50 | | | | — | | | | — | | | | 291,646 | |
1290 Retirement 2035 | | | 50.47 | | | | 977 | | | | 62,661 | | | | 314,610 | |
1290 Retirement 2040 | | | 54.45 | | | | 470 | | | | 27,991 | | | | 87,747 | |
1290 Retirement 2045 | | | 60.11 | | | | 734 | | | | 46,820 | | | | 177,383 | |
1290 Retirement 2050 | | | 62.85 | | | | 564 | | | | 34,292 | | | | 50,542 | |
1290 Retirement 2055 | | | 64.18 | | | | 532 | | | | 31,438 | | | | 43,156 | |
1290 Retirement 2060 | | | 68.42 | | | | 536 | | | | 31,338 | | | | 53,812 | |
1290 SmartBeta Equity | | | 85.71 | | | | — | | | | — | | | | 352,092 | |
167
MANAGEMENT OF THE TRUST (UNAUDITED)
The Trust’s Board is responsible for the overall management of the Trust and the Funds, including general supervision and review of the Funds’ investment activities and their conformity with federal and state law as well as the stated policies of the Funds. The Board elects the officers of the Trust who are responsible for administering the Trust’s day-to-day operations. The Trustees of the Trust are identified in the table below along with information as to their principal business occupations held during the last five years and certain other information are shown below. The SAI includes additional information about the Trust’s Board and is available at the Funds’ website www.1290funds.com and available without charge upon request by calling 1-888-310-0416 or by sending an e-mail request to 1290funds@dfinsolutions.com.
The Trustees
| | | | | | | | | | |
Name, Address and
Year of Birth | | Position(s)
Held With
Fund | | Term of
Office** and
Length of
Time Served | | Principal Occupation(s) During Past 5 Years | | Number of
Funds in Fund
Complex
Overseen by Trustee† | | Other Directorships
Held by Trustee
During Past 5 Years |
| |
| Interested Trustees |
Steven M. Joenk* 1290 Avenue of the Americas, New York, New York (1958) | | Trustee,
and Chief Executive Officer | | From October 1, 2017 to present, Trustee and Chief Executive Officer, from June 2014 through February 2020, President and from June 9, 2014 through September 30, 2017, Trustee, Chairman, President and Chief Executive Officer | | From May 2011 to present, Chairman of the Board, Chief Executive Officer and President, EIM; from July 2021 to present, Chairman of the Board, Chief Executive Officer and President, Equitable Investment Management, LLC; from April 2017 to 2019, Senior Vice President and Chief Investment Officer, of AXA Financial, Inc.; from April 2017 to present, Chief Investment Officer and from September 1999 to present, Managing Director, Equitable Financial. | | 127 | | None |
| |
| Independent Trustees |
Mark A. Barnard c/o 1290 Funds 1290 Avenue of the Americas New York, NY 10104 (1949) | | Trustee | | From February 27, 2017 to present | | Retired. Previously, Managing Director – Private Investments, Howard Hughes Medical Institute, 2001 to 2016 (and, prior thereto, Director of Private Investments from 1998 to 2001, and Manager of Private Investments from 1995 to 1998). | | 127 | | None. |
168
| | | | | | | | | | |
Name, Address and
Year of Birth | | Position(s)
Held With
Fund | | Term of
Office** and
Length of
Time Served | | Principal Occupation(s) During Past 5 Years | | Number of
Funds in Fund
Complex
Overseen by Trustee† | | Other Directorships
Held by Trustee
During Past 5 Years |
Thomas W. Brock c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104
(1947) | | Trustee | | From January 1, 2016 to present | | Retired. Previously, Director, President and Chief Executive Officer of Silver Bay Realty Trust Corp., June 2016 to May 2017 (and, prior thereto, Director and interim President and Chief Executive Officer from January 2016 to June 2016); Chief Executive Officer and Co-Founder of Stone Harbor Investment Partners, 2006 to 2012. | | 127 | | Liberty All-Star Funds (2) |
Michael B. Clement c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104
(1957) | | Trustee | | From
January 1, 2019 to present | | Professor of Accounting, University of Texas, 2011 to present; Department of Accounting Chair, September 2018 to present. | | 127 | | New York Mortgage Trust |
Donald E. Foley c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104
