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)
SHANE DALY.
Executive Vice President, General Counsel and Secretary
Equitable Investment Management, LLC
1345 Avenue of the Americas
New York, New York 10105
(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, 2023
| Item 1. | Reports to Stockholders. |
Item 1(a):
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, 2023
1290 Funds
Annual Report
October 31, 2023
Table of Contents
Market Overview for the year ended October 31, 2023
Bonds
In the past year, 10-year U.S. Treasury rates went up almost 90 basis points, a major headwind for fixed-income assets. At the beginning of the reporting period, investment-grade credit spreads, a measure of perceived risk in the bond market, signaled a more benign outlook, narrowing as the third quarter of 2022’s GDP was revised higher despite tighter monetary policy aimed at cooling economic activity, adding to hopes a recession would be avoidable. The market began 2023 on a positive note, due to signs of moderating inflation and hopes that the world’s central banks would be less aggressive in terms of tightening monetary policy. Investor sentiment reversed course in February, however, as robust economic data — and an increase in inflation numbers — renewed higher rate fears. Volatility intensified in March when the instability in small regional banks unnerved investors. Nonetheless, the 10-year U.S. Treasury yield fell from 3.9% to 3.5% over the first quarter of 2023 and the Bloomberg U.S. Aggregate Bond Index returned 3.0%.
The U.S. fixed-income market was volatile and weakened during the second quarter of 2023. As recession concerns began to moderate, the 10-year U.S. Treasury rate moved higher over the quarter, ending at 3.81%, and the Bloomberg U.S. Aggregate Bond Index returned -0.84%. As the reporting period came to an end, the market initially rallied given signs of moderating inflation, expectations for less monetary policy tightening, and hopes for a soft economic landing—but was disappointed that the U.S. Federal Reserve later signaled that it wouldn’t start cutting rates until June 2024. The U.S. bond market’s gains for the year were almost completely erased, and the Bloomberg Aggregate was roughly flat for the year ended 10/31/2023, with a gain of 0.3%.
Stocks
Global equities recovered over the past 12 months as investors were able to shake off recession concerns in the world’s largest economies, a jittery U.S. banking sector, US debt-ceiling concerns, a faltering recovery in China, and generally stubbornly high inflation. Returns were thus positive, with the MSCI All Country World Index up 10.5% for the year ended 10/31/2023. Nearly all the return has been driven by the so-called “Magnificent Seven” U.S. stocks (NVIDIA, Apple, Microsoft, Meta, Amazon, Tesla, and Alphabet) amid enthusiasm for the prospects for Artificial Intelligence with mega-cap technology stocks being the main perceived beneficiaries.
The market’s behavior was not without volatility, however. Initially, investors appeared to anticipate that central banks would soon be able to shift monetary policy towards a reduction in interest rates. The Fed’s mid-Summer pause in its rate-hiking cycle provided strong support to equity markets through the end of July, and markets went into August with attractive gains, led by a 20.7% in year-to-date rise in the S&P 500 Index. But as summer unfolded, it became clear that inflation remained elevated, which brought a general consensus that interest rates would have to stay at high levels for a longer period than anticipated. This led to a souring of sentiment late summer as surging oil prices, Chinese economic uncertainty and a rising risk of default in its beleaguered property sector, and a steep rise in borrowing costs caused havoc. Equity markets around the world gave back 9.6% of their value from August through the end of October. Even the technology giants which had dominated market returns so far, benefitting from the hype around artificial intelligence (AI), went into reverse.
The year saw a strong divergence in returns across sectors, countries and styles. Communication services and technology delivered the strongest returns, supported by expected strong growth in demand for artificial intelligence technologies. Energy recovered in the final part of the period under review, delivering strong returns as oil prices surge amid production cuts in the Middle East and Russia. More defensive and interest-rate sensitive sectors such as utilities, consumer staples, healthcare and real estate lagged. From a country standpoint, as concerns for the strength of the Chinese economy grew, Asian developed and emerging markets lagged. Japan equities delivered by far the strongest returns for investors supported by currency depreciation and stock market reforms.
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
1290 Diversified Bond Fund
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.
1290 Essex Small Cap Growth Fund
Russell 2000® Growth Index measures the performance of those Russell 2000® Index companies with higher price-to-book ratios and higher forecasted growth values. It is market-capitalization weighted.
1290 GAMCO Small/Mid Cap Value Fund
Russell 2500TM 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.
1290 High Yield Bond Fund
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.
1290 Loomis Sayles Multi-Asset Income Fund
20% MSCI World High Dividend Yield Index/20% Cboe S&P 500 BuyWrite IndexSM/30% Bloomberg U.S. Corporate High Yield Index/30% Bloomberg U.S. Aggregate Bond Index is a hypothetical combination of unmanaged indexes. The composite or “blended” index combines the total return of the MSCI World High Dividend Yield Index at a weighting of 20%, the Cboe S&P500 BuyWrite IndexSM at a weighing of 20%, the Bloomberg U.S. Corporate High Yield Index at a weighting of 30% and the Bloomberg U.S. Aggregate Bond Index at a weighting of 30%.
Morgan Stanley Capital International (MSCI) World High Dividend Yield Index is based on the MSCI World Index, its parent index, and includes large and mid-cap stocks across 23 Developed Markets countries. The index is designed to reflect the performance of equities in the parent index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. The index also applies quality screens and reviews 12-month past performance to omit stocks with potentially deteriorating fundamentals that could force them to cut or reduce dividends. The MSCI World High Dividend Yield Index is net of withholding taxes for dividend payments.
The Cboe S&P 500 BuyWrite IndexSM is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index®.
Bloomberg U.S. Corporate High Yield Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on the indices’ EM country definition, are excluded. The Bloomberg U.S. Corporate High Yield Index is a component of the US Universal and Global High Yield Indices.
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.
Prior to August 19, 2022 the benchmark was a blend of the S&P 500® Index (60%) and the Bloomberg U.S. Aggregate Bond Index (40%)
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.
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
2
NOTES ON PERFORMANCE (Unaudited)
corporate securities, agency fixed rate and hybrid adjustable mortgage pass through securities, asset-backed securities and commercial mortgage-backed securities.
1290 Multi-Alternative Strategies Fund
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.
1290 Retirement Fund Series
S&P Target Date® Index Series 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.
1290 SmartBeta Equity Fund
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.
Other indices mentioned:
Bloomberg Global Aggregate Index is a flagship measure of global investment grade debt from twenty- four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg U.S. Corporate High Yield Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on the indices’ EM country definition, are excluded. The Bloomberg U.S. Corporate High Yield Index is a component of the U.S. Universal and Global High Yield Indices.
MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 24 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.”
Russell 1000® Index measures the performance of approximately 1,000 of the largest companies in the Russell 3000® Index and represents approximately 92% of the total market capitalization of the Russell 3000® Index. It is market-capitalization weighted.
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.
Glossary
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.”
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.
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 return 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.
Mortgage backed security (MBS) is a type of asset- backed security that is secured by a mortgage or collection of mortgages.
Swap is a derivative contract through which two parties exchange financial instruments.
3
NOTES ON PERFORMANCE (Unaudited)
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.
4
1290 DIVERSIFIED BOND FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | Brandywine Global Investment Management, LLC (Brandywine Global) |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | (1.50 | )% | | | 0.48 | % | | | 0.83 | % |
| | | with Sales Charge (a) | | | (5.91 | ) | | | (0.45 | ) | | | 0.27 | |
Fund – Class I Shares* | | | | | (1.23 | ) | | | 0.69 | | | | 1.06 | |
Fund – Class R Shares* | | | | | (1.66 | ) | | | 0.21 | | | | 0.57 | |
Bloomberg U.S. Aggregate Bond Index | | | | | 0.36 | | | | (0.06 | ) | | | 0.45 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratios for Class A, I and R shares were 1.20%, 0.95% and 1.46%, 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, 2024. 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 (1.23)% for the year ended October 31, 2023. The Fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, returned 0.36% over the same year.
Overview — Brandywine Global Investment Management, LLC (Brandywine Global)
Market notes
At the beginning of the reporting period, the 10-year U.S. Treasury rate was volatile, but overall rose a modest five bps from 3.83% to 3.88%. Investment-grade credit spreads managed to narrow as the third quarter of 2022’s Gross Domestic Product, or GDP, was revised higher, despite tighter monetary policy aimed at cooling economic activity, in addition to hopes that a recession might be avoidable. The market began 2023 on a positive note, due to signs of moderating inflation and hopes that central banks would be less aggressive in terms of tightening monetary policy. Investor sentiment then reversed course in February as robust economic data, including an increase in inflation, triggered higher rate expectations. Volatility intensified in March when the instability in small regional banks unnerved investors. All told, the 10-year U.S. Treasury yield fell from 3.9% to 3.5% over the first quarter of 2023 and the Bloomberg U.S. Aggregate Bond Index returned 3.0%.
The U.S. fixed income market was volatile and weakened during the second quarter of 2023. As recession concerns began to moderate, the 10-year U.S. Treasury rate moved higher over the quarter, ending at 3.81%, and the Bloomberg U.S. Aggregate Bond Index returned -0.84%. After rising over the first half of 2023, the U.S. bond market’s gains were erased during the third
5
1290 DIVERSIFIED BOND FUND (Unaudited)
quarter of 2023. The market initially rallied given signs of moderating inflation, expectations for less monetary policy tightening, and hopes for a soft economic landing — but was disappointed that the Federal Reserve later signaled that it wouldn’t start cutting rates until June 2024.
What helped performance during the year?
| • | | Over the 12-month period, the largest contributor to relative performance was an overweight position in select emerging market debt, with the largest additive performance coming from Colombian and Brazilian debt, where central banks in the region have toned down their hawkish rhetoric with expectations for rate cuts. Other emerging market debt in Peru and Poland also added to performance. |
| • | | Overweight positioning in U.S. corporate bonds was additive to relative and absolute performance over the 12-month period. Investment-grade and high-yield spreads, a measure of the market’s assessment of risk, have been mixed over the past 12 months. |
| • | | Among currencies, positioning in the Colombian peso was the largest individual contributor over the past twelve months as the Colombian peso had very strong gains to start 2023. Also contributing positively were emerging market currencies like the Polish zloty and Thai baht. |
What hurt performance during the year?
| • | | An overweight to long-dated U.S. Treasuries was the key detractor on both a relative and absolute basis, as U.S. rates continued to increase, with the market pricing in a “higher-for-longer” environment — a reference to expectations for the Federal Reserve’s interest-rate policy. While this safe-haven duration detracted from performance, we continue to believe that this ballast against a meaningful downturn in growth is warranted given the dangers in the macroeconomic outlook. |
| • | | An overweight to agency mortgage-backed securities detracted from relative performance over the last 12 months. Spreads have widened since October 2022, mostly due to interest-rate volatility and the exit of the largest mortgage-backed security (MBS) buyer, the Federal Reserve. |
| • | | Among currencies, on a one-year basis, an overweight in the Japanese yen was the largest detractor from relative performance. The Japanese yen’s 2023 performance year to date has prompted speculation that the Japanese government may intervene to prop up its currency; given Japan’s high inflation, we believe the Japanese government prefers a strong yen. |
The primary use of derivatives by the Fund is for its various currency exposures where we utilize currency forwards. We may also use futures or other derivatives for additional exposures where we choose to not hold actual bonds.
| | | | |
| | |
Fund Characteristics
As of October 31, 2023 | | | |
Weighted Average Life (Years) | | | 14.18 | |
Weighted Average Coupon (%) | | | 4.80 | |
Weighted Average Effective Duration (Years)* | | | 9.09 | |
Weighted Average Rating** | | | AA | |
| |
* 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, 2023 | | % of
Net Assets | |
Mortgage-Backed Securities | | | 37.0 | % |
U.S. Treasury Obligations | | | 35.8 | |
Foreign Government Securities | | | 12.9 | |
Energy | | | 2.7 | |
Investment Companies | | | 2.6 | |
Financials | | | 1.9 | |
Information Technology | | | 1.1 | |
Communication Services | | | 1.0 | |
Real Estate | | | 0.8 | |
Health Care | | | 0.5 | |
Materials | | | 0.2 | |
Cash and Other | | | 3.5 | |
| | | | | |
| | | | 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.
6
1290 DIVERSIFIED BOND FUND (Unaudited)
The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended October 31, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses Paid During Period*
5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $884.60 | | | | $3.56 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.42 | | | | 3.82 | |
Class I | |
Actual | | | 1,000.00 | | | | 885.30 | | | | 2.38 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.68 | | | | 2.55 | |
Class R | |
Actual | | | 1,000.00 | | | | 883.60 | | | | 4.75 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.16 | | | | 5.09 | |
| |
* Expenses are equal to the Fund’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). | |
7
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
LONG-TERM DEBT SECURITIES: | |
Convertible Bond (0.6%) | |
Information Technology (0.6%) | | | | | |
Technology Hardware, Storage & Peripherals (0.6%) | |
Western Digital Corp.
1.500%, 2/1/24 (e) | | $ | 3,450,000 | | | $ | 3,406,875 | |
| | | | | | | | |
Total Information Technology | | | | | | | 3,406,875 | |
| | | | | | | | |
Total Convertible Bond | | | | | | | 3,406,875 | |
| | | | | | | | |
Corporate Bonds (7.6%) | |
Communication Services (1.0%) | | | | | |
Diversified Telecommunication Services (0.5%) | |
Altice France SA 5.500%, 1/15/28§ | | | 3,800,000 | | | | 2,812,000 | |
| | | | | | | | |
Media (0.5%) | |
Charter Communications Operating LLC 6.484%, 10/23/45 | | | 3,330,000 | | | | 2,809,721 | |
| | | | | | | | |
Total Communication Services | | | | | | | 5,621,721 | |
| | | | | | | | |
Energy (2.7%) | | | | | |
Oil, Gas & Consumable Fuels (2.7%) | |
Baytex Energy Corp. 8.500%, 4/30/30 (x)§ | | | 2,219,000 | | | | 2,196,810 | |
Devon Energy Corp. 7.875%, 9/30/31 | | | 1,190,000 | | | | 1,274,451 | |
Petroleos Mexicanos 5.350%, 2/12/28 | | | 14,860,000 | | | | 11,937,781 | |
| | | | | | | | |
Total Energy | | | | | | | 15,409,042 | |
| | | | | | | | |
Financials (1.9%) | | | | | |
Capital Markets (1.2%) | |
Ares Capital Corp.
4.250%, 3/1/25 (x) | | | 1,070,000 | | | | 1,029,374 | |
Golub Capital BDC, Inc. 2.500%, 8/24/26 | | | 5,275,000 | | | | 4,614,811 | |
UBS Group AG
(US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 2.00%), 6.301%, 9/22/34 (k)§ | | | 1,670,000 | | | | 1,583,157 | |
| | | | | | | | |
| | | | | | | 7,227,342 | |
| | | | | | | | |
Financial Services (0.7%) | |
Freedom Mortgage Corp. 6.625%, 1/15/27§ | | | 3,210,000 | | | | 2,775,526 | |
United Wholesale Mortgage LLC
5.500%, 4/15/29§ | | | 1,271,000 | | | | 1,067,640 | |
| | | | | | | | |
| | | | | | | 3,843,166 | |
| | | | | | | | |
Total Financials | | | | | | | 11,070,508 | |
| | | | | | | | |
Health Care (0.5%) | | | | | |
Health Care Providers & Services (0.5%) | |
DaVita, Inc. 4.625%, 6/1/30§ | | | 3,530,000 | | | | 2,743,869 | |
| | | | | | | | |
Total Health Care | | | | | | | 2,743,869 | |
| | | | | | | | |
Information Technology (0.5%) | | | | | |
Technology Hardware, Storage & Peripherals (0.5%) | |
Dell International LLC 3.375%, 12/15/41 | | | 4,790,000 | | | | 3,088,723 | |
| | | | | | | | |
Total Information Technology | | | | | | | 3,088,723 | |
| | | | | | | | |
Materials (0.2%) | | | | | |
Metals & Mining (0.2%) | |
First Quantum Minerals Ltd. 7.500%, 4/1/25§ | | | 1,380,000 | | | | 1,286,988 | |
| | | | | | | | |
Total Materials | | | | | | | 1,286,988 | |
| | | | | | | | |
Real Estate (0.8%) | | | | | |
Specialized REITs (0.8%) | |
Equinix, Inc. (REIT) 2.500%, 5/15/31 | | | 5,925,000 | | | | 4,523,452 | |
| | | | | | | | |
Total Real Estate | | | | | | | 4,523,452 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 43,744,303 | |
| | | | | | | | |
Foreign Government Securities (12.9%) | |
Mex Bonos Desarr Fix Rt | | | | | | | | |
Series M
8.000%, 7/31/53 | | MXN | 391,500,000 | | | | 17,419,133 | |
Republic of South Africa | | | | | | | | |
Series 2048
8.750%, 2/28/48 | | ZAR | 940,050,000 | | | | 35,268,008 | |
Titulos de Tesoreria | | | | | | | | |
Series B
7.250%, 10/26/50 | | COP | 139,480,000,000 | | | | 21,149,045 | |
| | | | | | | | |
Total Foreign Government Securities | | | | | | | 73,836,186 | |
| | | | | | | | |
Mortgage-Backed Securities (37.0%) | |
FHLMC UMBS
4.000%, 7/1/52 | | $ | 30,128,728 | | | | 26,085,637 | |
FNMA UMBS
5.000%, 10/1/52 | | | 1,897,686 | | | | 1,751,668 | |
5.000%, 11/1/52 | | | 30,635,941 | | | | 28,278,652 | |
5.500%, 12/1/52 | | | 3,795,173 | | | | 3,606,702 | |
5.500%, 1/1/53 | | | 30,282,444 | | | | 28,769,130 | |
GNMA
5.000%, 10/20/52 | | | 3,290,940 | | | | 3,066,523 | |
5.500%, 10/20/52 | | | 27,598,648 | | | | 26,403,359 | |
5.000%, 2/20/53 | | | 12,535,264 | | | | 11,684,372 | |
5.500%, 2/20/53 | | | 7,380,428 | | | | 7,067,703 | |
5.000%, 3/20/53 | | | 13,569,940 | | | | 12,657,295 | |
5.500%, 4/20/53 | | | 22,711,735 | | | | 21,742,291 | |
5.500%, 5/20/53 | | | 16,301,798 | | | | 15,595,772 | |
5.000%, 6/20/53 | | | 10,313,254 | | | | 9,605,939 | |
5.500%, 6/20/53 | | | 5,982,298 | | | | 5,723,207 | |
6.000%, 8/20/53 | | | 10,170,996 | | | | 9,973,301 | |
| | | | | | | | |
Total Mortgage-Backed Securities | | | | | | | 212,011,551 | |
| | | | | | | | |
See Notes to Financial Statements.