(1951) | | Trustee | | From June 9, 2014 to present | | Retired. Previously, Chairman of the Board and Chief Executive Officer, Wilmington Trust Corporation, 2010 to 2011; Senior Vice President, Treasurer and Director of Tax, ITT Corporation, 1996 to 2010. | | 127 | | BioSig Technologies, Inc.; Wilmington Funds (12) |
Christopher P.A. Komisarjevsky c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1945) | | Trustee | | From June 9, 2014 to present | | Retired. Previously, Senior Counselor for APCO Worldwide® (global communications consulting) and member of its International Advisory Council, 2006 to 2008; President and Chief Executive Officer, Burson- Marsteller Worldwide (public relations), 1998 to 2005. | | 127 | | None |
H. Thomas McMeekin c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104
(1953) | | Trustee | | From June 9, 2014 to present | | Managing Partner and Founder, Griffin Investments, LLC, 2000 to present; CEO of Blue Key Services, LLC., 2015 to present; previously, Chief Investment Officer, AIG Life & Retirement and United Guaranty Corporation and Senior Managing Director of AIG Asset Management, 2009 to 2012. | | 127 | | None |
Gloria D. Reeg c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1951) | | Trustee | | From February 27, 2017 to present | | Retired. Previously, Chief Investment Officer and Senior Vice President, New York-Presbyterian Hospital, 2007 to 2016. | | 127 | | None. |
169
| | | | | | | | | | |
Name, Address and
Year of Birth | | Position(s)
Held With
Fund | | Term of
Office** and
Length of
Time Served | | Principal Occupation(s) During Past 5 Years | | Number of
Funds in Fund
Complex
Overseen by Trustee† | | Other Directorships
Held by Trustee
During Past 5 Years |
Gary S. Schpero c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104
(1953) | | Chairman of the Board | | From June 9, 2014 to present Independent Trustee, from October 1, 2017 to present, Chairman of the Board and from June 9, 2014 through September 2017, Lead Independent Trustee | | Retired. Prior to January 1, 2000, Partner of Simpson Thacher & Bartlett (law firm) and Managing Partner of the Investment Management and Investment Company Practice Group. | | 127 | | Blackstone Funds (4) |
Kathleen Stephansen c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1954) | | Trustee | | From
January 1, 2019 to present | | .Senior Economist, Haver Analytics, 2019 to present; Senior Economic Advisor, Boston Consulting Group, 2018 to 2019 and in 2016; Chief Economist, Huawei Technologies USA Inc., 2016 to 2018; various positions at American International Group, including Chief Economist and Senior Managing Director and Senior Investment Strategies and Global Head of Sovereign Research – AIG Asset Management from 2010 to 2016. | | 127 | | None. |
Caroline L. Williams c/o 1290 Funds 1290 Avenue of the Americas New York, New York 10104 (1946) | | Trustee | | From June 9, 2014 to present | | Retired. Previously, Executive Vice President, Nathan Cummings Foundation (non-profit organization), July 2010 to December 2012 (and, prior thereto, Consultant from May 2005 to December 2007 and Chief Financial and Investment Officer from May 2001 to May 2005); Managing Director, Donaldson, Lufkin & Jenrette Securities Corporation (investment bank), 1988 to 1992 (and, prior thereto, various other positions from 1971 to 1988). | | 127 | | None. |
| * | Affiliated with the Adviser. |
| ** | Each Trustee serves during the existence of the Trust until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor or, if sooner, until he or she dies, declines to serve, resigns, retires, is removed, is incapacitated or is otherwise unable or unwilling to serve. Each Independent Trustee shall retire from the Board as of the last day of the calendar year in which he or she attains the age of 75 years. The Trust’s retirement policy is subject to periodic review by the Trust’s Governance Committee, which may recommend for Board approval any changes to the policy that it determines to be appropriate. |
| † | The registered investment companies in the fund complex include the EQ Premier VIP Trust, EQ Advisors Trust and 1290 Funds. Mr. Joenk serves as Trustee, President and Chief Executive Officer for each of the registered investment companies in the fund complex, except for the 1290 Funds for which he serves as Trustee and Chief Executive Officer. Mr. Schpero serves as Chairman of the Board for each such company. |
170