8
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
U.S. Treasury Obligations (35.8%) | |
U.S. Treasury Bonds
2.875%, 5/15/52 | | $ | 110,040,000 | | | $ | 74,001,757 | |
U.S. Treasury Notes
3.875%, 8/15/33 | | | 142,030,000 | | | | 131,045,641 | |
| | | | | | | | |
Total U.S. Treasury Obligations | | | | | | | 205,047,398 | |
| | | | | | | | |
Total Long-Term Debt Securities (93.9%)
(Cost $579,734,419) | | | | | | | 538,046,313 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (2.6%) | | | | | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 114,350 | | | | 114,350 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 14,897,596 | | | | 14,903,555 | |
| | | | | | | | |
Total Investment Companies | | | | 15,017,905 | |
| | | | | |
Total Short-Term Investments (2.6%)
(Cost $15,017,905) | | | | | | | 15,017,905 | |
| | | | | | | | |
Total Investments in Securities (96.5%)
(Cost $594,752,324) | | | | | | | 553,064,218 | |
Other Assets Less Liabilities (3.5%) | | | | 20,055,549 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 573,119,767 | |
| | | | | | | | |
| § | 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, 2023, the market value of these securities amounted to $14,465,990 or 2.5% of net assets. |
| (e) | Step Bond — Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2023. 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, 2023. |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $112,023. This was collateralized by cash of $114,350 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | EUR | — European Currency Unit |
| | FHLMC | — Federal Home Loan Mortgage Corp. |
| | FNMA | — Federal National Mortgage Association |
| | GNMA | — Government National Mortgage Association |
| | REIT | — Real Estate Investment Trust |
| | UMBS | — Uniform Mortgage-Backed Securities |
| | USD | — United States Dollar |
| | | | |
| |
Country Diversification As a Percentage of Total Net Assets | |
Canada | | | 0.4 | % |
Colombia | | | 3.7 | |
France | | | 0.5 | |
Mexico | | | 5.1 | |
South Africa | | | 6.1 | |
Switzerland | | | 0.3 | |
United States | | | 80.2 | |
Zambia | | | 0.2 | |
Cash and Other | | | 3.5 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
| | | | | |
See Notes to Financial Statements.
9
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Futures contracts outstanding as of October 31, 2023 (Note 1):
| | | | | | | | | | | | | | | | | | | | |
Description | | Number of
Contracts | | | Expiration
Date | | | Trading
Currency | | | Notional
Amount ($) | | | Value and
Unrealized
Appreciation
(Depreciation) ($) | |
Long Contracts | |
U.S. Treasury 5 Year Note | | | 4,983 | | | | 12/2023 | | | | USD | | | | 520,606,713 | | | | (9,219,688 | ) |
U.S. Treasury 10 Year Ultra Note | | | 165 | | | | 12/2023 | | | | USD | | | | 17,956,641 | | | | (207,608 | ) |
U.S. Treasury Ultra Bond | | | 213 | | | | 12/2023 | | | | USD | | | | 23,975,813 | | | | (1,334,248 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (10,761,544 | ) |
| | | | | | | | | | | | | | | | | | | | |
Short Contracts | |
Japan 10 Year Bond | | | (177 | ) | | | 12/2023 | | | | JPY | | | | (167,862,444 | ) | | | 2,925,911 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 2,925,911 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | (7,835,633 | ) |
| | | | | | | | | | | | | | | | | | | | |
Forward Foreign Currency Contracts outstanding as of October 31, 2023 (Note 1):
| | | | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement
Date | | | Unrealized
Appreciation
(Depreciation) ($) | |
EUR | | | 3,380,000 | | | | USD | | | | 3,570,125 | | | JPMorgan Chase Bank | | | 11/7/2023 | | | | 6,958 | |
USD | | | 16,693,539 | | | | EUR | | | | 15,090,000 | | | JPMorgan Chase Bank | | | 11/7/2023 | | | | 723,662 | |
HUF | | | 6,520,000,000 | | | | USD | | | | 17,780,687 | | | Barclays Bank plc | | | 11/14/2023 | | | | 219,312 | |
ZAR | | | 22,900,000 | | | | USD | | | | 1,206,802 | | | Barclays Bank plc | | | 11/15/2023 | | | | 20,492 | |
ZAR | | | 63,200,000 | | | | USD | | | | 3,333,953 | | | Goldman Sachs Bank USA | | | 11/15/2023 | | | | 53,165 | |
ZAR | | | 296,800,000 | | | | USD | | | | 15,803,542 | | | Morgan Stanley | | | 11/15/2023 | | | | 103,052 | |
USD | | | 892,231 | | | | GBP | | | | 710,000 | | | Citibank NA | | | 12/8/2023 | | | | 29,041 | |
USD | | | 79,151,756 | | | | GBP | | | | 62,950,000 | | | JPMorgan Chase Bank | | | 12/8/2023 | | | | 2,619,627 | |
CHF | | | 1,070,000 | | | | USD | | | | 1,172,904 | | | JPMorgan Chase Bank | | | 12/12/2023 | | | | 8,840 | |
CHF | | | 560,000 | | | | USD | | | | 617,787 | | | Morgan Stanley | | | 12/12/2023 | | | | 696 | |
USD | | | 62,912,164 | | | | CHF | | | | 55,570,000 | | | Goldman Sachs Bank USA | | | 12/12/2023 | | | | 1,538,763 | |
USD | | | 18,461,397 | | | | JPY | | | | 2,728,000,000 | | | Barclays Bank plc | | | 12/15/2023 | | | | 329,027 | |
USD | | | 30,597,379 | | | | JPY | | | | 4,444,000,000 | | | Citibank NA | | | 12/15/2023 | | | | 1,059,164 | |
USD | | | 1,288,853 | | | | JPY | | | | 190,000,000 | | | Goldman Sachs Bank USA | | | 12/15/2023 | | | | 25,968 | |
USD | | | 579,116 | | | | JPY | | | | 86,000,000 | | | HSBC Bank plc | | | 12/15/2023 | | | | 7,494 | |
USD | | | 36,173,896 | | | | JPY | | | | 5,396,000,000 | | | Morgan Stanley | | | 12/15/2023 | | | | 307,963 | |
USD | | | 43,391,753 | | | | NOK | | | | 471,100,000 | | | Morgan Stanley | | | 1/18/2024 | | | | 1,124,872 | |
CLP | | | 15,960,000,000 | | | | USD | | | | 17,168,051 | | | Morgan Stanley** | | | 1/26/2024 | | | | 569,303 | |
MXN | | | 313,500,000 | | | | USD | | | | 16,851,939 | | | Citibank NA | | | 1/29/2024 | | | | 268,804 | |
| | | | | | | | | | | | | | | | | | | | | | |
Total unrealized appreciation | | | | | | | 9,016,203 | |
| | | | | | | | |
EUR | | | 11,710,000 | | | | USD | | | | 12,783,104 | | | Morgan Stanley | | | 11/7/2023 | | | | (390,311 | ) |
CLP | | | 16,850,000,000 | | | | USD | | | | 19,612,864 | | | HSBC Bank plc** | | | 11/8/2023 | | | | (792,358 | ) |
USD | | | 18,616,098 | | | | CLP | | | | 16,850,000,000 | | | HSBC Bank plc** | | | 11/8/2023 | | | | (204,408 | ) |
HUF | | | 12,450,000,000 | | | | USD | | | | 34,756,044 | | | Morgan Stanley | | | 11/14/2023 | | | | (384,881 | ) |
USD | | | 33,041,401 | | | | HUF | | | | 12,450,000,000 | | | Barclays Bank plc | | | 11/14/2023 | | | | (1,329,762 | ) |
USD | | | 38,592,220 | | | | ZAR | | | | 729,200,000 | | | Goldman Sachs Bank USA | | | 11/15/2023 | | | | (488,267 | ) |
CZK | | | 1,128,000,000 | | | | USD | | | | 49,352,908 | | | Citibank NA | | | 11/16/2023 | | | | (799,509 | ) |
CZK | | | 434,000,000 | | | | USD | | | | 18,951,634 | | | Morgan Stanley | | | 11/16/2023 | | | | (270,628 | ) |
USD | | | 23,996,761 | | | | CZK | | | | 563,000,000 | | | Barclays Bank plc | | | 11/16/2023 | | | | (236,895 | ) |
USD | | | 23,712,708 | | | | CZK | | | | 554,000,000 | | | Goldman Sachs Bank USA | | | 11/16/2023 | | | | (133,553 | ) |
USD | | | 17,950,655 | | | | CZK | | | | 423,000,000 | | | Morgan Stanley | | | 11/16/2023 | | | | (256,870 | ) |
USD | | | 943,188 | | | | CZK | | | | 22,000,000 | | | UBS AG | | | 11/16/2023 | | | | (3,775 | ) |
GBP | | | 16,530,000 | | | | USD | | | | 20,988,554 | | | Barclays Bank plc | | | 12/8/2023 | | | | (892,031 | ) |
GBP | | | 37,020,000 | | | | USD | | | | 45,193,268 | | | HSBC Bank plc | | | 12/8/2023 | | | | (185,810 | ) |
GBP | | | 10,110,000 | | | | USD | | | | 12,860,678 | | | JPMorgan Chase Bank | | | 12/8/2023 | | | | (569,339 | ) |
CHF | | | 510,000 | | | | USD | | | | 567,772 | | | Morgan Stanley | | | 12/12/2023 | | | | (4,511 | ) |
USD | | | 18,548,696 | | | | CHF | | | | 16,960,000 | | | Goldman Sachs Bank USA | | | 12/12/2023 | | | | (182,506 | ) |
See Notes to Financial Statements.
10
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | | | | | | | | | | | | | | | |
Currency Purchased | | | Currency Sold | | | Counterparty | | Settlement
Date | | | Unrealized
Appreciation
(Depreciation) ($) | |
JPY | | | 20,218,000,000 | | | | USD | | | | 139,169,581 | | | JPMorgan Chase Bank | | | 12/15/2023 | | | | (4,785,327 | ) |
NOK | | | 471,100,000 | | | | USD | | | | 43,817,549 | | | Morgan Stanley | | | 1/18/2024 | | | | (1,550,668 | ) |
USD | | | 3,586,400 | | | | EUR | | | | 3,380,000 | | | JPMorgan Chase Bank | | | 2/7/2024 | | | | (6,795 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Total unrealized depreciation | | | | | | | (13,468,204 | ) |
| | | | | | | | |
Net unrealized depreciation | | | | | | | (4,452,001 | ) |
| | | | | | | | |
| ** | Non-deliverable forward. |
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, 2023:
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: | |
Convertible Bonds | | | | | | | | | | | | | | | | |
Information Technology | | $ | — | | | $ | 3,406,875 | | | $ | — | | | $ | 3,406,875 | |
Corporate Bonds | | | | | | | | | | | | | | | | |
Communication Services | | | — | | | | 5,621,721 | | | | — | | | | 5,621,721 | |
Energy | | | — | | | | 15,409,042 | | | | — | | | | 15,409,042 | |
Financials | | | — | | | | 11,070,508 | | | | — | | | | 11,070,508 | |
Health Care | | | — | | | | 2,743,869 | | | | — | | | | 2,743,869 | |
Information Technology | | | — | | | | 3,088,723 | | | | — | | | | 3,088,723 | |
Materials | | | — | | | | 1,286,988 | | | | — | | | | 1,286,988 | |
Real Estate | | | — | | | | 4,523,452 | | | | — | | | | 4,523,452 | |
Foreign Government Securities | | | — | | | | 73,836,186 | | | | — | | | | 73,836,186 | |
Forward Currency Contracts | | | — | | | | 9,016,203 | | | | — | | | | 9,016,203 | |
Futures | | | 2,925,911 | | | | — | | | | — | | | | 2,925,911 | |
Mortgage-Backed Securities | | | — | | | | 212,011,551 | | | | — | | | | 212,011,551 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 15,017,905 | | | | — | | | | — | | | | 15,017,905 | |
U.S. Treasury Obligations | | | — | | | | 205,047,398 | | | | — | | | | 205,047,398 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 17,943,816 | | | $ | 547,062,516 | | | $ | — | | | $ | 565,006,332 | |
| | | | | | | | | | | | | | | | |
Liabilities: | |
Forward Currency Contracts | | $ | — | | | $ | (13,468,204 | ) | | $ | — | | | $ | (13,468,204 | ) |
Futures | | | (10,761,544 | ) | | | — | | | | — | | | | (10,761,544 | ) |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | (10,761,544 | ) | | $ | (13,468,204 | ) | | $ | — | | | $ | (24,229,748 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,182,272 | | | $ | 533,594,312 | | | $ | — | | | $ | 540,776,584 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
11
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Fair Values of Derivative Instruments as of October 31, 2023:
| | | | | | |
| | | Statement of Assets and Liabilities | |
Derivatives Contracts^ | | Asset Derivatives | | Fair Value | |
Interest rate contracts | | Receivables, Net assets – Unrealized appreciation | | $ | 2,925,911 | * |
Foreign exchange contracts | | Receivables | | | 9,016,203 | |
| | | | | | |
Total | | | | $ | 11,942,114 | |
| | | | | | |
| | |
| | | Liability Derivatives | | | |
Interest rate contracts | | Payables, Net assets – Unrealized depreciation | | $ | (10,761,544 | )* |
Foreign exchange contracts | | Payables | | | (13,468,204 | ) |
| | | | | | |
Total | | | | $ | (24,229,748 | ) |
| | | | | | |
| * | 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. |
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2023:
| | | | | | | | | | | | | | | | |
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Futures | | | Forward
Foreign
Currency
Contracts | | | Swaps | | | Total | |
Interest rate contracts | | $ | (22,438,763 | ) | | $ | — | | | $ | 1,120,641 | | | $ | (21,318,122 | ) |
Foreign exchange contracts | | | — | | | | (18,117,300 | ) | | | — | | | | (18,117,300 | ) |
Credit contracts | | | — | | | | — | | | | 3,345,844 | | | | 3,345,844 | |
| | | | | | | | | | | | | | | | |
Total | | $ | (22,438,763 | ) | | $ | (18,117,300 | ) | | $ | 4,466,485 | | | $ | (36,089,578 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Futures | | | Forward
Foreign
Currency
Contracts | | | Swaps | | | Total | |
Interest rate contracts | | $ | 3,933,486 | | | $ | — | | | $ | — | | | $ | 3,933,486 | |
Foreign exchange contracts | | | — | | | | (9,152,753 | ) | | | — | | | | (9,152,753 | ) |
Credit contracts | | | — | | | | — | | | | (444,642 | ) | | | (444,642 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 3,933,486 | | | $ | (9,152,753 | ) | | $ | (444,642 | ) | | $ | (5,663,909 | ) |
| | | | | | | | | | | | | | | | |
^ The Fund held forward foreign currency contracts, futures contracts and swaps contracts as a substitute for investing in conventional securities, hedging and in an attempt to enhance returns.
| | | | |
Average Balances of Outstanding Derivative Financial Instruments | | | | |
Futures contracts | | | | |
Average notional value of contracts — long | | $ | 353,372,000 | |
Average notional value of contracts — short | | | 306,227,000 | |
Forward foreign currency exchange contracts | | | | |
Average amounts purchased — in USD | | $ | 536,297,000 | |
Average amounts sold — in USD | | | 509,033,000 | |
Credit index swaps | | | | |
Average notional value — sell protection | | $ | 44,463,000 | |
Average notional value — buy protection | | | 92,717,000 | |
Interest rate swaps | | | | |
Average notional value — pays fixed rate | | $ | 38,536,000 | |
See Notes to Financial Statements.
12
1290 FUNDS
1290 DIVERSIFIED BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
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, 2023:
| | | | | | | | | | | | | | | | |
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 | |
Barclays Bank plc | | $ | 568,831 | | | $ | (568,831 | ) | | $ | — | | | $ | — | |
Citibank NA | | | 1,357,009 | | | | (799,509 | ) | | | — | | | | 557,500 | |
Goldman Sachs Bank USA | | | 1,617,896 | | | | (804,326 | ) | | | — | | | | 813,570 | |
HSBC Bank plc | | | 7,494 | | | | (7,494 | ) | | | — | | | | — | |
JPMorgan Chase Bank | | | 3,359,087 | | | | (3,359,087 | ) | | | — | | | | — | |
Morgan Stanley | | | 2,105,886 | | | | (2,105,886 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 9,016,203 | | | $ | (7,645,133 | ) | | $ | — | | | $ | 1,371,070 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
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 | | $ | 2,458,688 | | | $ | (568,831 | ) | | $ | — | | | $ | 1,889,857 | |
Citibank NA | | | 799,509 | | | | (799,509 | ) | | | — | | | | — | |
Goldman Sachs Bank USA | | | 804,326 | | | | (804,326 | ) | | | — | | | | — | |
HSBC Bank plc | | | 1,182,576 | | | | (7,494 | ) | | | (1,000,000 | ) | | | 175,082 | |
JPMorgan Chase Bank | | | 5,361,461 | | | | (3,359,087 | ) | | | — | | | | 2,002,374 | |
Morgan Stanley | | | 2,857,869 | | | | (2,105,886 | ) | | | — | | | | 751,983 | |
UBS AG | | | 3,775 | | | | — | | | | — | | | | 3,775 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 13,468,204 | | | $ | (7,645,133 | ) | | $ | (1,000,000 | ) | | $ | 4,823,071 | |
| | | | | | | | | | | | | | | | |
| (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, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 470,309,696 | |
Long-term U.S. government debt securities | | | 656,877,962 | |
| | | | |
| | $ | 1,127,187,658 | |
| | | | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 528,703,248 | |
Long-term U.S. government debt securities | | | 612,721,480 | |
| | | | |
| | $ | 1,141,424,728 | |
| | | | |
As of October 31, 2023, 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 | | $ | 12,320,061 | |
Aggregate gross unrealized depreciation | | | (57,305,531 | ) |
| | | | |
Net unrealized depreciation | | $ | (44,985,470 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 585,762,054 | |
| | | | |
See Notes to Financial Statements.
13
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
|
ASSETS | |
Investments in Securities, at value (x) (Cost $594,752,324) | | $ | 553,064,218 | |
Cash | | | 878,000 | |
Cash held as collateral for forward foreign currency contracts | | | 1,000,000 | |
Due from broker for futures variation margin | | | 14,809,949 | |
Unrealized appreciation on forward foreign currency contracts | | | 9,016,203 | |
Dividends, interest and other receivables | | | 5,524,606 | |
Receivable for securities sold | | | 4,074,723 | |
Receivable for Fund shares sold | | | 2,168,776 | |
Prepaid registration and filing fees | | | 33,906 | |
Securities lending income receivable | | | 135 | |
Other assets | | | 5,249 | |
| | | | |
Total assets | | | 590,575,765 | |
| | | | |
LIABILITIES | |
Unrealized depreciation on forward foreign currency contracts | | | 13,468,204 | |
Payable for securities purchased | | | 2,622,833 | |
Payable for Fund shares repurchased | | | 716,771 | |
Foreign currency overdraft payable | | | 119,891 | |
Payable for return of collateral on securities loaned | | | 114,350 | |
Administrative fees payable | | | 74,681 | |
Transfer agent fees payable | | | 57,266 | |
Investment advisory fees payable | | | 47,159 | |
Trustees’ fees payable | | | 1,618 | |
Distribution fees payable – Class A | | | 1,106 | |
Distribution fees payable – Class R | | | 1,000 | |
Accrued expenses | | | 231,119 | |
| | | | |
Total liabilities | | | 17,455,998 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 573,119,767 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 773,857,359 | |
Total distributable earnings (loss) | | | (200,737,592 | ) |
| | | | |
Net assets | | $ | 573,119,767 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $5,061,717 / 639,134 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.92 | |
Maximum sales charge (4.50% of offering price) | | | 0.37 | |
| | | | |
Maximum offering price per share | | $ | 8.29 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $565,647,058 / 71,062,746 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.96 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $2,410,992 / 306,792 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.86 | |
| | | | |
| (x) | Includes value of securities on loan of $112,023. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
|
INVESTMENT INCOME | |
Interest (net of $253,666 foreign withholding tax) | | $ | 36,607,038 | |
Dividends | | | 673,129 | |
Securities lending (net) | | | 42,764 | |
| | | | |
Total income | | | 37,322,931 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 3,861,791 | |
Administrative fees | | | 965,448 | |
Professional fees | | | 465,604 | |
Transfer agent fees | | | 376,900 | |
Custodian fees | | | 256,300 | |
Printing and mailing expenses | | | 137,149 | |
Registration and filing fees | | | 68,800 | |
Trustees’ fees | | | 18,730 | |
Distribution fees – Class A | | | 16,422 | |
Distribution fees – Class R | | | 10,862 | |
Miscellaneous | | | 96,991 | |
| | | | |
Gross expenses | | | 6,274,997 | |
Waiver from investment adviser | | | (3,030,013 | ) |
| | | | |
Net expenses | | | 3,244,984 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 34,077,947 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | (40,035,596 | ) |
Futures contracts | | | (22,438,763 | ) |
Forward foreign currency contracts | | | (18,117,300 | ) |
Foreign currency transactions | | | 632,858 | |
Swaps | | | 4,466,485 | |
| | | | |
Net realized gain (loss) | | | (75,492,316 | ) |
| | | | |
Change in unrealized appreciation (depreciation) on: | |
Investments in securities | | | 38,818,236 | |
Futures contracts | | | 3,933,486 | |
Forward foreign currency contracts | | | (9,152,753 | ) |
Foreign currency translations | | | 170,862 | |
Swaps | | | (444,642 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 33,325,189 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (42,167,127 | ) |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (8,089,180 | ) |
| | | | |
See Notes to Financial Statements.
14
1290 FUNDS
1290 DIVERSIFIED BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 34,077,947 | | | $ | 20,245,867 | |
Net realized gain (loss) | | | (75,492,316 | ) | | | (95,477,364 | ) |
Net change in unrealized appreciation (depreciation) | | | 33,325,189 | | | | (72,757,596 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | (8,089,180 | ) | | | (147,989,093 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (163,937 | ) | | | (188,400 | ) |
Class I | | | (15,397,087 | ) | | | (15,568,311 | ) |
Class R | | | (45,660 | ) | | | (32,711 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (15,606,684 | ) | | | (15,789,422 | ) |
| | | | | | | | |
Tax return of capital: | | | | | | | | |
Class A | | | (88,150 | ) | | | — | |
Class I | | | (8,279,101 | ) | | | — | |
Class R | | | (24,551 | ) | | | — | |
| | | | | | | | |
Total tax return of capital | | | (8,391,802 | ) | | | — | |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 83,483 and 344,531 shares, respectively ] | | | 742,404 | | | | 3,530,170 | |
Capital shares issued in reinvestment of dividends [ 24,703 and 17,771 shares, respectively ] | | | 224,297 | | | | 179,508 | |
Capital shares repurchased [ (262,790) and (367,977) shares , respectively] | | | (2,310,066 | ) | | | (3,633,376 | ) |
| | | | | | | | |
Total Class A transactions | | | (1,343,365 | ) | | | 76,302 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 17,626,727 and 23,508,727 shares, respectively ] | | | 156,148,768 | | | | 233,550,194 | |
Capital shares issued in reinvestment of dividends [ 2,592,764 and 1,540,016 shares, respectively ] | | | 23,622,504 | | | | 15,545,930 | |
Capital shares repurchased [ (18,330,147) and (18,709,408) shares , respectively] | | | (160,540,380 | ) | | | (183,231,555 | ) |
| | | | | | | | |
Total Class I transactions | | | 19,230,892 | | | | 65,864,569 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 200,824 and 122,727 shares, respectively ] | | | 1,767,395 | | | | 1,171,008 | |
Capital shares issued in reinvestment of dividends [ 7,726 and 3,248 shares, respectively ] | | | 69,671 | | | | 32,335 | |
Capital shares repurchased [ (120,330) and (26,149) shares , respectively] | | | (1,083,042 | ) | | | (238,047 | ) |
| | ���� | | | | | | |
Total Class R transactions | | | 754,024 | | | | 965,296 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 18,641,551 | | | | 66,906,167 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (13,446,115 | ) | | | (96,872,348 | ) |
NET ASSETS: | |
Beginning of year | | | 586,565,882 | | | | 683,438,230 | |
| | | | | | | | |
End of year | | $ | 573,119,767 | | | $ | 586,565,882 | |
| | | | | | | | |
See Notes to Financial Statements.
15
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class A | | Year Ended October 31, | |
| | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.33 | | | $ | 10.70 | | | $ | 10.68 | | | $ | 10.34 | | | $ | 9.52 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.45 | | | | 0.27 | | | | 0.29 | | | | 0.39 | | | | 0.41 | ** |
Net realized and unrealized gain (loss) | | | (0.54 | ) | | | (2.41 | ) | | | 0.44 | | | | 0.43 | | | | 0.80 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | (0.09 | ) | | | (2.14 | ) | | | 0.73 | | | | 0.82 | | | | 1.21 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.21 | ) | | | (0.23 | ) | | | (0.47 | ) | | | (0.15 | ) | | | (0.39 | ) |
Distributions from net realized gains | | | — | | | | — | | | | (0.22 | ) | | | (0.33 | ) | | | — | |
Return of capital | | | (0.11 | ) | | | — | | | | (0.02 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.32 | ) | | | (0.23 | ) | | | (0.71 | ) | | | (0.48 | ) | | | (0.39 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.92 | | | $ | 8.33 | | | $ | 10.70 | | | $ | 10.68 | | | $ | 10.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | (1.50 | )% | | | (20.39 | )% | | | 6.73 | % | | | 8.32 | % | | | 12.97 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 5,062 | | | $ | 6,608 | | | $ | 8,550 | | | $ | 7,796 | | | $ | 3,848 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % |
Before waivers and reimbursements (f) | | | 1.22 | % | | | 1.20 | % | | | 1.22 | % | | | 1.42 | % | | | 1.55 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 5.07 | % | | | 2.75 | % | | | 2.62 | % | | | 3.76 | %* | | | 4.00 | %** |
Before waivers and reimbursements (f) | | | 4.60 | % | | | 2.31 | % | | | 2.15 | % | | | 3.09 | %* | | | 3.19 | %** |
Portfolio turnover rate ^ | | | 193 | % | | | 244 | % | | | 165 | % | | | 200 | % | | | 194 | % |
| |
Class I | | Year Ended October 31, | |
| | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.36 | | | $ | 10.72 | | | $ | 10.71 | | | $ | 10.37 | | | $ | 9.53 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.47 | | | | 0.30 | | | | 0.31 | | | | 0.41 | | | | 0.42 | ** |
Net realized and unrealized gain (loss) | | | (0.54 | ) | | | (2.42 | ) | | | 0.43 | | | | 0.41 | | | | 0.84 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | (0.07 | ) | | | (2.12 | ) | | | 0.74 | | | | 0.82 | | | | 1.26 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.21 | ) | | | (0.24 | ) | | | (0.49 | ) | | | (0.15 | ) | | | (0.42 | ) |
Distributions from net realized gains | | | — | | | | — | | | | (0.22 | ) | | | (0.33 | ) | | | — | |
Return of capital | | | (0.12 | ) | | | — | | | | (0.02 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.33 | ) | | | (0.24 | ) | | | (0.73 | ) | | | (0.48 | ) | | | (0.42 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.96 | | | $ | 8.36 | | | $ | 10.72 | | | $ | 10.71 | | | $ | 10.37 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | (1.23 | )% | | | (20.18 | )% | | | 6.85 | % | | | 8.34 | % | | | 13.43 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 565,647 | | | $ | 578,149 | | | $ | 673,625 | | | $ | 169,409 | | | $ | 81,249 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.50 | % | | | 0.50 | % | | | 0.50 | % | | | 0.50 | % | | | 0.50 | % |
Before waivers and reimbursements (f) | | | 0.97 | % | | | 0.95 | % | | | 0.96 | % | | | 1.17 | % | | | 1.34 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 5.30 | % | | | 3.04 | % | | | 2.79 | % | | | 3.95 | %* | | | 4.12 | %** |
Before waivers and reimbursements (f) | | | 4.83 | % | | | 2.59 | % | | | 2.33 | % | | | 3.28 | %* | | | 3.28 | %** |
Portfolio turnover rate ^ | | | 193 | % | | | 244 | % | | | 165 | % | | | 200 | % | | | 194 | % |
See Notes to Financial Statements.
16
1290 FUNDS
1290 DIVERSIFIED BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
Class R | | Year Ended October 31, | |
| | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.27 | | | $ | 10.64 | | | $ | 10.63 | | | $ | 10.34 | | | $ | 9.51 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.42 | | | | 0.26 | | | | 0.25 | | | | 0.35 | * | | | 0.35 | ** |
Net realized and unrealized gain (loss) | | | (0.52 | ) | | | (2.42 | ) | | | 0.45 | | | | 0.41 | | | | 0.85 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | (0.10 | ) | | | (2.16 | ) | | | 0.70 | | | | 0.76 | | | | 1.20 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.20 | ) | | | (0.21 | ) | | | (0.45 | ) | | | (0.14 | ) | | | (0.37 | ) |
Distributions from net realized gains | | | — | | | | — | | | | (0.22 | ) | | | (0.33 | ) | | | — | |
Return of capital | | | (0.11 | ) | | | — | | | | (0.02 | ) | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.31 | ) | | | (0.21 | ) | | | (0.69 | ) | | | (0.47 | ) | | | (0.37 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.86 | | | $ | 8.27 | | | $ | 10.64 | | | $ | 10.63 | | | $ | 10.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | (1.66 | )% | | | (20.60 | )% | | | 6.44 | % | | | 7.77 | % | | | 12.84 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 2,411 | | | $ | 1,808 | | | $ | 1,264 | | | $ | 298 | | | $ | 145 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % |
Before waivers and reimbursements (f) | | | 1.47 | % | | | 1.46 | % | | | 1.47 | % | | | 1.67 | % | | | 1.88 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 4.79 | % | | | 2.68 | % | | | 2.24 | % | | | 3.43 | %* | | | 3.51 | %** |
Before waivers and reimbursements (f) | | | 4.32 | % | | | 2.22 | % | | | 1.77 | % | | | 2.75 | %* | | | 2.63 | %** |
Portfolio turnover rate ^ | | | 193 | % | | | 244 | % | | | 165 | % | | | 200 | % | | | 194 | % |
| * | 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. |
| ^ | 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.
17
1290 ESSEX SMALL CAP GROWTH FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | Essex Investment Management Company, LLC (“Essex”) |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | | | | 1
Year | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | (15.28 | )% | | | (8.24 | )% |
| | | | with Sales Charge (a) | | | | (19.91 | ) | | | (12.11 | ) |
Fund – Class I Shares* | | | | | | | (15.08 | ) | | | (8.00 | ) |
Fund – Class R Shares* | | | | | | | (15.49 | ) | | | (8.47 | ) |
Russell 2000® Growth Index | | | | | | | (7.63 | ) | | | (0.58 | ) |
| |
* Date of inception 7/11/22. (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 Essex Small Cap Growth Fund and the Russell 2000® Growth Index from 7/11/22 to 10/31/23. The performance of the Russell 2000® Growth 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 2000® Growth 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, 2023, the gross expense ratios for Class A, I and R shares were 5.74%, 5.45% and 5.95%, respectively. The net expense ratios for Class A, I and R shares were 1.13%, 0.88% and 1.38%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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 (15.08)% for the year ended October 31, 2023. The Fund’s benchmarks, the Russell 2000® Growth Index returned (7.63)% over the same year.
Overview — Essex Investment Management Company, LLC
Market performance in the small-cap sector was impacted by disproportionate strength in the largest-cap members of those indices, especially companies that touted their potential exposure to Artificial Intelligence (AI). Overall, the Russell 2000® Growth Index was down 7.6% while the Russell Microcap Growth Index was down 18.0% for the same period. This was also an extremely narrow market within the small and microcap segments with only consumer staples and energy having positive returns. Performance was also heavily weighted toward the larger-cap end of the benchmark as only the segment above $2.5 billion in market cap had a positive return for the period.
Fund Highlights
What helped performance during the year?
| • | | Stock selection was particularly strong in industrials with contributions from a focus on infrastructure (Sterling Infrastructure, Inc.), smart defense (Leonardo DRS, Inc.), and a resilient home buying market (Builders FirstSource, Inc.) as well as contributions from holdings related to environmental solutions and energy service. |
| • | | Financials also had strong stock selection from financial payment processors (PaymentUS Holdings, Inc. and Payoneer Global, Inc.) and insurance (HCI Group, Inc. |
18
1290 ESSEX SMALL CAP GROWTH FUND (Unaudited)
| | and Heritage Insurance Holdings, Inc.), combined with minimal exposure to regional banks. |
| • | | Sector allocation added value broadly with particular strength in an overweight position in industrials and technology combined with an underweight position in financials. |
What hurt performance during the year?
| • | | Market-cap positioning detracted the most from performance with a significant overweight position in stocks under $1 billion (51.7% in the portfolio versus less than 10% in the Russell 2000® Growth Index). Stock selection added value versus the index in all market-cap buckets, but the overall impact was negative due to the smaller market-cap footprint. |
| • | | Stock selection detracted from performance in technology as companies related to semiconductors and communications hardware struggled with a buildup of inventory in the channel. This inventory cycle also caused weakness in semiconductor equipment suppliers as the U.S. Government has been slow to award CHIPS ACT grants. Names that were impacted include Digi International, Inc., Cambium Networks Corp., DZS, Inc., and Amtech Systems, Inc. |
| • | | Healthcare was also a detractor as aesthetics companies (Cutera, Inc., Apyx Medical Corp., and Revance Therapeutics, Inc.), diagnostics companies (NanoString Technologies, Inc., ViewRay, Inc., Akoya Biosciences, Inc.), and suppliers to biotech companies (Inotiv, Inc. and Codexis, Inc.) came under pressure following the collapse of Silicon Valley Bank in March. |
Portfolio Positioning and Outlook
The good news is that the market started to broaden in June, as investors grew more comfortable that inflation was moderating, the U.S. Federal Reserve was pausing, and a potential soft landing might be possible for the economy. In fact, the number of companies priced at new highs is expanding, and more sectors are participating. To us, valuations were very attractive in the small and microcap sectors of the market, both in absolute and relative terms, earnings growth has remained solid, and these sectors have significant exposure to what we believe are the positive themes of: infrastructure spending, sustainable solutions, reshoring of manufacturing, and smart defense spending.