The Trust’s Officers
No officer of the Trust, other than the Chief Compliance Officer, receives any compensation paid by the Trust. Each officer of the Trust is an employee of Equitable Financial, EIM and/or Equitable Distributors, LLC. The Trust’s principal officers are:
| | | | | | |
| | | | |
Name, Address and
Year of Birth | | Position(s) Held
With Fund | | Term of Office and Length of Time Served* | | Principal Occupation(s) During Past 5 Years |
Steven M. Joenk 1290 Avenue of the Americas, New York, New York 10104
(1958) | | Trustee and Chief Executive Officer | | Trustee and Chief Executive Officer from June 2014 to present; President from June 2014 through February 2020 and Chairman of the Board from June 2014 through September 2017 | | From May 2011 to present, Chairman of the Board, Chief Executive Officer and President, EIM; from July 2021 to present, Chairman of the Board, Chief Executive Officer and President, Equitable Investment Management, LLC; from April 2017 to 2019, Senior Vice President and Chief Investment Officer of AXA Financial, Inc.; from April 2017 to present, Chief Investment Officer and from September 1999 to present Managing Director, Equitable Financial. |
Michal Levy 1290 Avenue of the Americas, New York, New York 10104 (1979) | | President | | President from February 2020 to Present, Vice President from June 2016 to February 2020 | | From December 2014 to present, member of the Board of Directors; from March 2017 to present, Senior Vice President and Chief Operating Officer of EIM; from July 2021 to present, Executive Vice President and Chief Operating Officer of Equitable Investment Management, LLC; from June 2014 to March 2017, Vice President of EIM; from April 2017 to present, Lead Director and from October 2013 to present, Senior Director of Equitable; from October 2011 to October 2013 and Assistant Vice President of Equitable Financial. |
William MacGregor 1290 Avenue of the Americas, New York, New York 10104 (1975) | | Chief Legal Officer, Senior Vice President and Secretary | | Senior Vice President and Secretary from August
2018 to present; Chief Legal Officer from October 2018 to present | | From August 2018 to present, Managing Director and Associate General Counsel of Equitable Financial; Executive Vice President and Secretary of EIM; from July 2021 to present, Executive Vice President, General Counsel and Secretary of Equitable Investment Management, LLC; from January 2017 to June 2018, Executive Director and Deputy General Counsel at UBS Business Solutions LLC; from July 2015 to June 2018, Executive Director and Deputy General Counsel at UBS Asset Management (Americas) Inc.; from June 2012 to July 2015, Senior Vice President, Secretary and Associate General Counsel of EIM; from May 2008 to July 2015, Lead Director and Associate Counsel of Equitable Financial. |
Brian Walsh 1290 Avenue of the Americas, New York, New York 10104 (1968) | | Chief Financial Officer and Treasurer | | From June 2014 to present | | From May 2011 to present, Senior Vice President of EIM; from July 2021 to present, Senior Vice President of Equitable Investment Management, LLC; from February 2011 to present, member of the Board of Directors of EIM; from February 2003 to present, Lead Director of Equitable Financial. |
Kenneth Kozlowski 1290 Avenue of the Americas New York, New York 10104
(1961) | | Senior Vice President and Chief Investment Officer | | From June 2014 to present | | From June 2012 to present, Executive Vice President and Chief Investment Officer of EIM; from July 2021 to present, Executive Vice President of Equitable Investment Management, LLC; from May 2011 to June 2012, Senior Vice President of EIM; from September 2011 to present, Managing Director of Equitable Financial and Equitable; from February 2001 to September 2011, Vice President of Equitable Financial. |
Joseph J. Paolo 1290 Avenue of the Americas, New York, New York 10104 (1970) | | Chief Compliance Officer and Vice President | | From June 2014 to present | | From May 2011 to present, Senior Vice President and Chief Compliance Officer of EIM; from July 2021 to present, Vice President and Chief Compliance Officer of Equitable Investment Management, LLC; from September 2011 to present, Managing Director of Equitable Financial; from February 2001 to September 2011, Vice President of Equitable Financial. |