| | | | |
| | |
Sector Weightings
as of October 31, 2023 | | % of
Net Assets | |
Industrials | | | 32.0 | % |
Health Care | | | 19.8 | |
Information Technology | | | 19.7 | |
Consumer Discretionary | | | 11.1 | |
Financials | | | 8.1 | |
Energy | | | 3.7 | |
Investment Companies | | | 2.7 | |
Consumer Staples | | | 2.1 | |
Materials | | | 2.1 | |
Exchange Traded Fund | | | 0.2 | |
Cash and Other | | | (1.5 | ) |
| | | | | |
| | | | 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, 2023 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
19
1290 ESSEX SMALL CAP GROWTH 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
5/1/23† | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $874.10 | | | | $5.33 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.52 | | | | 5.75 | |
Class I | |
Actual | | | 1,000.00 | | | | 875.40 | | | | 4.16 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.77 | | | | 4.48 | |
Class R | |
Actual | | | 1,000.00 | | | | 872.90 | | | | 6.51 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.25 | | | | 7.02 | |
| |
† The Fund commenced operations for July 11, 2022. * Expenses are equal to the Fund’s Class A, Class I and Class R shares annualized expense ratio of 1.13%, 0.88% and 1.38%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
20
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
COMMON STOCKS: | |
Consumer Discretionary (11.1%) | |
Automobile Components (2.3%) | |
Patrick Industries, Inc. | | | 7,657 | | | $ | 575,423 | |
Superior Industries International, Inc.* | | | 164,619 | | | | 455,995 | |
| | | | | | | | |
| | | | | | | 1,031,418 | |
| | | | | | | | |
Diversified Consumer Services (2.7%) | |
Coursera, Inc.* | | | 30,929 | | | | 536,309 | |
Lincoln Educational Services Corp.* | | | 79,488 | | | | 679,622 | |
| | | | | | | | |
| | | | | | | 1,215,931 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (1.6%) | |
Kura Sushi USA, Inc., Class A (x)* | | | 5,692 | | | | 325,241 | |
Sweetgreen, Inc., Class A* | | | 37,830 | | | | 390,784 | |
| | | | | | | | |
| | | | | | | 716,025 | |
| | | | | | | | |
Household Durables (2.4%) | |
Century Communities, Inc. | | | 7,153 | | | | 439,910 | |
Lifetime Brands, Inc. | | | 4,821 | | | | 25,744 | |
Skyline Champion Corp.* | | | 10,226 | | | | 599,550 | |
| | | | | | | | |
| | | | | | | 1,065,204 | |
| | | | | | | | |
Specialty Retail (2.1%) | |
CarParts.com, Inc.* | | | 81,957 | | | | 231,938 | |
Revolve Group, Inc., Class A (x)* | | | 18,839 | | | | 259,036 | |
Stitch Fix, Inc., Class A* | | | 68,205 | | | | 223,713 | |
ThredUp, Inc., Class A (x)* | | | 70,472 | | | | 226,920 | |
| | | | | | | | |
| | | | | | | 941,607 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 4,970,185 | |
| | | | | | | | |
Consumer Staples (2.1%) | |
Food Products (0.8%) | |
SunOpta, Inc.* | | | 95,205 | | | | 365,587 | |
| | | | | | | | |
Personal Care Products (1.3%) | |
e.l.f. Beauty, Inc.* | | | 6,196 | | | | 573,936 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 939,523 | |
| | | | | | | | |
Energy (3.7%) | |
Energy Equipment & Services (2.4%) | |
Expro Group Holdings NV* | | | 22,315 | | | | 351,461 | |
TETRA Technologies, Inc.* | | | 156,660 | | | | 742,568 | |
| | | | | | | | |
| | | | | | | 1,094,029 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (1.3%) | |
Matador Resources Co. | | | 9,168 | | | | 565,574 | |
| | | | | | | | |
Total Energy | | | | | | | 1,659,603 | |
| | | | | | | | |
Financials (8.1%) | |
Banks (1.3%) | |
Bancorp, Inc. (The)* | | | 14,558 | | | | 518,993 | |
Brookline Bancorp, Inc. | | | 5,185 | | | | 42,206 | |
| | | | | | | | |
| | | | | | | 561,199 | |
| | | | | | | | |
Capital Markets (1.3%) | |
Evercore, Inc., Class A | | | 4,382 | | | | 570,449 | |
| | | | | | | | |
Financial Services (3.1%) | |
Paymentus Holdings, Inc., Class A (x)* | | | 52,539 | | | | 764,968 | |
Payoneer Global, Inc.* | | | 111,022 | | | | 642,817 | |
| | | | | | | | |
| | | | | | | 1,407,785 | |
| | | | | | | | |
Insurance (2.4%) | |
HCI Group, Inc. | | | 11,838 | | | | 698,087 | |
Heritage Insurance Holdings, Inc.* | | | 65,837 | | | | 389,096 | |
| | | | | | | | |
| | | | | | | 1,087,183 | |
| | | | | | | | |
Total Financials | | | | | | | 3,626,616 | |
| | | | | | | | |
Health Care (19.8%) | |
Biotechnology (3.8%) | |
Insmed, Inc.* | | | 27,655 | | | | 693,034 | |
Kiniksa Pharmaceuticals Ltd., Class A* | | | 35,412 | | | | 540,033 | |
Veracyte, Inc.* | | | 23,373 | | | | 484,289 | |
| | | | | | | | |
| | | | | | | 1,717,356 | |
| | | | | | | | |
Health Care Equipment & Supplies (7.9%) | |
Accuray, Inc.* | | | 139,130 | | | | 367,303 | |
Alphatec Holdings, Inc.* | | | 56,770 | | | | 521,148 | |
Apyx Medical Corp.* | | | 74,099 | | | | 169,687 | |
AtriCure, Inc.* | | | 13,500 | | | | 467,640 | |
Axogen, Inc.* | | | 58,785 | | | | 221,032 | |
Cutera, Inc.* | | | 34,254 | | | | 106,530 | |
Inari Medical, Inc.* | | | 9,168 | | | | 556,589 | |
Orthofix Medical, Inc.* | | | 29,972 | | | | 330,891 | |
PROCEPT BioRobotics Corp. (x)* | | | 15,263 | | | | 408,896 | |
Stereotaxis, Inc. (x)* | | | 249,346 | | | | 376,512 | |
| | | | | | | | |
| | | | | | | 3,526,228 | |
| | | | | | | | |
Health Care Providers & Services (3.5%) | |
Biodesix, Inc.* | | | 172,577 | | | | 245,059 | |
PetIQ, Inc., Class A* | | | 26,345 | | | | 494,496 | |
Talkspace, Inc.* | | | 280,930 | | | | 500,055 | |
Viemed Healthcare, Inc. (x)* | | | 52,287 | | | | 329,931 | |
| | | | | | | | |
| | | | | | | 1,569,541 | |
| | | | | | | | |
Health Care Technology (2.2%) | |
Augmedix, Inc.* | | | 86,037 | | | | 378,563 | |
Evolent Health, Inc., Class A* | | | 16,724 | | | | 408,567 | |
Phreesia, Inc.* | | | 15,213 | | | | 207,810 | |
| | | | | | | | |
| | | | | | | 994,940 | |
| | | | | | | | |
Life Sciences Tools & Services (0.6%) | |
Adaptive Biotechnologies Corp.* | | | 53,647 | | | | 238,193 | |
| | | | | | | | |
Pharmaceuticals (1.8%) | |
Evolus, Inc.* | | | 51,934 | | | | 394,699 | |
EyePoint Pharmaceuticals, Inc. (x)* | | | 40,903 | | | | 246,236 | |
Revance Therapeutics, Inc.* | | | 21,308 | | | | 168,120 | |
| | | | | | | | |
| | | | | | | 809,055 | |
| | | | | | | | |
Total Health Care | | | | | | | 8,855,313 | |
| | | | | | | | |
Industrials (32.0%) | |
Aerospace & Defense (4.7%) | |
Kratos Defense & Security Solutions, Inc.* | | | 50,071 | | | | 853,710 | |
Leonardo DRS, Inc.* | | | 66,895 | | | | 1,275,688 | |
| | | | | | | | |
| | | | | | | 2,129,398 | |
| | | | | | | | |
Building Products (2.4%) | |
Builders FirstSource, Inc.* | | | 3,627 | | | | 393,602 | |
Caesarstone Ltd.* | | | 36,923 | | | | 148,430 | |
Griffon Corp. | | | 13,349 | | | | 533,159 | |
| | | | | | | | |
| | | | | | | 1,075,191 | |
| | | | | | | | |
See Notes to Financial Statements.
21
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Commercial Services & Supplies (3.9%) | |
CECO Environmental Corp.* | | | 43,069 | | | $ | 696,856 | |
Enviri Corp.* | | | 71,026 | | | | 407,689 | |
Performant Financial Corp.* | | | 120,845 | | | | 281,569 | |
Perma-Fix Environmental Services, Inc.* | | | 39,492 | | | | 367,276 | |
| | | | | | | | |
| | | | | | | 1,753,390 | |
| | | | | | | | |
Construction & Engineering (7.9%) | |
Argan, Inc. | | | 10,427 | | | | 476,931 | |
Great Lakes Dredge & Dock Corp.* | | | 61,556 | | | | 467,825 | |
Matrix Service Co.* | | | 61,606 | | | | 717,710 | |
Orion Group Holdings, Inc.* | | | 44,379 | | | | 213,019 | |
Sterling Infrastructure, Inc.* | | | 22,668 | | | | 1,651,364 | |
| | | | | | | | |
| | | | | | | 3,526,849 | |
| | | | | | | | |
Electrical Equipment (3.5%) | |
American Superconductor Corp.* | | | 47,250 | | | | 296,021 | |
Babcock & Wilcox Enterprises, Inc.* | | | 100,343 | | | | 263,902 | |
Beam Global (x)* | | | 15,364 | | | | 84,195 | |
FTC Solar, Inc.* | | | 117,570 | | | | 125,800 | |
LSI Industries, Inc. | | | 55,259 | | | | 822,254 | |
| | | | | | | | |
| | | | | | | 1,592,172 | |
| | | | | | | | |
Machinery (2.8%) | |
3D Systems Corp.* | | | 46,192 | | | | 172,296 | |
Commercial Vehicle Group, Inc.* | | | 43,976 | | | | 306,513 | |
Graham Corp.* | | | 33,296 | | | | 519,085 | |
Manitex International, Inc.* | | | 64,427 | | | | 258,352 | |
| | | | | | | | |
| | | | | | | 1,256,246 | |
| | | | | | | | |
Professional Services (3.2%) | |
BlackSky Technology, Inc., Class A* | | | 199,426 | | | | 237,317 | |
DLH Holdings Corp.* | | | 20,653 | | | | 282,533 | |
Fiverr International Ltd.* | | | 19,091 | | | | 404,157 | |
Willdan Group, Inc.* | | | 28,360 | | | | 500,270 | |
| | | | | | | | |
| | | | | | | 1,424,277 | |
| | | | | | | | |
Trading Companies & Distributors (3.6%) | |
Alta Equipment Group, Inc. | | | 34,757 | | | | 319,417 | |
MRC Global, Inc.* | | | 55,158 | | | | 579,711 | |
Transcat, Inc.* | | | 7,858 | | | | 707,377 | |
| | | | | | | | |
| | | | | | | 1,606,505 | |
| | | | | | | | |
Total Industrials | | | | | | | 14,364,028 | |
| | | | | | | | |
Information Technology (19.7%) | |
Communications Equipment (2.5%) | |
Ceragon Networks Ltd.* | | | 226,426 | | | | 384,924 | |
Digi International, Inc.* | | | 13,450 | | | | 338,671 | |
Lantronix, Inc.* | | | 85,281 | | | | 389,734 | |
| | | | | | | | |
| | | | | | | 1,113,329 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (4.9%) | |
Identiv, Inc.* | | | 83,065 | | | | 505,866 | |
Luna Innovations, Inc. (x)* | | | 74,955 | | | | 425,744 | |
Mirion Technologies, Inc., Class A* | | | 65,837 | | | | 456,251 | |
Novanta, Inc.* | | | 4,181 | | | | 552,143 | |
Vuzix Corp. (x)* | | | 82,561 | | | | 268,323 | |
| | | | | | | | |
| | | | | | | 2,208,327 | |
| | | | | | | | |
IT Services (2.1%) | |
BigCommerce Holdings, Inc.* | | | 49,768 | | | | 442,438 | |
Endava plc (ADR)* | | | 9,672 | | | | 485,147 | |
| | | | | | | | |
| | | | | | | 927,585 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (3.7%) | |
Aehr Test Systems (x)* | | | 17,379 | | | | 409,449 | |
Amtech Systems, Inc.* | | | 68,759 | | | | 492,658 | |
Ichor Holdings Ltd.* | | | 16,321 | | | | 395,947 | |
Kopin Corp. (x)* | | | 280,124 | | | | 344,553 | |
| | | | | | | | |
| | | | | | | 1,642,607 | |
| | | | | | | | |
Software (5.2%) | |
American Software, Inc., Class A | | | 33,951 | | | | 372,443 | |
Cognyte Software Ltd.* | | | 70,824 | | | | 296,044 | |
Docebo, Inc. (x)* | | | 15,263 | | | | 599,531 | |
Domo, Inc., Class B* | | | 22,819 | | | | 186,203 | |
EverCommerce, Inc.* | | | 47,149 | | | | 451,687 | |
Zeta Global Holdings Corp., Class A* | | | 57,677 | | | | 449,881 | |
| | | | | | | | |
| | | | | | | 2,355,789 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (1.3%) | |
Stratasys Ltd.* | | | 34,455 | | | | 350,407 | |
Turtle Beach Corp.* | | | 29,770 | | | | 245,603 | |
| | | | | | | | |
| | | | | | | 596,010 | |
| | | | | | | | |
Total Information Technology | | | | | | | 8,843,647 | |
| | | | | | | | |
Materials (2.1%) | |
Chemicals (2.1%) | |
AdvanSix, Inc. | | | 17,631 | | | | 485,734 | |
Aspen Aerogels, Inc.* | | | 56,669 | | | | 437,485 | |
| | | | | | | | |
Total Materials | | | | | | | 923,219 | |
| | | | | | | | |
Total Common Stocks (98.6%)
(Cost $50,357,526) | | | | | | | 44,182,134 | |
| | | | | | | | |
EXCHANGE TRADED FUND (ETF): | | | | | |
Equity (0.2%) | |
iShares Russell 2000 Growth ETF(x) | | | 375 | | | | 77,621 | |
| | | | | | | | |
Total Exchange Traded Fund (0.2%)
(Cost $78,660) | | | | | | | 77,621 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (2.7%) | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 100,000 | | | | 100,000 | |
Goldman Sachs Financial Square Government Fund 5.26% (7 day yield) (xx) | | | 150,000 | | | | 150,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 866,899 | | | | 866,899 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 107,258 | | | | 107,301 | |
| | | | | | | | |
Total Investment Companies | | | | 1,224,200 | |
| | | | | |
Total Short-Term Investments (2.7%)
(Cost $1,224,194) | | | | 1,224,200 | |
| | | | | | | | |
Total Investments in Securities (101.5%)
(Cost $51,660,380) | | | | 45,483,955 | |
Other Assets Less Liabilities (-1.5%) | | | | (654,852 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 44,829,103 | |
| | | | | | | | |
See Notes to Financial Statements.
22
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,155,606. This was collateralized by $27,664 of various U.S. Government Treasury Securities, ranging from 0.000% – 5.435%, maturing 11/16/23 – 5/15/52 and by cash of $1,116,899 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | ADR | — American Depositary Receipt |
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, 2023:
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 | | | | | | | | | | | | | | | | |
Consumer Discretionary | | $ | 4,970,185 | | | $ | — | | | $ | — | | | $ | 4,970,185 | |
Consumer Staples | | | 939,523 | | | | — | | | | — | | | | 939,523 | |
Energy | | | 1,659,603 | | | | — | | | | — | | | | 1,659,603 | |
Financials | | | 3,626,616 | | | | — | | | | — | | | | 3,626,616 | |
Health Care | | | 8,855,313 | | | | — | | | | — | | | | 8,855,313 | |
Industrials | | | 14,364,028 | | | | — | | | | — | | | | 14,364,028 | |
Information Technology | | | 8,843,647 | | | | — | | | | — | | | | 8,843,647 | |
Materials | | | 923,219 | | | | — | | | | — | | | | 923,219 | |
Exchange Traded Fund | | | 77,621 | | | | — | | | | — | | | | 77,621 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 1,224,200 | | | | — | | | | — | | | | 1,224,200 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 45,483,955 | | | $ | — | | | $ | — | | | $ | 45,483,955 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 45,483,955 | | | $ | — | | | $ | — | | | $ | 45,483,955 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 68,734,865 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 25,820,565 | |
As of October 31, 2023, 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 | | $ | 4,112,979 | |
Aggregate gross unrealized depreciation | | | (10,307,298 | ) |
| | | | |
Net unrealized depreciation | | $ | (6,194,319 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 51,678,274 | |
| | | | |
See Notes to Financial Statements.
23
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
|
ASSETS | |
Investments in Securities, at value (x) (Cost $51,660,380) | | $ | 45,483,955 | |
Cash | | | 300,000 | |
Receivable for securities sold | | | 186,218 | |
Receivable for Fund shares sold | | | 49,659 | |
Prepaid registration and filing fees | | | 21,907 | |
Receivable from investment adviser | | | 6,695 | |
Securities lending income receivable | | | 2,783 | |
Dividends, interest and other receivables | | | 1,991 | |
Other assets | | | 1,083 | |
| | | | |
Total assets | | | 46,054,291 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 1,116,899 | |
Payable for Fund shares repurchased | | | 15,643 | |
Payable for securities purchased | | | 11,737 | |
Transfer agent fees payable | | | 9,377 | |
Distribution fees payable – Class R | | | 51 | |
Distribution fees payable – Class A | | | 27 | |
Accrued expenses | | | 71,454 | |
| | | | |
Total liabilities | | | 1,225,188 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 44,829,103 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 53,263,874 | |
Total distributable earnings (loss) | | | (8,434,771 | ) |
| | | | |
Net assets | | $ | 44,829,103 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $121,624 / 13,683 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.89 | |
Maximum sales charge (5.50% of offering price) | | | 0.52 | |
| | | | |
Maximum offering price per share | | $ | 9.41 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $44,594,171 / 5,000,823 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.92 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $113,308 / 12,789 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.86 | |
| | | | |
| (x) | Includes value of securities on loan of $1,155,606. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
| |
INVESTMENT INCOME | | | | |
Dividends | | $ | 193,327 | |
Interest | | | 12,161 | |
Securities lending (net) | | | 41,526 | |
| | | | |
Total income | | | 247,014 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 291,757 | |
Offering costs | | | 143,382 | |
Professional fees | | | 94,479 | |
Registration and filing fees | | | 62,908 | |
Administrative fees | | | 58,352 | |
Transfer agent fees | | | 50,800 | |
Printing and mailing expenses | | | 26,738 | |
Custodian fees | | | 12,499 | �� |
Trustees’ fees | | | 977 | |
Distribution fees – Class R | | | 589 | |
Distribution fees – Class A | | | 320 | |
Miscellaneous | | | 12,300 | |
| | | | |
Gross expenses | | | 755,101 | |
Less: Waiver from investment adviser | | | (350,109 | ) |
Reimbursement from investment adviser | | | (61,978 | ) |
| | | | |
Net expenses | | | 343,014 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | (96,000 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Net realized gain (loss) on investments in securities | | | (2,166,435 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | (6,673,955 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (8,840,390 | ) |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (8,936,390 | ) |
| | | | |
See Notes to Financial Statements.
24
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended
October 31,
2023 | | | July 11, 2022* to
October 31, 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | (96,000 | ) | | $ | (11,760 | ) |
Net realized gain (loss) | | | (2,166,435 | ) | | | 74,961 | |
Net change in unrealized appreciation (depreciation) | | | (6,673,955 | ) | | | 497,530 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | (8,936,390 | ) | | | 560,731 | |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (663 | ) | | | — | |
Class I | | | (72,415 | ) | | | — | |
Class R | | | (559 | ) | | | — | |
| | | | | | | | |
Total distributions to shareholders | | | (73,637 | ) | | | — | |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 2,339 and 11,877 shares, respectively ] | | | 25,259 | | | | 119,798 | |
Capital shares issued in reinvestment of dividends [ 10 and 0 shares ] | | | 105 | | | | — | |
Capital shares repurchased [ (543) and 0 shares ] | | | (6,000 | ) | | | — | |
| | | | | | | | |
Total Class A transactions | | | 19,364 | | | | 119,798 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 4,556,929 and 980,000 shares, respectively ] | | | 48,783,568 | | | | 9,800,000 | |
Capital shares issued in reinvestment of dividends [ 1,695 and 0 shares ] | | | 17,682 | | | | — | |
Capital shares repurchased [ (537,801) and 0 shares ] | | | (5,591,615 | ) | | | — | |
| | | | | | | | |
Total Class I transactions | | | 43,209,635 | | | | 9,800,000 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 2,789 and 10,000 shares, respectively ] | | | 29,602 | | | | 100,000 | |
| | | | | | | | |
Total Class R transactions | | | 29,602 | | | | 100,000 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 43,258,601 | | | | 10,019,798 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 34,248,574 | | | | 10,580,529 | |
NET ASSETS: | |
Beginning of period | | | 10,580,529 | | | | — | |
| | | | | | | | |
End of period | | $ | 44,829,103 | | | $ | 10,580,529 | |
| | | | | | | | |
* Commencement of operations. | | | | | | | | |
See Notes to Financial Statements.
25
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | |
| Class A | | Year Ended
October 31, 2023 | | | July 11, 2022* to
October 31, 2022 | |
Net asset value, beginning of period | | $ | 10.55 | | | $ | 10.00 | |
| | | | | | | | |
Income (loss) from investment operations: | | | | | | | | |
Net investment income (loss) (e) | | | (0.05 | )(1) | | | (0.02 | ) |
Net realized and unrealized gain (loss) | | | (1.55 | ) | | | 0.57 | |
| | | | | | | | |
Total from investment operations | | | (1.60 | ) | | | 0.55 | |
| | | | | | | | |
Less distributions: | | | | | | | | |
Distributions from net realized gains | | | (0.06 | ) | | | — | |
| | | | | | | | |
Net asset value, end of period | | $ | 8.89 | | | $ | 10.55 | |
| | | | | | | | |
Total return (b) | | | (15.28 | )% | | | 5.50 | % |
| | | | | | | | |
Ratios/Supplemental Data: | | | | | |
Net assets, end of period (000’s) | | $ | 122 | | | $ | 125 | |
Ratio of expenses to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 1.13 | % | | | 1.13 | % |
Before waivers and reimbursements (a)(f) | | | 2.38 | % | | | 6.32 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | (0.49 | )%(aa) | | | (0.61 | )%(l) |
Before waivers and reimbursements (a)(f) | | | (1.74 | )%(aa) | | | (5.80 | )%(l) |
Portfolio turnover rate ^ | | | 69 | % | | | 29 | %(z) |
| | |
| Class I | | Year Ended
October 31, 2023 | | | July 11, 2022* to
October 31, 2022 | |
Net asset value, beginning of period | | $ | 10.56 | | | $ | 10.00 | |
| | | | | | | | |
Income (loss) from investment operations: | | | | | | | | |
Net investment income (loss) (e) | | | (0.03 | )(1) | | | (0.01 | ) |
Net realized and unrealized gain (loss) | | | (1.55 | ) | | | 0.57 | |
| | | | | | | | |
Total from investment operations | | | (1.58 | ) | | | 0.56 | |
| | | | | | | | |
Less distributions: | | | | | | | | |
Distributions from net realized gains | | | (0.06 | ) | | | — | |
| | | | | | | | |
Net asset value, end of period | | $ | 8.92 | | | $ | 10.56 | |
| | | | | | | | |
Total return (b) | | | (15.08 | )% | | | 5.60 | % |
| | | | | | | | |
Ratios/Supplemental Data: | | | | | |
Net assets, end of period (000’s) | | $ | 44,594 | | | $ | 10,350 | |
Ratio of expenses to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 0.88 | % | | | 0.88 | % |
Before waivers and reimbursements (a)(f) | | | 1.94 | % | | | 6.03 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | (0.24 | )%(aa) | | | (0.35 | )%(l) |
Before waivers and reimbursements (a)(f) | | | (1.30 | )%(aa) | | | (5.50 | )(l) |
Portfolio turnover rate ^ | | | 69 | % | | | 29 | %(z) |
See Notes to Financial Statements.
26
1290 FUNDS
1290 ESSEX SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | |
| Class R | | Year Ended
October 31, 2023 | | | July 11, 2022* to
October 31, 2022 | |
Net asset value, beginning of period | | $ | 10.54 | | | $ | 10.00 | |
| | | | | | | | |
Income (loss) from investment operations: | | | | | | | | |
Net investment income (loss) (e) | | | (0.08 | )(1) | | | (0.03 | ) |
Net realized and unrealized gain (loss) | | | (1.54 | ) | | | 0.57 | |
| | | | | | | | |
Total from investment operations | | | (1.62 | ) | | | 0.54 | |
| | | | | | | | |
Less distributions: | | | | | | | | |
Distributions from net realized gains | | | (0.06 | ) | | | — | |
| | | | | | | | |
Net asset value, end of period | | $ | 8.86 | | | $ | 10.54 | |
| | | | | | | | |
Total return (b) | | | (15.49 | )% | | | 5.40 | % |
| | | | | | | | |
Ratios/Supplemental Data: | | | | | |
Net assets, end of period (000’s) | | $ | 113 | | | $ | 105 | |
Ratio of expenses to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | 1.38 | % | | | 1.38 | % |
Before waivers and reimbursements (a)(f) | | | 2.59 | % | | | 6.53 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | |
After waivers and reimbursements (a)(f) | | | (0.74 | )%(aa) | | | (0.85 | )%(l) |
Before waivers and reimbursements (a)(f) | | | (1.95 | )%(aa) | | | (6.00 | )(l) |
Portfolio turnover rate ^ | | | 69 | % | | | 29 | %(z) |
| (1) | Includes income resulting from a special dividend. Without this dividend, the per share income amounts would be $(0.06), $(0.03) and $(0.08) for Class A, Class I and Class R, respectively. |
| * | Commencement of operations. |
| ^ | 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. |
| (l) | The annualized ratio of net investment income to average net assets may not be indicative of operating results for a full year. |
| (z) | Portfolio turnover rate for periods less than one year is not annualized |
| (aa) | Includes income resulting from a special dividend. Without this dividend, the ratios for each class would have been 0.06% lower. |
See Notes to Financial Statements.
27
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | GAMCO Asset Management, Inc. |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 3.88 | % | | | 5.86 | % | | | 6.50 | % |
| | | with Sales Charge (a) | | | (1.81 | ) | | | 4.66 | | | | 5.83 | |
Fund – Class I Shares* | | | | | 4.11 | | | | 6.11 | | | | 6.76 | |
Fund – Class R Shares* | | | | | 3.62 | | | | 5.59 | | | | 6.24 | |
Fund – Class T Shares*† | | without Sales Charge | | | 4.18 | | | | 6.13 | | | | 6.77 | |
| | | with Sales Charge (b) | | | 1.56 | | | | 5.59 | | | | 6.47 | |
Russell 2500TM Value Index | | | | | (4.94 | ) | | | 4.65 | | | | 5.35 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratios including acquired fund fees for Class A, I, R and T shares were 1.51%, 1.25%, 1.76% and 1.51%, respectively. The net expense ratios for Class A, I, R and T shares were 1.20%, 0.95%, 1.45% and 0.95%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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 4.11% for the year ended October 31, 2023. The Fund’s benchmark, the Russell 2500TM Value Index, returned (4.94)% over the same year.
Overview — GAMCO Asset Management, Inc.
What helped performance during the year?
| • | | The Fund’s industrial sector performance was the largest contributor to relative returns by sector during the trailing year ended in October. Importantly, security selection and interaction had an even stronger impact on performance than the effect of the Fund’s larger weighting in the sector. Companies including CIRCOR International, Inc. (no longer in portfolio as deal closed in October) and Core Molding Technologies, Inc. (1.5%) had robust performance in the trailing year. Pump & valve company CIRCOR benefited from a bidding war for the company, concluding with KKR’s sweetened offer, which went from an initial $49/share to $56/share at the end of the second quarter. |
| • | | Shares of financial companies sold off earlier in the year over bank contagion fears after regional banks Silicon Valley Bank and Signature Bank collapsed due to poor risk management. The Fund’s underweighting in the financial sector helped returns relative to the benchmark. |
| • | | Financial engineering continues to be used to surface value in the Fund, including a split-off of Atlanta Braves Holdings, Inc. (Class A: 1.3%; Class C: 0.5%) and the spin-offs of payments business Crane NXT Co. (0.3%) from aerospace supplier Crane Co. (1.5%) earlier this year and Sphere Entertainment Co. (which opened with headliner U2 to much fanfare in Las Vegas at the end of September) from Madison Square Garden Entertainment Corp. (0.5%). Two of |
28
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
| | the holdings spun off during the second quarter, Crane NXT (0.3%) and Sphere (0.5%), were up more than 45% during the trailing year ended in October. |
What hurt performance during the year?
| • | | The Fund’s exposure to small-capitalization companies defined as companies with under $3 billion market capitalization at the time of purchase, was a detractor from relative returns over the trailing year from a purely allocation perspective. However, the underlying stock selection within small-capitalization companies in the Fund more than outweighed the allocation impact resulting in a positive overall contribution to return relative to the index within this category. |
| • | | The Fund’s lower allocation to the energy sector was a detractor from relative performance for the trailing year. |
| • | | Shares of Grupo Televisa SAB (0.8%) fell during the period along with other media companies facing slowing advertising and accelerating cord cutting. The company’s 45%-owned TelevisaUnivision’s high leverage and exposure to emerging markets magnified these trends. In addition, Televisa has faced increased competition from fiber overbuilders in its Mexican broadband business. Grupo Televisa’s possible upcoming catalysts include a monetization of Univision (likely via a 2024 IPO), Sky business turnaround and eventual consolidation of the cable unit with peer Megacable. |
Portfolio Positioning and Outlook — GAMCO Asset Management, Inc.
The Fund is significantly different from its benchmark index, and performance will often not closely track it. Holdings tend to be domestically focused with strong franchises and often pricing power. We have never been top-down allocators, trying to chase every trend. Rather, we rely on fundamental bottom-up research informed by our view of the shifting political and economic tides. We purchase and hold securities trading at discounts to their Private Market Values appropriate for their level of risk and seek to identify one or more catalysts that could close that valuation gap. Industry consolidation, financial engineering (e.g., spin-offs), changes in management and changes in regulation are just a few long-term catalysts in which the Fund is well positioned.
While this is not a pretty picture for financial markets, there are positives. The unemployment rate continues to sit near an all-time low at 3.9%, and the U.S. consumer has been remarkably resilient. Demand for experiences such as live sporting events and concerts remains robust. Consumer branded goods companies in attractive categories have demonstrated significant pricing power to offset inflation and are increasing spending on advertising in order to spur volume growth for new products. Political advertising should be as strong as ever in 2024. Long-term tailwinds for aerospace and defense companies are still intact. Finally, the challenging macroeconomic backdrop has created opportunities in the market: the S&P 500 Index trades at just over 18x expected next twelve months’ earnings, slightly below the average over the last five years, but excluding the so-called “Maginificent 7” of mega-cap stocks that dominate the current rally, the benchmark multiple is under 16x. Small cap stocks are even cheaper, with the Russell 2000 Value Index trading at just over 14x expected next twelve months’ earnings.
| | | | |
| | |
Sector Weightings
as of October 31, 2023 | | % of
Net Assets | |
Industrials | | | 36.7 | % |
Consumer Discretionary | | | 14.6 | |
Communication Services | | | 13.9 | |
Consumer Staples | | | 10.0 | |
Materials | | | 7.4 | |
Investment Companies | | | 7.0 | |
Utilities | | | 2.8 | |
Health Care | | | 2.7 | |
Information Technology | | | 2.3 | |
Financials | | | 1.9 | |
Energy | | | 1.7 | |
Real Estate | | | 0.8 | |
Cash and Other | | | (1.8 | ) |
| | | | | |
| | | | 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, 2023 and held for the entire six-month period.
29
1290 GAMCO SMALL/MID CAP VALUE FUND (Unaudited)
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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $973.90 | | | | $5.95 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.18 | | | | 6.08 | |
Class I | |
Actual | | | 1,000.00 | | | | 974.60 | | | | 4.71 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.44 | | | | 4.82 | |
Class R | |
Actual | | | 1,000.00 | | | | 972.30 | | | | 7.19 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,017.92 | | | | 7.35 | |
Class T | |
Actual | | | 1,000.00 | | | | 975.30 | | | | 4.71 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.43 | | | | 4.82 | |
| |
* Expenses are equal to the Fund’s A, I, R and T shares annualized expense ratio of 1.20%, 0.95%, 1.45% and 0.95%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
30
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
COMMON STOCKS: | |
Communication Services (13.9%) | |
Diversified Telecommunication Services (1.0%) | |
EchoStar Corp., Class A* | | | 4,500 | | | $ | 62,370 | |
Telesat Corp.* | | | 110,000 | | | | 1,122,000 | |
| | | | | | | | |
| | | | | | | 1,184,370 | |
| | | | | | | | |
Entertainment (4.2%) | |
Atlanta Braves Holdings, Inc., Class A (x)* | | | 40,500 | | | | 1,535,355 | |
Atlanta Braves Holdings, Inc., Class C* | | | 19,000 | | | | 660,820 | |
Liberty Media Corp.-Liberty Live, Class A* | | | 1,000 | | | | 31,240 | |
Madison Square Garden Entertainment Corp., Class A* | | | 18,500 | | | | 563,880 | |
Madison Square Garden Sports Corp.* | | | 10,500 | | | | 1,765,470 | |
Sphere Entertainment Co.* | | | 19,500 | | | | 641,745 | |
| | | | | | | | |
| | | | | | | 5,198,510 | |
| | | | | | | | |
Media (6.7%) | |
Altice USA, Inc., Class A* | | | 4,500 | | | | 13,005 | |
AMC Networks, Inc., Class A* | | | 20,000 | | | | 236,000 | |
Clear Channel Outdoor Holdings, Inc. (x)* | | | 313,000 | | | | 344,300 | |
Corus Entertainment, Inc., Class B (x) | | | 135,000 | | | | 62,304 | |
EW Scripps Co. (The), Class A* | | | 28,000 | | | | 153,160 | |
Grupo Televisa SAB (ADR) | | | 415,000 | | | | 958,650 | |
JCDecaux SE* | | | 29,000 | | | | 452,909 | |
Liberty Media Corp.-Liberty SiriusXM, Class A* | | | 4,000 | | | | 97,960 | |
News Corp., Class B | | | 13,000 | | | | 278,720 | |
Nexstar Media Group, Inc., Class A | | | 10,200 | | | | 1,428,816 | |
Paramount Global, Class A (x) | | | 109,500 | | | | 1,522,050 | |
Sinclair, Inc. (x) | | | 145,000 | | | | 1,576,150 | |
Sirius XM Holdings, Inc. (x) | | | 27,760 | | | | 118,813 | |
TEGNA, Inc. | | | 48,000 | | | | 696,480 | |
WideOpenWest, Inc.* | | | 28,000 | | | | 197,120 | |
| | | | | | | | |
| | | | | | | 8,136,437 | |
| | | | | | | | |
Wireless Telecommunication Services (2.0%) | |
Gogo, Inc.* | | | 12,900 | | | | 135,450 | |
Millicom International Cellular SA (x)* | | | 42,000 | | | | 659,820 | |
Telephone and Data Systems, Inc. | | | 30,000 | | | | 545,700 | |
United States Cellular Corp.* | | | 27,200 | | | | 1,143,216 | |
| | | | | | | | |
| | | | | | | 2,484,186 | |
| | | | | | | | |
Total Communication Services | | | | | | | 17,003,503 | |
| | | | | | | | |
Consumer Discretionary (14.6%) | |
Automobile Components (5.6%) | |
Dana, Inc. | | | 98,000 | | | | 1,125,040 | |
Garrett Motion, Inc.* | | | 10,000 | | | | 70,600 | |
Gentex Corp. | | | 24,000 | | | | 688,320 | |
Gentherm, Inc.* | | | 2,800 | | | | 112,616 | |
Goodyear Tire & Rubber Co. (The)* | | | 140,000 | | | | 1,666,000 | |
Modine Manufacturing Co.* | | | 55,800 | | | | 2,204,100 | |
Strattec Security Corp.* | | | 43,000 | | | | 978,250 | |
| | | | | | | | |
| | | | | | | 6,844,926 | |
| | | | | | | | |
| | | | | | | | |
Diversified Consumer Services (0.3%) | |
Graham Holdings Co., Class B | | | 500 | | | | 289,360 | |
H&R Block, Inc. | | | 3,000 | | | | 123,150 | |
| | | | | | | | |
| | | | | | | 412,510 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (3.3%) | |
Bally’s Corp.* | | | 19,000 | | | | 173,280 | |
Caesars Entertainment, Inc.* | | | 32,000 | | | | 1,276,480 | |
Churchill Downs, Inc. | | | 4,000 | | | | 439,360 | |
GAN Ltd.* | | | 15,000 | | | | 13,147 | |
Golden Entertainment, Inc. | | | 23,000 | | | | 721,280 | |
Nathan’s Famous, Inc. | | | 19,500 | | | | 1,276,470 | |
Wynn Resorts Ltd. | | | 800 | | | | 70,224 | |
| | | | | | | | |
| | | | | | | 3,970,241 | |
| | | | | | | | |
Household Durables (1.0%) | |
Bassett Furniture Industries, Inc. | | | 24,000 | | | | 369,360 | |
Lennar Corp., Class B | | | 9,000 | | | | 887,490 | |
| | | | | | | | |
| | | | | | | 1,256,850 | |
| | | | | | | | |
Leisure Products (1.8%) | |
Brunswick Corp. | | | 14,500 | | | | 1,007,315 | |
Johnson Outdoors, Inc., Class A | | | 21,000 | | | | 998,550 | |
Mattel, Inc.* | | | 12,900 | | | | 246,132 | |
| | | | | | | | |
| | | | | | | 2,251,997 | |
| | | | | | | | |
Specialty Retail (2.6%) | |
Advance Auto Parts, Inc. | | | 17,000 | | | | 884,510 | |
AutoNation, Inc.* | | | 7,500 | | | | 975,600 | |
Lands’ End, Inc.* | | | 10,000 | | | | 62,800 | |
Monro, Inc. | | | 36,000 | | | | 893,520 | |
Valvoline, Inc. | | | 10,000 | | | | 296,700 | |
| | | | | | | | |
| | | | | | | 3,113,130 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 17,849,654 | |
| | | | | | | | |
Consumer Staples (10.0%) | |
Beverages (1.7%) | |
Boston Beer Co., Inc. (The), Class A* | | | 500 | | | | 166,975 | |
National Beverage Corp.* | | | 19,000 | | | | 881,220 | |
Remy Cointreau SA | | | 9,400 | | | | 1,065,729 | |
| | | | | | | | |
| | | | | | | 2,113,924 | |
| | | | | | | | |
Consumer Staples Distribution & Retail (0.3%) | |
Ingles Markets, Inc., Class A | | | 2,000 | | | | 160,440 | |
Village Super Market, Inc., Class A | | | 8,900 | | | | 217,783 | |
| | | | | | | | |
| | | | | | | 378,223 | |
| | | | | | | | |
Food Products (3.7%) | |
Bunge Ltd. | | | 3,500 | | | | 370,930 | |
Calavo Growers, Inc. | | | 30,500 | | | | 772,870 | |
Farmer Bros Co.* | | | 96,000 | | | | 241,920 | |
Hain Celestial Group, Inc. (The)* | | | 44,000 | | | | 486,200 | |
J M Smucker Co. (The) | | | 13,000 | | | | 1,479,920 | |
Maple Leaf Foods, Inc. (x) | | | 47,000 | | | | 935,763 | |
McCormick & Co., Inc. (Non-Voting) | | | 2,900 | | | | 186,325 | |
| | | | | | | | |
| | | | | | | 4,473,928 | |
| | | | | | | | |
Household Products (3.5%) | |
Energizer Holdings, Inc. | | | 62,000 | | | | 1,957,960 | |
Spectrum Brands Holdings, Inc. | | | 31,000 | | | | 2,334,920 | |
| | | | | | | | |
| | | | | | | 4,292,880 | |
| | | | | | | | |
See Notes to Financial Statements.