171
| | | | | | |
| | | | |
Name, Address and
Year of Birth | | Position(s) Held
With Fund | | Term of Office and Length of Time Served* | | Principal Occupation(s) During Past 5 Years |
Alwi Chan 1290 Avenue of the Americas, New York, New York 10104
(1974) | | Vice President and Deputy Chief Investment Officer | | From June 2014 to present | | From June 2012 to present, Senior Vice President and Deputy Chief Investment Officer of EIM; from May 2011 to June 2012, Vice President of EIM; from February 2007 to present, Lead Director of Equitable. |
James Kelly 1290 Avenue of the Americas, New York, New York 10104 (1968) | | Controller | | From June 2014 to present | | From May 2011 to present, Vice President of EIM; from July 2021 to present, Vice President of Equitable Investment Management, LLC; from September 2008 to present, Senior Director of Equitable; from March 2006 to September 2008, Assistant Vice President, Equitable Financial. |
Roselle Ibanga 1290 Avenue of the Americas, New York, New York 10104 (1978) | | Assistant Controller | | From June 2014 to present | | From February 2009 to present, Director of Equitable Financial. |
Lisa Perrelli 1290 Avenue of the Americas, New York, New York 10104 (1974) | | Assistant Controller | | From June 2014 to present | | From November 2012 to present, Senior Director of Equitable; from September 2008 to November 2012, Assistant Vice President of Equitable Financial. |
Victoria Zozulya, Esq. 1290 Avenue of the Americas, New York, New York 10104 (1983) | | Vice President and Assistant Secretary | | From December 2018 to present. | | From September 2018 to present, Senior Director and Counsel of Equitable Financial; Vice President; Assistant Secretary and Associate General Counsel of EIM; from July 2021 to present, Vice President, Assistant Secretary and Associate General Counsel of Equitable Investment Management, LLC; from May 2011 to March 2014, Compliance Analyst, and from March 2014 to August 2018, Vice President and Assistant General Counsel, Neuberger Berman. |
Maureen E. Kane, Esq. 1290 Avenue of the Americas, New York, New York 10104 (1962) | | Vice President and Assistant Secretary | | From March 2019 to present. | | From February 2019 to present, Lead Director and Associate General Counsel of Equitable Financial; Senior Vice President and Associate General Counsel of EIM; from July 2021 to present, Senior Vice President, Assistant Secretary and Associate General Counsel of Equitable Investment Management, LLC; from July 2014 to February 2019, Managing Director and Managing Counsel of The Bank of New York Mellon. |
Carla Byer 1290 Avenue of the Americas, New York, New York 10104 (1976) | | Vice President | | From June 2017 to present | | From April 2017 to present, Vice President of EIM. From July 2021 to present, Vice President of Equitable Investment Management, LLC; From April 2014 through August 2016, Senior Vice President, Zealot Networks. From September 2008 through April 2012, Vice President of EIM. |
Patricia Cox 1290 Avenue of the Americas, New York, New York 10104 (1958) | | Vice President and Anti-Money Laundering Compliance Officer | | From June 2014 to present | | From June 2014 to present, Vice President of EIM; from April 2014 to present, Senior Director of Equitable; Operations Consultant for Wells Real Estate Funds March 2009-September 2010; Director of Transfer Agent Operations for Wells Real Estate Funds October 2010 - March 2014; Senior VP of Operations for the Equitable Enterprise Group of Funds August 2004-August 2008. |
Miao Hu 1290 Avenue of the Americas, New York, New York 10104 (1978) | | Vice President | | From June 2016 to present | | From November 2013 to December 2014, Lead Manager and from December 2014 to present, Director of Portfolio Analytics of EIM. |
Xavier Poutas 1290 Avenue of the Americas, New York, New York 10104 (1977) | | Vice President | | From June 2016 to present | | From May 2011 to present, Assistant Portfolio Manager of EIM and from June, 2016 to present, Vice President of EIM; from November 2008 to August 2013, Director, from September 2013 to present, Senior Director, and from October 2018 to present, Lead Director of Equitable Financial. |