31
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Personal Care Products (0.8%) | |
Edgewell Personal Care Co. | | | 27,300 | | | $ | 952,770 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 12,211,725 | |
| | | | | | | | |
Energy (1.7%) | |
Energy Equipment & Services (1.7%) | |
Dril-Quip, Inc.* | | | 56,500 | | | | 1,223,790 | |
RPC, Inc. | | | 104,000 | | | | 865,280 | |
| | | | | | | | |
Total Energy | | | | | | | 2,089,070 | |
| | | | | | | | |
Financials (1.9%) | |
Banks (1.4%) | |
Cadence Bank | | | 9,000 | | | | 190,620 | |
Flushing Financial Corp. | | | 27,000 | | | | 333,180 | |
SouthState Corp. | | | 4,500 | | | | 297,450 | |
Synovus Financial Corp. | | | 37,000 | | | | 964,590 | |
| | | | | | | | |
| | | | | | | 1,785,840 | |
| | | | | | | | |
Capital Markets (0.3%) | |
Affiliated Managers Group, Inc. | | | 1,200 | | | | 147,312 | |
Janus Henderson Group plc | | | 8,000 | | | | 184,560 | |
| | | | | | | | |
| | | | | | | 331,872 | |
| | | | | | | | |
Financial Services (0.2%) | |
NCR Atleos Corp.* | | | 10,500 | | | | 231,630 | |
| | | | | | | | |
Total Financials | | | | | | | 2,349,342 | |
| | | | | | | | |
Health Care (2.7%) | |
Health Care Equipment & Supplies (0.3%) | |
Cutera, Inc. (x)* | | | 29,500 | | | | 91,745 | |
QuidelOrtho Corp.* | | | 4,600 | | | | 280,968 | |
| | | | | | | | |
| | | | | | | 372,713 | |
| | | | | | | | |
Health Care Providers & Services (0.9%) | |
Option Care Health, Inc.* | | | 17,500 | | | | 485,275 | |
Patterson Cos., Inc. | | | 20,000 | | | | 609,200 | |
| | | | | | | | |
| | | | | | | 1,094,475 | |
| | | | | | | | |
Health Care Technology (0.4%) | |
Evolent Health, Inc., Class A* | | | 17,000 | | | | 415,310 | |
Teladoc Health, Inc.* | | | 3,400 | | | | 56,236 | |
| | | | | | | | |
| | | | | | | 471,546 | |
| | | | | | | | |
Life Sciences Tools & Services (0.1%) | |
Bio-Rad Laboratories, Inc., Class A* | | | 300 | | | | 82,584 | |
| | | | | | | | |
Pharmaceuticals (1.0%) | |
Perrigo Co. plc | | | 31,000 | | | | 856,840 | |
Teva Pharmaceutical Industries Ltd. (ADR)* | | | 48,000 | | | | 411,840 | |
| | | | | | | | |
| | | | | | | 1,268,680 | |
| | | | | | | | |
Total Health Care | | | | | | | 3,289,998 | |
| | | | | | | | |
Industrials (36.7%) | |
Aerospace & Defense (5.8%) | |
AAR Corp.* | | | 18,100 | | | | 1,074,416 | |
Kaman Corp. | | | 64,000 | | | | 1,191,040 | |
Moog, Inc., Class A | | | 10,500 | | | | 1,218,525 | |
Moog, Inc., Class B | | | 12,900 | | | | 1,497,045 | |
Park Aerospace Corp. | | | 2,000 | | | | 29,360 | |
Textron, Inc. | | | 27,300 | | | | 2,074,800 | |
| | | | | | | | |
| | | | | | | 7,085,186 | |
| | | | | | | | |
| | | | | | | | |
Building Products (2.5%) | |
AZZ, Inc. | | | 31,000 | | | | 1,465,370 | |
Griffon Corp. | | | 38,000 | | | | 1,517,720 | |
| | | | | | | | |
| | | | | | | 2,983,090 | |
| | | | | | | | |
Commercial Services & Supplies (1.6%) | |
Matthews International Corp., Class A | | | 47,000 | | | | 1,665,680 | |
OPENLANE, Inc.* | | | 20,000 | | | | 268,600 | |
| | | | | | | | |
| | | | | | | 1,934,280 | |
| | | | | | | | |
Construction & Engineering (1.5%) | |
Arcosa, Inc. | | | 13,500 | | | | 932,445 | |
MDU Resources Group, Inc. | | | 2,400 | | | | 44,664 | |
Valmont Industries, Inc. | | | 4,500 | | | | 886,095 | |
| | | | | | | | |
| | | | | | | 1,863,204 | |
| | | | | | | | |
Machinery (22.3%) | |
Astec Industries, Inc. | | | 48,000 | | | | 1,921,920 | |
CNH Industrial NV | | | 31,300 | | | | 343,674 | |
Commercial Vehicle Group, Inc.* | | | 91,100 | | | | 634,967 | |
Crane Co. | | | 18,500 | | | | 1,800,605 | |
Donaldson Co., Inc. | | | 800 | | | | 46,128 | |
Eastern Co. (The) | | | 26,900 | | | | 437,125 | |
Enerpac Tool Group Corp., Class A | | | 22,000 | | | | 622,600 | |
EnPro Industries, Inc. | | | 21,000 | | | | 2,332,260 | |
Flowserve Corp. | | | 43,000 | | | | 1,578,960 | |
Gorman-Rupp Co. (The) | | | 11,500 | | | | 339,825 | |
Graco, Inc. | | | 3,000 | | | | 223,050 | |
Hyster-Yale Materials Handling, Inc. | | | 40,500 | | | | 1,620,405 | |
Ingersoll Rand, Inc. | | | 16,000 | | | | 970,880 | |
ITT, Inc. | | | 12,000 | | | | 1,120,200 | |
Iveco Group NV* | | | 60,000 | | | | 504,968 | |
Kennametal, Inc. | | | 19,000 | | | | 439,090 | |
L B Foster Co., Class A* | | | 42,000 | | | | 824,040 | |
Manitowoc Co., Inc. (The)* | | | 16,800 | | | | 215,040 | |
Mueller Industries, Inc. | | | 66,000 | | | | 2,488,860 | |
Mueller Water Products, Inc., Class A | | | 13,700 | | | | 169,469 | |
Park-Ohio Holdings Corp. | | | 72,000 | | | | 1,632,960 | |
Shyft Group, Inc. (The) | | | 4,000 | | | | 43,920 | |
Snap-on, Inc. | | | 4,500 | | | | 1,160,730 | |
Tennant Co. | | | 11,500 | | | | 853,530 | |
Terex Corp. | | | 12,500 | | | | 572,500 | |
Timken Co. (The) | | | 1,000 | | | | 69,120 | |
Toro Co. (The) | | | 5,300 | | | | 428,452 | |
Trinity Industries, Inc. | | | 75,000 | | | | 1,562,250 | |
Twin Disc, Inc.* | | | 111,000 | | | | 1,525,140 | |
Watts Water Technologies, Inc., Class A | | | 4,500 | | | | 778,545 | |
| | | | | | | | |
| | | | | | | 27,261,213 | |
| | | | | | | | |
Trading Companies & Distributors (3.0%) | |
Ashtead Group plc | | | 2,300 | | | | 131,502 | |
GATX Corp. | | | 12,900 | | | | 1,349,082 | |
Herc Holdings, Inc. | | | 20,500 | | | | 2,189,195 | |
| | | | | | | | |
| | | | | | | 3,669,779 | |
| | | | | | | | |
Total Industrials | | | | | | | 44,796,752 | |
| | | | | | | | |
Information Technology (2.3%) | |
Communications Equipment (0.3%) | |
Viasat, Inc. (x)* | | | 20,000 | | | | 368,800 | |
| | | | | | | | |
See Notes to Financial Statements.
32
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.8%) | |
Crane NXT Co. | | | 6,000 | | | $ | 312,000 | |
Landis+Gyr Group AG | | | 8,900 | | | | 657,484 | |
| | | | | | | | |
| | | | | | | 969,484 | |
| | | | | | | | |
IT Services (0.8%) | |
Kyndryl Holdings, Inc.* | | | 68,000 | | | | 994,840 | |
| | | | | | | | |
Software (0.4%) | |
A10 Networks, Inc. | | | 12,000 | | | | 130,440 | |
NCR Voyix Corp.* | | | 21,000 | | | | 321,090 | |
| | | | | | | | |
| | | | | | | 451,530 | |
| | | | | | | | |
Total Information Technology | | | | | | | 2,784,654 | |
| | | | | | | | |
Materials (7.4%) | |
Chemicals (4.8%) | |
Axalta Coating Systems Ltd.* | | | 23,500 | | | | 616,405 | |
Core Molding Technologies, Inc.* | | | 72,500 | | | | 1,854,550 | |
Element Solutions, Inc. | | | 65,900 | | | | 1,201,357 | |
HB Fuller Co. | | | 9,700 | | | | 641,655 | |
Huntsman Corp. | | | 10,000 | | | | 233,300 | |
Scotts Miracle-Gro Co. (The) (x) | | | 29,500 | | | | 1,310,980 | |
| | | | | | | | |
| | | | | | | 5,858,247 | |
| | | | | | | | |
Construction Materials (0.0%)† | |
Knife River Corp.* | | | 600 | | | | 30,192 | |
| | | | | | | | |
Containers & Packaging (1.7%) | |
Ardagh Metal Packaging SA (x) | | | 35,000 | | | | 117,950 | |
Greif, Inc., Class A | | | 19,000 | | | | 1,206,500 | |
Myers Industries, Inc. | | | 42,000 | | | | 704,340 | |
| | | | | | | | |
| | | | | | | 2,028,790 | |
| | | | | | | | |
Metals & Mining (0.9%) | |
Ampco-Pittsburgh Corp.* | | | 85,000 | | | | 225,250 | |
Freeport-McMoRan, Inc. | | | 18,500 | | | | 624,930 | |
Tredegar Corp. | | | 69,000 | | | | 309,120 | |
| | | | | | | | |
| | | | | | | 1,159,300 | |
| | | | | | | | |
Total Materials | | | | | | | 9,076,529 | |
| | | | | | | | |
Real Estate (0.8%) | |
Hotel & Resort REITs (0.2%) | |
Ryman Hospitality Properties, Inc. (REIT) | | | 2,500 | | | | 214,000 | |
| | | | | | | | |
Real Estate Management & Development (0.6%) | |
Seritage Growth Properties (REIT), Class A (x)* | | | 16,000 | | | | 115,840 | |
St Joe Co. (The) | | | 14,500 | | | | 676,280 | |
| | | | | | | | |
| | | | | | | 792,120 | |
| | | | | | | | |
Total Real Estate | | | | | | | 1,006,120 | |
| | | | | | | | |
Utilities (2.8%) | |
Gas Utilities (2.0%) | |
National Fuel Gas Co. | | | 26,000 | | | | 1,324,700 | |
Southwest Gas Holdings, Inc. | | | 19,000 | | | | 1,113,590 | |
| | | | | | | | |
| | | | | | | 2,438,290 | |
| | | | | | | | |
| | | | | | | | |
Independent Power and Renewable Electricity Producers (0.8%) | |
AES Corp. (The) | | | 50,000 | | | | 745,000 | |
NextEra Energy Partners LP | | | 7,000 | | | | 189,490 | |
| | | | | | | | |
| | | | | | | 934,490 | |
| | | | | | | | |
Total Utilities | | | | | | | 3,372,780 | |
| | | | | | | | |
Total Common Stocks (94.8%)
(Cost $110,029,037) | | | | | | | 115,830,127 | |
| | | | | | | | |
| | | |
| | | Number of
Rights | | | Value
(Note 1) | |
RIGHTS: | |
Industrials (0.0%)† | |
Electrical Equipment (0.0%)† | |
Pineapple Energy, Inc., CVR (r)*
(Cost $—) | | | 6,250 | | | | 4,945 | |
| | | | | | | | |
| | | |
| | | Number of
Warrants | | | Value
(Note 1) | |
WARRANTS: | |
Energy (0.0%)† | |
Energy Equipment & Services (0.0%)† | |
Weatherford International plc, expiring 12/13/23* | | | 1,117 | | | | 2,066 | |
| | | | | | | | |
Total Energy | | | | | | | 2,066 | |
| | | | | | | | |
Health Care (0.0%)† | |
Health Care Providers & Services (0.0%)† | |
Option Care Health, Inc., expiring 6/30/25* | | | 22 | | | | 8 | |
| | | | | | | | |
Total Health Care | | | | | | | 8 | |
| | | | | | | | |
Materials (0.0%)† | |
Metals & Mining (0.0%)† | |
Ampco-Pittsburgh Corp., expiring 8/1/25* | | | 30,000 | | | | 7,500 | |
| | | | | | | | |
Total Materials | | | | | | | 7,500 | |
| | | | | | | | |
Total Warrants (0.0%)†
(Cost $—) | | | | | | | 9,574 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (7.0%) | | | | | |
BlackRock Liquidity FedFund, Institutional Shares 5.24% (7 day yield) (xx) | | | 200,000 | | | | 200,000 | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 200,000 | | | | 200,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 1,633,255 | | | | 1,633,255 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 6,338,629 | | | | 6,341,165 | |
See Notes to Financial Statements.
33
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Morgan Stanley Institutional Liquidity Fund - Government Portfolio 5.25% (7 day yield) (xx) | | | 200,000 | | | $ | 200,000 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 8,574,420 | |
| | | | | | | | |
Total Short-Term Investments (7.0%)
(Cost $8,574,025) | | | | | | | 8,574,420 | |
| | | | | | | | |
Total Investments in Securities (101.8%)
(Cost $118,603,062) | | | | | | | 124,419,066 | |
Other Assets Less Liabilities (-1.8%) | | | | | | | (2,151,239 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 122,267,827 | |
| | | | | | | | |
| † | Percent shown is less than 0.05%. |
| (r) | Fair value determined using significant unobservable inputs. |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $3,909,069. This was collateralized by $1,782,231 of various U.S. Government Treasury Securities, ranging from 0.000% – 5.538%, maturing 11/16/23 – 5/15/52 and by cash of $2,233,255 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | ADR | — American Depositary Receipt |
| | CVR | — Contingent Value Right |
| | REIT | — Real Estate Investment Trust |
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, 2023:
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 | | $ | 16,550,594 | | | $ | 452,909 | | | $ | — | | | $ | 17,003,503 | |
Consumer Discretionary | | | 17,849,654 | | | | — | | | | — | | | | 17,849,654 | |
Consumer Staples | | | 10,959,671 | | | | 1,252,054 | | | | — | | | | 12,211,725 | |
Energy | | | 2,089,070 | | | | — | | | | — | | | | 2,089,070 | |
Financials | | | 2,349,342 | | | | — | | | | — | | | | 2,349,342 | |
Health Care | | | 3,289,998 | | | | — | | | | — | | | | 3,289,998 | |
Industrials | | | 42,226,112 | | | | 2,570,640 | | | | — | | | | 44,796,752 | |
Information Technology | | | 2,127,170 | | | | 657,484 | | | | — | | | | 2,784,654 | |
Materials | | | 9,076,529 | | | | — | | | | — | | | | 9,076,529 | |
Real Estate | | | 1,006,120 | | | | — | | | | — | | | | 1,006,120 | |
Utilities | | | 3,372,780 | | | | — | | | | — | | | | 3,372,780 | |
Rights | | | | | | | | | | | | | | | | |
Industrials | | | — | | | | — | | | | 4,945 | | | | 4,945 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 8,574,420 | | | | — | | | | — | | | | 8,574,420 | |
Warrants | | | | | | | | | | | | | | | | |
Energy | | | 2,066 | | | | — | | | | — | | | | 2,066 | |
Health Care | | | — | | | | 8 | | | | — | | | | 8 | |
Materials | | | — | | | | 7,500 | | | | — | | | | 7,500 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 119,473,526 | | | $ | 4,940,595 | | | $ | 4,945 | | | $ | 124,419,066 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 119,473,526 | | | $ | 4,940,595 | | | $ | 4,945 | | | $ | 124,419,066 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
See Notes to Financial Statements.
34
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 18,221,207 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 16,816,486 | |
As of October 31, 2023, 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 | | $ | 19,988,905 | |
Aggregate gross unrealized depreciation | | | (17,352,211 | ) |
| | | | |
Net unrealized appreciation | | $ | 2,636,694 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 121,782,372 | |
| | | | |
See Notes to Financial Statements.
35
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x) (Cost $118,603,062) | | $ | 124,419,066 | |
Cash | | | 331,000 | |
Foreign cash (Cost $6,784) | | | 6,591 | |
Receivable for securities sold | | | 229,290 | |
Receivable for Fund shares sold | | | 153,118 | |
Dividends, interest and other receivables | | | 57,197 | |
Prepaid registration and filing fees | | | 25,909 | |
Securities lending income receivable | | | 7,406 | |
Other assets | | | 771 | |
| | | | |
Total assets | | | 125,230,348 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 2,233,255 | |
Payable for securities purchased | | | 452,701 | |
Payable for Fund shares repurchased | | | 108,428 | |
Investment advisory fees payable | | | 40,068 | |
Transfer agent fees payable | | | 24,492 | |
Administrative fees payable | | | 15,918 | |
Distribution fees payable – Class A | | | 1,207 | |
Distribution fees payable – Class R | | | 480 | |
Trustees’ fees payable | | | 190 | |
Distribution fees payable – Class T** | | | 32 | |
Accrued expenses | | | 85,750 | |
| | | | |
Total liabilities | | | 2,962,521 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 122,267,827 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 114,639,929 | |
Total distributable earnings (loss) | | | 7,627,898 | |
| | | | |
Net assets | | $ | 122,267,827 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $5,477,805 / 376,792 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.54 | |
Maximum sales charge (5.50% of offering price) | | | 0.85 | |
| | | | |
Maximum offering price per share | | $ | 15.39 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $115,537,434 / 7,922,582 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.58 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $1,104,111 / 76,729 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.39 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $148,477 / 10,179 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.59 | |
Maximum sales charge (2.50% of offering price) | | | 0.37 | |
| | | | |
Maximum offering price per share | | $ | 14.96 | |
| | | | |
| (x) | Includes value of securities on loan of $3,909,069. |
| ^ | See Note 2 in Notes to the Financial Statements. |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | |
Dividends (net of $12,921 foreign withholding tax) | | $ | 2,211,964 | |
Interest | | | 14,497 | |
Securities lending (net) | | | 61,190 | |
| | | | |
Total income | | | 2,287,651 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 924,774 | |
Transfer agent fees | | | 200,800 | |
Administrative fees | | | 184,956 | |
Professional fees | | | 147,370 | |
Printing and mailing expenses | | | 45,707 | |
Registration and filing fees | | | 41,754 | |
Distribution fees – Class A | | | 14,222 | |
Custodian fees | | | 11,000 | |
Distribution fees – Class R | | | 5,759 | |
Trustees’ fees | | | 3,536 | |
Distribution fees – Class T** | | | 390 | |
Miscellaneous | | | 19,202 | |
| | | | |
Gross expenses | | | 1,599,470 | |
Waiver from investment adviser | | | (411,133 | ) |
Waiver from distributor | | | (390 | ) |
| | | | |
Net expenses | | | 1,187,947 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 1,099,704 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | 4,096,143 | |
Foreign currency transactions | | | 42,311 | |
| | | | |
Net realized gain (loss) | | | 4,138,454 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | |
Investments in securities | | | (972,528 | ) |
Foreign currency translations | | | 144 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | (972,384 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 3,166,070 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 4,265,774 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
36
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 1,099,704 | | | $ | 929,206 | |
Net realized gain (loss) | | | 4,138,454 | | | | 2,685,439 | |
Net change in unrealized appreciation (depreciation) | | | (972,384 | ) | | | (23,467,296 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 4,265,774 | | | | (19,852,651 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (115,589 | ) | | | (387,779 | ) |
Class I | | | (2,655,839 | ) | | | (9,782,485 | ) |
Class R | | | (23,110 | ) | | | (73,341 | ) |
Class T** | | | (3,637 | ) | | | (11,801 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (2,798,175 | ) | | | (10,255,406 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 61,592 and 46,002 shares, respectively ] | | | 961,657 | | | | 729,775 | |
Capital shares issued in reinvestment of dividends [ 7,696 and 23,486 shares, respectively ] | | | 111,872 | | | | 376,006 | |
Capital shares repurchased [ (51,328) and (54,051) shares , respectively] | | | (784,540 | ) | | | (829,479 | ) |
| | | | | | | | |
Total Class A transactions | | | 288,989 | | | | 276,302 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 2,069,994 and 3,073,849 shares, respectively ] | | | 31,772,142 | | | | 47,407,966 | |
Capital shares issued in reinvestment of dividends [ 146,693 and 505,418 shares, respectively ] | | | 2,135,267 | | | | 8,096,806 | |
Capital shares repurchased [ (1,930,280) and (4,377,065) shares , respectively] | | | (29,340,104 | ) | | | (62,504,731 | ) |
| | | | | | | | |
Total Class I transactions | | | 4,567,305 | | | | (6,999,959 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 20,991 and 13,472 shares, respectively ] | | | 313,247 | | | | 209,451 | |
Capital shares issued in reinvestment of dividends [ 1,367 and 3,895 shares, respectively ] | | | 19,714 | | | | 62,009 | |
Capital shares repurchased [ (17,616) and (9,596) shares , respectively] | | | (264,051 | ) | | | (134,914 | ) |
| | | | | | | | |
Total Class R transactions | | | 68,910 | | | | 136,546 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 4,925,204 | | | | (6,587,111 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 6,392,803 | | | | (36,695,168 | ) |
NET ASSETS: | |
Beginning of year | | | 115,875,024 | | | | 152,570,192 | |
| | | | | | | | |
End of year | | $ | 122,267,827 | | | $ | 115,875,024 | |
| | | | | | | | |
| | | | | | | | |
** Class T shares currently are not offered for sale. | | | | | | | | |
See Notes to Financial Statements.
37
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.31 | | | $ | 17.19 | | | $ | 11.41 | | | $ | 12.46 | | | $ | 12.33 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.10 | | | | 0.06 | | | | 0.09 | (2) | | | 0.04 | (1) | | | 0.05 | |
Net realized and unrealized gain (loss) | | | 0.45 | | | | (1.82 | ) | | | 5.73 | | | | (0.90 | ) | | | 0.22 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.55 | | | | (1.76 | ) | | | 5.82 | | | | (0.86 | ) | | | 0.27 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | — | | | | (0.26 | ) | | | (0.04 | ) | | | (0.04 | ) | | | (0.02 | ) |
Distributions from net realized gains | | | (0.32 | ) | | | (0.86 | ) | | | — | | | | (0.15 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.32 | ) | | | (1.12 | ) | | | (0.04 | ) | | | (0.19 | ) | | | (0.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.54 | | | $ | 14.31 | | | $ | 17.19 | | | $ | 11.41 | | | $ | 12.46 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.88 | % | | | (10.93 | )% | | | 51.10 | % | | | (7.04 | )% | | | 2.29 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 5,478 | | | $ | 5,134 | | | $ | 5,904 | | | $ | 3,400 | | | $ | 3,896 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.20 | %(j) | | | 1.21 | %(k) | | | 1.24 | %(o) | | | 1.25 | %(o) | | | 1.24 | %(o) |
Before waivers (f) | | | 1.53 | % | | | 1.51 | % | | | 1.42 | % | | | 1.58 | % | | | 1.66 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.66 | % | | | 0.42 | % | | | 0.55 | %(bb) | | | 0.40 | %(aa) | | | 0.39 | % |
Before waivers (f) | | | 0.33 | % | | | 0.13 | % | | | 0.37 | %(bb) | | | 0.07 | %(aa) | | | (0.03 | )% |
Portfolio turnover rate^ | | | 14 | % | | | 27 | % | | | 35 | % | | | 19 | % | | | 37 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.35 | | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.14 | | | | 0.10 | | | | 0.13 | (2) | | | 0.07 | (1) | | | 0.08 | |
Net realized and unrealized gain (loss) | | | 0.44 | | | | (1.84 | ) | | | 5.75 | | | | (0.91 | ) | | | 0.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.58 | | | | (1.74 | ) | | | 5.88 | | | | (0.84 | ) | | | 0.31 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.03 | ) | | | (0.29 | ) | | | (0.07 | ) | | | (0.07 | ) | | | (0.06 | ) |
Distributions from net realized gains | | | (0.32 | ) | | | (0.86 | ) | | | — | | | | (0.15 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.35 | ) | | | (1.15 | ) | | | (0.07 | ) | | | (0.22 | ) | | | (0.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.58 | | | $ | 14.35 | | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.11 | % | | | (10.74 | )% | | | 51.57 | % | | | (6.88 | )% | | | 2.57 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 115,537 | | | $ | 109,572 | | | $ | 145,394 | | | $ | 84,537 | | | $ | 95,601 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.95 | %(j) | | | 0.96 | %(k) | | | 0.99 | %(o) | | | 1.00 | %(o) | | | 0.99 | %(o) |
Before waivers (f) | | | 1.28 | % | | | 1.25 | % | | | 1.17 | % | | | 1.33 | % | | | 1.41 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.91 | % | | | 0.68 | % | | | 0.76 | %(bb) | | | 0.64 | %(aa) | | | 0.64 | % |
Before waivers (f) | | | 0.57 | % | | | 0.40 | % | | | 0.59 | %(bb) | | | 0.31 | %(aa) | | | 0.22 | % |
Portfolio turnover rate^ | | | 14 | % | | | 27 | % | | | 35 | % | | | 19 | % | | | 37 | % |
See Notes to Financial Statements.
38
1290 FUNDS
1290 GAMCO SMALL/MID CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.20 | | | $ | 17.07 | | | $ | 11.33 | | | $ | 12.38 | | | $ | 12.26 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.06 | | | | 0.03 | | | | 0.05 | (2) | | | 0.02 | (1) | | | 0.02 | |
Net realized and unrealized gain (loss) | | | 0.45 | | | | (1.82 | ) | | | 5.70 | | | | (0.91 | ) | | | 0.22 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.51 | | | | (1.79 | ) | | | 5.75 | | | | (0.89 | ) | | | 0.24 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | — | | | | (0.22 | ) | | | (0.01 | ) | | | (0.01 | ) | | | — | |
Distributions from net realized gains | | | (0.32 | ) | | | (0.86 | ) | | | — | | | | (0.15 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.32 | ) | | | (1.08 | ) | | | (0.01 | ) | | | (0.16 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.39 | | | $ | 14.20 | | | $ | 17.07 | | | $ | 11.33 | | | $ | 12.38 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.62 | % | | | (11.17 | )% | | | 50.80 | % | | | (7.31 | )% | | | 2.02 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 1,104 | | | $ | 1,022 | | | $ | 1,096 | | | $ | 685 | | | $ | 912 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.45 | %(j) | | | 1.46 | %(k) | | | 1.49 | %(o) | | | 1.50 | %(o) | | | 1.49 | %(o) |
Before waivers (f) | | | 1.78 | % | | | 1.76 | % | | | 1.67 | % | | | 1.83 | % | | | 1.91 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.41 | % | | | 0.17 | % | | | 0.28 | %(bb) | | | 0.15 | %(aa) | | | 0.14 | % |
Before waivers (f) | | | 0.08 | % | | | (0.12 | )% | | | 0.11 | %(bb) | | | (0.19 | )%(aa) | | | (0.28 | )% |
Portfolio turnover rate^ | | | 14 | % | | | 27 | % | | | 35 | % | | | 19 | % | | | 37 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.35 | | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | | | $ | 12.36 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.14 | | | | 0.11 | | | | 0.13 | (2) | | | 0.07 | (1) | | | 0.08 | |
Net realized and unrealized gain (loss) | | | 0.45 | | | | (1.85 | ) | | | 5.75 | | | | (0.91 | ) | | | 0.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.59 | | | | (1.74 | ) | | | 5.88 | | | | (0.84 | ) | | | 0.31 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.03 | ) | | | (0.29 | ) | | | (0.07 | ) | | | (0.07 | ) | | | (0.06 | ) |
Distributions from net realized gains | | | (0.32 | ) | | | (0.86 | ) | | | — | | | | (0.15 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.35 | ) | | | (1.15 | ) | | | (0.07 | ) | | | (0.22 | ) | | | (0.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.59 | | | $ | 14.35 | | | $ | 17.24 | | | $ | 11.43 | | | $ | 12.49 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.18 | % | | | (10.74 | )% | | | 51.57 | % | | | (6.88 | )% | | | 2.57 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 148 | | | $ | 146 | | | $ | 176 | | | $ | 116 | | | $ | 127 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.95 | %(j) | | | 0.96 | %(k) | | | 0.99 | %(o) | | | 1.00 | %(o) | | | 0.99 | %(o) |
Before waivers (f) | | | 1.53 | % | | | 1.51 | % | | | 1.42 | % | | | 1.58 | % | | | 1.66 | % |
Ratio of net investment income (loss) to average net assets: | | | | | �� | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.91 | % | | | 0.74 | % | | | 0.79 | %(bb) | | | 0.64 | %(aa) | | | 0.64 | % |
Before waivers (f) | | | 0.33 | % | | | 0.19 | % | | | 0.37 | %(bb) | | | 0.06 | %(aa) | | | (0.02 | )% |
Portfolio turnover rate^ | | | 14 | % | | | 27 | % | | | 35 | % | | | 19 | % | | | 37 | % |
See Notes to Financial Statements.
39
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. |
| (1) | 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. |
| (2) | 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. |
| (j) | Including direct and indirect expenses, the net expense ratio after waivers would be 1.20% for Class A, 0.95% for Class I, 1.45% for Class R and 0.95% for Class T. |
| (k) | Including direct and indirect expenses, the net expense ratio after waivers would be 1.21 for Class A, 0.96 for Class I, 1.46 for Class R and 0.96 for Class T. |
| (o) | Including direct and indirect expenses, the net expense ratio after waivers 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 0.09 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.
40
1290 HIGH YIELD BOND FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | AXA Investment Managers US, Inc. |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 4.30 | % | | | 2.53 | % | | | 2.88 | % |
| | | with Sales Charge (a) | | | (0.34 | ) | | | 1.59 | | | | 2.36 | |
Fund – Class I Shares* | | | | | 4.69 | | | | 2.79 | | | | 3.15 | |
Fund – Class R Shares* | | | | | 4.04 | | | | 2.28 | | | | 2.63 | |
Fund – Class T Shares*† | | without Sales Charge | | | 4.69 | | | | 2.81 | | | | 3.15 | |
| | | with Sales Charge (b) | | | 2.12 | | | | 2.29 | | | | 2.86 | |
ICE BofA U.S. High Yield Index | | | | | 5.90 | | | | 2.90 | | | | 3.59 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratios for Class A, I, R and T shares were 1.43%, 1.18%, 1.67% and 1.43%, respectively. The net expense ratios for Class A, I, R and T shares were 1.00%, 0.75%, 1.25% and 0.75%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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 4.69% for the year ended October 31, 2023. The Fund’s benchmark, the ICE BofA U.S. High Yield Index, returned 5.90% over the same year.
Overview — AXA Investment Managers US, Inc.
What helped performance during the year:
| • | | From a macro risk positioning perspective, the largest contributor to the Fund’s relative performance was being underweight the better-quality, intermediate duration and long duration segments of the market. |
| • | | Looking at performance by sector, security selection in the media industry was the top contributor to the Fund’s relative performance. |
| • | | From an individual security perspective, Specialty Building Products Holdings LLC 6.375% notes due 2026 was the top contributor to the Fund’s performance. |
What hurt performance during the year:
| • | | Looking at performance by sector, security selection in the telecommunications space was the top detractor from the Fund’s relative performance. |
| • | | From a macro risk positioning perspective, the largest detractor from the Fund’s relative performance was security selection in the highest-yielding segment of the market. |
| • | | From an individual security perspective, Curo Group Holdings Corp. 7.5% notes due 2028 was the worst contributor to the Fund’s performance. |
41
1290 HIGH YIELD BOND FUND (Unaudited)
Portfolio Positioning and Outlook
As of the end of October, the Fund remained well diversified by sector and issuer. The average yield-to-worst (ex-cash) was line with the benchmark level and the duration-to-worst (ex-cash) was just below the benchmark. Our expectations continue to range from a mild recession in the near term to simply a period of below-average growth. Correspondingly, we also still believe that the default rate of the U.S. high-yield bond market is unlikely to increase to a level significantly higher than its long-term average. Based on our outlook for the economy and current valuations, we continue to believe that portions of the U.S. high-yield market may deliver attractive total returns over the next 12 months.
| | | | |
| | |
Fund Characteristics
As of October 31, 2023 | | | |
Weighted Average Life (Years) | | | 4.64 | |
Weighted Average Coupon (%) | | | 6.30 | |
Weighted Average Effective Duration (Years)* | | | 3.45 | |
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, 2023 | | % of
Net Assets | |
Consumer Discretionary | | | 15.7 | % |
Industrials | | | 14.7 | |
Information Technology | | | 13.6 | |
Investment Companies | | | 11.8 | |
Materials | | | 11.4 | |
Communication Services | | | 10.2 | |
Energy | | | 8.4 | |
Health Care | | | 8.1 | |
Financials | | | 6.5 | |
Consumer Staples | | | 4.7 | |
Real Estate | | | 3.2 | |
Utilities | | | 0.6 | |
Cash and Other | | | (8.9 | ) |
| | | | | |
| | | | 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, 2023 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.
42
1290 HIGH YIELD BOND FUND (Unaudited)
EXAMPLE
| | | | | | | | | | | | |
| | | | |
| | | Beginning
Account
Value
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $993.40 | | | | $5.02 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.16 | | | | 5.09 | |
Class I | |
Actual | | | 1,000.00 | | | | 994.70 | | | | 3.77 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.42 | | | | 3.82 | |
Class R | |
Actual | | | 1,000.00 | | | | 992.20 | | | | 6.28 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.90 | | | | 6.36 | |
Class T | |
Actual | | | 1,000.00 | | | | 994.70 | | | | 3.77 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.43 | | | | 3.82 | |
| |
* Expenses are equal to the Fund’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). | |
43
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
LONG-TERM DEBT SECURITIES: | |
Corporate Bonds (97.1%) | |
Communication Services (10.2%) | | | | | |
Diversified Telecommunication Services (3.7%) | |
Altice France SA
8.125%, 2/1/27§ | | $ | 200,000 | | | $ | 168,500 | |
CCO Holdings LLC
5.500%, 5/1/26§ | | | 187,000 | | | | 177,650 | |
6.375%, 9/1/29 (x)§ | | | 290,000 | | | | 264,353 | |
4.750%, 3/1/30§ | | | 175,000 | | | | 144,696 | |
4.500%, 5/1/32 | | | 426,000 | | | | 324,782 | |
4.500%, 6/1/33§ | | | 452,000 | | | | 337,305 | |
Level 3 Financing, Inc.
4.250%, 7/1/28§ | | | 191,000 | | | | 107,437 | |
Lumen Technologies, Inc.
5.125%, 12/15/26 (x)§ | | | 235,000 | | | | 108,100 | |
Windstream Escrow LLC
7.750%, 8/15/28 (x)§ | | | 219,000 | | | | 173,582 | |
Zayo Group Holdings, Inc.
4.000%, 3/1/27§ | | | 356,000 | | | | 267,000 | |
6.125%, 3/1/28§ | | | 268,000 | | | | 175,540 | |
| | | | | | | | |
| | | | | | | 2,248,945 | |
| | | | | | | | |
Entertainment (0.5%) | | | | | |
Live Nation Entertainment, Inc.
4.875%, 11/1/24§ | | | 169,000 | | | | 165,000 | |
6.500%, 5/15/27§ | | | 186,000 | | | | 180,420 | |
| | | | | | | | |
| | | | | | | 345,420 | |
| | | | | | | | |
Interactive Media & Services (0.1%) | | | | | |
Rackspace Technology Global, Inc.
5.375%, 12/1/28§ | | | 187,000 | | | | 54,230 | |
| | | | | | | | |
Media (5.9%) | | | | | |
CSC Holdings LLC
11.250%, 5/15/28§ | | | 200,000 | | | | 190,500 | |
5.750%, 1/15/30§ | | | 200,000 | | | | 104,250 | |
Gray Television, Inc.
4.750%, 10/15/30 (x)§ | | | 314,000 | | | | 201,588 | |
McGraw-Hill Education, Inc.
8.000%, 8/1/29§ | | | 339,000 | | | | 278,505 | |
Nexstar Media, Inc.
5.625%, 7/15/27§ | | | 351,000 | | | | 314,040 | |
Outfront Media Capital LLC
5.000%, 8/15/27§ | | | 362,000 | | | | 320,370 | |
Sinclair Television Group, Inc.
5.500%, 3/1/30§ | | | 161,000 | | | | 85,330 | |
Sirius XM Radio, Inc.
3.125%, 9/1/26§ | | | 304,000 | | | | 272,618 | |
3.875%, 9/1/31§ | | | 423,000 | | | | 316,986 | |
Stagwell Global LLC
5.625%, 8/15/29 (x)§ | | | 315,000 | | | | 259,132 | |
TEGNA, Inc.
4.750%, 3/15/26§ | | | 253,000 | | | | 236,853 | |
5.000%, 9/15/29 (x) | | | 174,000 | | | | 145,725 | |
Univision Communications, Inc.
7.375%, 6/30/30§ | | | 250,000 | | | | 220,000 | |
Videotron Ltd.
3.625%, 6/15/29§ | | | 195,000 | | | | 163,936 | |
VZ Secured Financing BV
5.000%, 1/15/32§ | | | 270,000 | | | | 203,961 | |
Ziggo Bond Co. BV
6.000%, 1/15/27§ | | | 350,000 | | | | 318,801 | |
| | | | | | | | |
| | | | | | | 3,632,595 | |
| | | | | | | | |
Total Communication Services | | | | | | | 6,281,190 | |
| | | | | | | | |
Consumer Discretionary (15.7%) | | | | | |
Automobile Components (0.4%) | | | | | |
Clarios Global LP
6.750%, 5/15/28§ | | | 231,000 | | | | 222,915 | |
| | | | | | | | |
Automobiles (0.4%) | | | | | |
Ford Motor Co.