Helen Lai 1290 Avenue of the Americas, New York, New York 10104 (1973) | | Assistant Vice President | | From June 2016 to present | | From February 2019 to present, Director and from March 2013 to January 2019, Pricing and Valuation-Compliance of EIM and Senior Manager of Equitable Financial. |
172
| | | | | | |
| | | | |
Name, Address and
Year of Birth | | Position(s) Held
With Fund | | Term of Office and Length of Time Served* | | Principal Occupation(s) During Past 5 Years |
Jennifer Mastronardi 1290 Avenue of the Americas, New York, New York 10104 (1985) | | Assistant Vice President | | From June 2014 to present | | From December 2018 to present, Senior Director and from February 2009 to November 2018, Director of Equitable Financial; from April 2015 to present, Vice President of EIM; from July 2021 to present, Vice President of Equitable Investment Management, LLC. |
Helen Espaillat 1290 Avenue of the Americas, New York, New York 10104 (1963) | | Assistant Secretary | | From June 2014 to present | | From April 2018 to present, Director and Assistant Secretary and from July 2004 to March 2018, Lead Manager/Legal Assistant of Equitable Financial; and from March 2015 to present, Assistant Vice President and Assistant Secretary of EIM; from July 2021 to present, Assistant Vice President and Assistant Secretary of Equitable Investment Management, LLC. |
Lorelei Fajardo 1290 Avenue of the Americas, New York, New York 10104 (1978) | | Assistant Secretary | | From June 2016 to present | | From July 2013 to present, Senior Manager/Legal Assistant of Equitable; from July 2008 to June 2013, Lead Associate/Legal Assistant of Equitable Financial. |
Bradley Tobin 1290 Avenue of the Americas, New York, New York 10104 (1974) | | Vice President – Director of Risk | | From September 2019 to present | | From January 2019 to present, Vice President of EIM; from July 2021 to present, Vice President of Equitable Investment Management, LLC; from January 2019 to Present, Director, Risk Management, Equitable Financial; from March 2007 to January 2017, Vice President, Investment Management, Prudential Financial, Inc.; from March 2005 to January 2017, Vice President, AST Investment Services, Inc.; from March 2016 to January 2017, Vice President, Prudential Investments LLC. |
Artemis Brannigan 1290 Avenue of the Americas, New York, New York 10104 (1974) | | Vice President | | From September 2019 to present | | From August 2019 to present, Senior Director of Equitable Financial; from July 2021 to present, Vice President of Equitable Investment Management, LLC; From January 2016 to July 2019, Director of Prudential Financial; From October 2006 to December 2015, Vice President of BlackRock. |
Kevin McCarthy 1290 Avenue of the Americas, New York, New York 10104 (1983) | | Vice President | | From September 2019 to present | | From December 2018 to present, Assistant Portfolio Manager and a Director of Equitable Financial. From August 2015 to November 2018, Lead Manager of Equitable Financial; From October 2013 to August 2015, Senior Quantitative Analyst at Aviva Investors. |
Cheryl Cherian 1290 Avenue of the Americas, New York, New York 10104 (1979) | | Assistant Secretary | | From July 2019 to present | | From April 2019 to present, Lead Manager – Legal Assistant of Equitable Financial; and from November 2016 to March 2018 worked at a mutual fund company. |
Monica Giron 1290 Avenue of the Americas, New York, New York 10104 (1976) | | Assistant Secretary | | From July 2019 to present | | From June 2019 to present, Lead Manager-Senior Legal Assistant of Equitable Financial; and from August 2015 to May 2019, Senior Paralegal at Gemini Fund Services. |
| * | The officers in the table above (except Patricia Cox) hold similar positions with other registered investment companies in the fund complex. The registered investment companies in the fund complex include the Trust, EQ Premier VIP Trust and EQ Advisors Trust. |
| ** | Each officer is elected on an annual basis. |
173
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES (UNAUDITED)
Equitable Investment Management Group, LLC may be deemed to be a control person with respect to the 1290 Funds by virtue of its ownership of a substantial majority of the 1290 Funds’ shares. Shareholders owning more than 25% of the outstanding shares of a Fund may be able to determine the outcome of most issues that are submitted to shareholders for a vote.
PROXY VOTING POLICIES AND PROCEDURES (UNAUDITED)
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (i) without charge, upon request, by calling a toll-free number at 1-888-310-0416 and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) on the Trust’s website at www.1290Funds.com and (ii) on the Securities and Exchange Commission’s website at http://www.sec.gov.
QUARTERLY PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Funds’ Form N-PORT filings are available on the Securities and Exchange Commission’s website at http://www.sec.gov.
174
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Visit the Funds’ Website: 1290Funds.com | |  |
| | |
| Must be accompanied or preceded by a Prospectus. 1290 Funds are distributed by ALPS Distributors, Inc. | | DFIN#133286 |
© 2021 Equitable Holdings, Inc. All rights reserved.
1290 Avenue of the Americas, New York, NY 10104.
Equitable Financial Life Insurance Company
As of the end of the period covered by this report, the registrant has adopted a “code of ethics,” as defined in Item 2, that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the registrant’s code of ethics is filed as an exhibit pursuant to Item 12(a)(1).
| Item 3. | Audit Committee Financial Expert. |
The registrant’s board of trustees has determined that Donald E. Foley and Caroline L. Williams serve on its audit committee as “audit committee financial experts” as defined in Item 3. Ms. Williams and Mr. Foley are considered to be “independent” for purposes of Item 3(a)(2).
| Item 4. | Principal Accountant Fees and Services. |
(a) Audit Fees for fiscal year 2021: $473,596 and for fiscal year 2020: $549,893.
(b) Audit-Related Fees fiscal year 2021: $0and for fiscal year 2020: $0.
(c) Tax Fees for fiscal year 2021:$162,162 and for fiscal year 2020: $232,600.
Tax fees include amounts related to tax compliance, tax advice and tax planning.
(d) All Other Fees for fiscal year 2021:$0 and for fiscal year 2020: $0.
All other fees include amounts related to consultation on or review of the registrant’s various regulatory filings.
(e)(1) The registrant’s audit committee has adopted policies and procedures relating to pre-approval of services performed by the registrant’s principal accountant for the registrant. Audit, audit-related and tax services provided to the registrant on an annual basis require pre-approval by the entire audit committee. In the event that the audit fees exceed the pre-approved estimated amount, the audit committee’s delegate, consisting of the audit committee chair, independent board chair, the registrant’s chief executive officer and chief financial officer, acting by at least three of such individuals, has the authority to increase the amount by up to 10% of the pre-approved amount. Any additional amount requires pre-approval by the entire audit committee. The audit committee chair or the independent board chair also has the authority to approve de minimis non-audit services (i.e., services in which the fee does not exceed $10,000 per engagement) to be provided by the registrant’s principal accountant for the registrant, provided that each such service is brought to the attention of the audit committee prior to the completion of the audit of the registrant’s financial statements.
(e)(2) None of the services included in (b) – (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) For fiscal year 2021: $ 0 and for fiscal year 2020: $0.
(h) The registrant’s audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-advisers whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
| Item 6. | Schedule of Investments. |
The Schedule of Investments is included as part of the annual report to Shareholders filed under Item 1 of this Form N-CSR.
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
| Item 11. | Controls and Procedures. |
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
| (b) | The registrant’s certifying officers are not aware of any changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not Applicable.
(a)(1) The Code of Ethics for Senior Officers of the Registrant is filed herewith.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed herewith.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
1290 FUNDS
| | |
| By: | | /s/ Steven M. Joenk |
| | Steven M. Joenk |
| | Chief Executive Officer |
| | December 29, 2021 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
/s/ Steven M. Joenk |
Steven M. Joenk |
Chief Executive Officer |
December 29, 2021 |
|
/s/ Brian E. Walsh |
Brian E. Walsh |
Chief Financial Officer |
December 29, 2021 |