6.625%, 10/1/28 | | | 271,000 | | | | 266,263 | |
| | | | | | | | |
Broadline Retail (1.1%) | | | | | |
Getty Images, Inc.
9.750%, 3/1/27§ | | | 668,000 | | | | 656,495 | |
| | | | | | | | |
Distributors (1.0%) | | | | | |
Ritchie Bros Holdings, Inc.
7.750%, 3/15/31§ | | | 261,000 | | | | 261,979 | |
Windsor Holdings III LLC
8.500%, 6/15/30 (x)§ | | | 370,000 | | | | 357,975 | |
| | | | | | | | |
| | | | | | | 619,954 | |
| | | | | | | | |
Diversified Consumer Services (0.3%) | | | | | |
GEMS MENASA Cayman Ltd.
7.125%, 7/31/26§ | | | 200,000 | | | | 191,500 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (8.8%) | | | | | |
1011778 BC ULC
5.750%, 4/15/25§ | | | 164,000 | | | | 161,950 | |
3.875%, 1/15/28§ | | | 96,000 | | | | 85,440 | |
Caesars Entertainment, Inc.
6.250%, 7/1/25§ | | | 372,000 | | | | 365,025 | |
4.625%, 10/15/29 (x)§ | | | 164,000 | | | | 134,275 | |
7.000%, 2/15/30§ | | | 112,000 | | | | 107,380 | |
Carnival Corp.
6.000%, 5/1/29 (x)§ | | | 405,000 | | | | 342,225 | |
7.000%, 8/15/29§ | | | 84,000 | | | | 82,320 | |
CDI Escrow Issuer, Inc.
5.750%, 4/1/30§ | | | 347,000 | | | | 309,659 | |
CEC Entertainment LLC
6.750%, 5/1/26§ | | | 211,000 | | | | 198,340 | |
Churchill Downs, Inc.
5.500%, 4/1/27§ | | | 175,000 | | | | 164,062 | |
Dave & Buster’s, Inc.
7.625%, 11/1/25§ | | | 319,000 | | | | 315,810 | |
Hilton Domestic Operating Co., Inc.
5.750%, 5/1/28§ | | | 267,000 | | | | 255,276 | |
3.625%, 2/15/32§ | | | 228,000 | | | | 180,804 | |
Life Time, Inc.
5.750%, 1/15/26§ | | | 370,000 | | | | 357,513 | |
MajorDrive Holdings IV LLC
6.375%, 6/1/29§ | | | 232,000 | | | | 179,220 | |
NCL Corp. Ltd.
8.375%, 2/1/28§ | | | 218,000 | | | | 216,092 | |
Ontario Gaming GTA LP
8.000%, 8/1/30§ | | | 203,000 | | | | 197,418 | |
Royal Caribbean Cruises Ltd.
5.375%, 7/15/27§ | | | 286,000 | | | | 262,762 | |
11.625%, 8/15/27§ | | | 156,000 | | | | 169,240 | |
7.250%, 1/15/30§ | | | 134,000 | | | | 131,990 | |
See Notes to Financial Statements.
44
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Scientific Games Holdings LP
6.625%, 3/1/30§ | | $ | 219,000 | | | $ | 188,340 | |
Six Flags Entertainment Corp.
7.250%, 5/15/31§ | | | 190,000 | | | | 173,612 | |
Station Casinos LLC
4.500%, 2/15/28 (x)§ | | | 303,000 | | | | 260,835 | |
4.625%, 12/1/31 (x)§ | | | 214,000 | | | | 168,576 | |
Wyndham Hotels & Resorts, Inc.
4.375%, 8/15/28§ | | | 203,000 | | | | 177,879 | |
Yum! Brands, Inc.
5.375%, 4/1/32 | | | 226,000 | | | | 201,875 | |
| | | | | | | | |
| | | | | | | 5,387,918 | |
| | | | | | | | |
Household Durables (0.7%) | | | | | |
CD&R Smokey Buyer, Inc.
6.750%, 7/15/25§ | | | 266,000 | | | | 252,700 | |
Newell Brands, Inc.
6.625%, 9/15/29 | | | 185,000 | | | | 169,737 | |
| | | | | | | | |
| | | | | | | 422,437 | |
| | | | | | | | |
Specialty Retail (2.4%) | | | | | |
Asbury Automotive Group, Inc.
5.000%, 2/15/32§ | | | 186,000 | | | | 150,885 | |
LBM Acquisition LLC
6.250%, 1/15/29§ | | | 256,000 | | | | 202,240 | |
LCM Investments Holdings II LLC
4.875%, 5/1/29§ | | | 218,000 | | | | 182,030 | |
Sonic Automotive, Inc.
4.875%, 11/15/31 (x)§ | | | 245,000 | | | | 195,234 | |
Specialty Building Products Holdings LLC
6.375%, 9/30/26§ | | | 368,000 | | | | 343,160 | |
SRS Distribution, Inc.
6.000%, 12/1/29§ | | | 209,000 | | | | 173,993 | |
White Cap Buyer LLC
6.875%, 10/15/28§ | | | 271,000 | | | | 235,716 | |
| | | | | | | | |
| | | | | | | 1,483,258 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.6%) | | | | | |
Crocs, Inc.
4.125%, 8/15/31§ | | | 228,000 | | | | 173,280 | |
Hanesbrands, Inc.
9.000%, 2/15/31§ | | | 224,000 | | | | 208,320 | |
| | | | | | | | |
| | | | | | | 381,600 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 9,632,340 | |
| | | | | | | | |
Consumer Staples (4.7%) | | | | | | | | |
Beverages (0.3%) | | | | | |
Primo Water Holdings, Inc.
4.375%, 4/30/29 (x)§ | | | 222,000 | | | | 186,875 | |
| | | | | | | | |
Consumer Staples Distribution & Retail (1.3%) | | | | | |
Performance Food Group, Inc.
6.875%, 5/1/25§ | | | 193,000 | | | | 191,794 | |
United Natural Foods, Inc.
6.750%, 10/15/28 (x)§ | | | 274,000 | | | | 214,405 | |
US Foods, Inc.
4.625%, 6/1/30§ | | | 318,000 | | | | 271,095 | |
7.250%, 1/15/32§ | | | 145,000 | | | | 142,100 | |
| | | | | | | | |
| | | | | | | 819,394 | |
| | | | | | | | |
Food Products (1.5%) | | | | | |
Post Holdings, Inc.
5.750%, 3/1/27§ | | | 118,000 | | | | 111,805 | |
4.625%, 4/15/30§ | | | 124,000 | | | | 103,540 | |
4.500%, 9/15/31§ | | | 289,000 | | | | 233,729 | |
Sigma Holdco BV
7.875%, 5/15/26§ | | | 200,000 | | | | 166,750 | |
Simmons Foods, Inc.
4.625%, 3/1/29§ | | | 365,000 | | | | 296,562 | |
| | | | | | | | |
| | | | | | | 912,386 | |
| | | | | | | | |
Household Products (0.9%) | | | | | |
Energizer Holdings, Inc.
4.750%, 6/15/28 (x)§ | | | 272,000 | | | | 232,560 | |
Kronos Acquisition Holdings, Inc.
7.000%, 12/31/27§ | | | 261,000 | | | | 221,850 | |
Spectrum Brands, Inc.
5.500%, 7/15/30§ | | | 21,000 | | | | 18,900 | |
3.875%, 3/15/31 (x)§ | | | 88,000 | | | | 70,510 | |
| | | | | | | | |
| | | | | | | 543,820 | |
| | | | | | | | |
Personal Care Products (0.7%) | | | | | |
Herbalife Nutrition Ltd.
7.875%, 9/1/25§ | | | 198,000 | | | | 185,772 | |
Prestige Brands, Inc.
3.750%, 4/1/31§ | | | 308,000 | | | | 243,705 | |
| | | | | | | | |
| | | | | | | 429,477 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 2,891,952 | |
| | | | | | | | |
Energy (8.4%) | | | | | | | | |
Energy Equipment & Services (0.4%) | | | | | |
Transocean, Inc.
8.750%, 2/15/30§ | | | 220,400 | | | | 219,023 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (8.0%) | | | | | |
Aethon United BR LP
8.250%, 2/15/26§ | | | 238,000 | | | | 235,620 | |
Antero Resources Corp.
7.625%, 2/1/29§ | | | 120,000 | | | | 121,386 | |
Ascent Resources Utica Holdings LLC
7.000%, 11/1/26§ | | | 234,000 | | | | 225,225 | |
Blue Racer Midstream LLC
7.625%, 12/15/25§ | | | 118,000 | | | | 117,791 | |
6.625%, 7/15/26§ | | | 230,000 | | | | 224,250 | |
Callon Petroleum Co.
7.500%, 6/15/30§ | | | 128,000 | | | | 123,840 | |
Crescent Energy Finance LLC
7.250%, 5/1/26§ | | | 291,000 | | | | 280,451 | |
Crestwood Midstream Partners LP
5.625%, 5/1/27§ | | | 170,000 | | | | 162,633 | |
6.000%, 2/1/29§ | | | 369,000 | | �� | | 355,624 | |
CrownRock LP
5.625%, 10/15/25 (x)§ | | | 293,000 | | | | 288,239 | |
Delek Logistics Partners LP
6.750%, 5/15/25 | | | 319,000 | | | | 312,620 | |
Encino Acquisition Partners Holdings LLC
8.500%, 5/1/28§ | | | 205,000 | | | | 199,067 | |
Genesis Energy LP
8.000%, 1/15/27 | | | 297,000 | | | | 285,120 | |
7.750%, 2/1/28 | | | 382,000 | | | | 359,080 | |
Holly Energy Partners LP
5.000%, 2/1/28§ | | | 181,000 | | | | 167,052 | |
See Notes to Financial Statements.
45
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Kinetik Holdings LP
5.875%, 6/15/30§ | | $ | 313,000 | | | $ | 286,724 | |
NuStar Logistics LP
5.750%, 10/1/25 | | | 186,000 | | | | 179,840 | |
6.000%, 6/1/26 | | | 175,000 | | | | 168,770 | |
Permian Resources Operating LLC
5.875%, 7/1/29§ | | | 151,000 | | | | 140,430 | |
Summit Midstream Holdings LLC
9.000%, 10/15/26 (e)§ | | | 360,000 | | | | 345,600 | |
Sunoco LP
4.500%, 4/30/30 | | | 428,000 | | | | 364,904 | |
| | | | | | | | |
| | | | | | | 4,944,266 | |
| | | | | | | | |
Total Energy | | | | | | | 5,163,289 | |
| | | | | | | | |
Financials (6.5%) | | | | | |
Capital Markets (0.3%) | | | | | |
Aretec Escrow Issuer 2, Inc.
10.000%, 8/15/30§ | | | 110,000 | | | | 111,409 | |
Aretec Escrow Issuer, Inc.
7.500%, 4/1/29§ | | | 111,000 | | | | 94,073 | |
| | | | | | | | |
| | | | | | | 205,482 | |
| | | | | | | | |
Consumer Finance (2.2%) | | | | | |
Bread Financial Holdings, Inc.
4.750%, 12/15/24§ | | | 160,000 | | | | 155,200 | |
7.000%, 1/15/26§ | | | 167,000 | | | | 152,596 | |
Ford Motor Credit Co. LLC
2.300%, 2/10/25 | | | 200,000 | | | | 188,214 | |
6.950%, 6/10/26 | | | 200,000 | | | | 200,544 | |
4.950%, 5/28/27 | | | 200,000 | | | | 187,578 | |
7.350%, 3/6/30 | | | 200,000 | | | | 201,000 | |
GGAM Finance Ltd.
8.000%, 6/15/28 (x)§ | | | 260,000 | | | | 255,760 | |
| | | | | | | | |
| | | | | | | 1,340,892 | |
| | | | | | | | |
Financial Services (2.8%) | | | | | |
Armor Holdco, Inc.
8.500%, 11/15/29§ | | | 145,000 | | | | 126,163 | |
Freedom Mortgage Corp.
6.625%, 1/15/27§ | | | 242,000 | | | | 209,245 | |
12.000%, 10/1/28 (x)§ | | | 186,000 | | | | 186,000 | |
PHH Mortgage Corp.
7.875%, 3/15/26§ | | | 156,000 | | | | 134,550 | |
Rocket Mortgage LLC
2.875%, 10/15/26§ | | | 129,000 | | | | 111,908 | |
Shift4 Payments LLC
4.625%, 11/1/26§ | | | 335,000 | | | | 309,456 | |
Verscend Escrow Corp.
9.750%, 8/15/26 (x)§ | | | 631,000 | | | | 626,268 | |
| | | | | | | | |
| | | | | | | 1,703,590 | |
| | | | | | | | |
Insurance (1.2%) | | | | | |
Alliant Holdings Intermediate LLC
6.750%, 10/15/27§ | | | 196,000 | | | | 178,360 | |
BroadStreet Partners, Inc.
5.875%, 4/15/29§ | | | 236,000 | | | | 205,197 | |
HUB International Ltd.
7.000%, 5/1/26§ | | | 352,000 | | | | 342,091 | |
| | | | | | | | |
| | | | | | | 725,648 | |
| | | | | | | | |
Total Financials | | | | | | | 3,975,612 | |
| | | | | | | | |
Health Care (8.1%) | | | | | |
Biotechnology (0.3%) | | | | | |
Grifols SA
4.750%, 10/15/28 (x)§ | | | 200,000 | | | | 167,500 | |
| | | | | | | | |
Health Care Equipment & Supplies (1.5%) | | | | | |
Garden Spinco Corp.
8.625%, 7/20/30§ | | | 275,000 | | | | 283,737 | |
Medline Borrower LP
3.875%, 4/1/29§ | | | 296,000 | | | | 249,380 | |
5.250%, 10/1/29§ | | | 300,000 | | | | 254,625 | |
Varex Imaging Corp.
7.875%, 10/15/27§ | | | 152,000 | | | | 149,530 | |
| | | | | | | | |
| | | | | | | 937,272 | |
| | | | | | | | |
Health Care Providers & Services (3.0%) | | | | | |
AdaptHealth LLC
6.125%, 8/1/28§ | | | 247,000 | | | | 203,775 | |
5.125%, 3/1/30§ | | | 229,000 | | | | 173,467 | |
HealthEquity, Inc.
4.500%, 10/1/29§ | | | 352,000 | | | | 300,858 | |
Heartland Dental LLC
10.500%, 4/30/28§ | | | 265,000 | | | | 254,037 | |
Star Parent, Inc.
9.000%, 10/1/30 (x)§ | | | 153,000 | | | | 151,088 | |
Tenet Healthcare Corp.
4.875%, 1/1/26 | | | 348,000 | | | | 333,944 | |
6.125%, 6/15/30 | | | 184,000 | | | | 170,200 | |
US Acute Care Solutions LLC
6.375%, 3/1/26§ | | | 299,000 | | | | 253,402 | |
| | | | | | | | |
| | | | | | | 1,840,771 | |
| | | | | | | | |
Health Care Technology (1.0%) | | | | | |
IQVIA, Inc.
5.000%, 10/15/26§ | | | 200,000 | | | | 190,000 | |
5.000%, 5/15/27§ | | | 260,000 | | | | 243,230 | |
5.700%, 5/15/28§ | | | 200,000 | | | | 191,267 | |
| | | | | | | | |
| | | | | | | 624,497 | |
| | | | | | | | |
Life Sciences Tools & Services (0.2%) | | | | | |
Fortrea Holdings, Inc.
7.500%, 7/1/30 (x)§ | | | 134,000 | | | | 128,975 | |
| | | | | | | | |
Pharmaceuticals (2.1%) | | | | | |
Bausch Health Cos., Inc.
5.500%, 11/1/25§ | | | 288,000 | | | | 248,400 | |
11.000%, 9/30/28§ | | | 188,000 | | | | 114,680 | |
Catalent Pharma Solutions, Inc.
5.000%, 7/15/27§ | | | 262,000 | | | | 233,180 | |
3.500%, 4/1/30 (x)§ | | | 245,000 | | | | 191,598 | |
Cheplapharm Arzneimittel GmbH
5.500%, 1/15/28§ | | | 400,000 | | | | 354,000 | |
Organon & Co.
5.125%, 4/30/31§ | | | 200,000 | | | | 155,700 | |
| | | | | | | | |
| | | | | | | 1,297,558 | |
| | | | | | | | |
Total Health Care | | | | | | | 4,996,573 | |
| | | | | | | | |
Industrials (14.7%) | | | | | |
Aerospace & Defense (0.3%) | | | | | |
Rolls-Royce plc
5.750%, 10/15/27§ | | | 200,000 | | | | 189,050 | |
| | | | | | | | |
See Notes to Financial Statements.
46
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Air Freight & Logistics (0.3%) | | | | | |
Forward Air Corp.
9.500%, 10/15/31§ | | $ | 163,000 | | | $ | 158,925 | |
| | | | | | | | |
Building Products (1.9%) | | | | | |
Advanced Drainage Systems, Inc.
6.375%, 6/15/30§ | | | 120,000 | | | | 112,800 | |
AmeriTex HoldCo Intermediate LLC
10.250%, 10/15/28 (x)§ | | | 213,000 | | | | 201,285 | |
Camelot Return Merger Sub, Inc.
8.750%, 8/1/28 (x)§ | | | 116,000 | | | | 108,170 | |
CP Atlas Buyer, Inc.
7.000%, 12/1/28§ | | | 152,000 | | | | 115,407 | |
Emerald Debt Merger Sub LLC
6.625%, 12/15/30§ | | | 333,000 | | | | 315,934 | |
New Enterprise Stone & Lime Co., Inc.
5.250%, 7/15/28§ | | | 188,000 | | | | 166,615 | |
Standard Industries, Inc.
4.375%, 7/15/30§ | | | 209,000 | | | | 170,398 | |
| | | | | | | | |
| | | | | | | 1,190,609 | |
| | | | | | | | |
Commercial Services & Supplies (6.4%) | | | | | |
ACCO Brands Corp.
4.250%, 3/15/29 (x)§ | | | 244,000 | | | | 201,605 | |
ADT Security Corp. (The)
4.875%, 7/15/32§ | | | 218,000 | | | | 182,030 | |
Allied Universal Holdco LLC
6.625%, 7/15/26§ | | | 404,000 | | | | 377,134 | |
9.750%, 7/15/27§ | | | 434,000 | | | | 376,790 | |
6.000%, 6/1/29§ | | | 248,000 | | | | 179,924 | |
Aramark Services, Inc.
5.000%, 4/1/25§ | | | 259,000 | | | | 252,525 | |
Garda World Security Corp.
9.500%, 11/1/27 (x)§ | | | 530,000 | | | | 480,104 | |
6.000%, 6/1/29 (x)§ | | | 299,000 | | | | 227,300 | |
GFL Environmental, Inc.
5.125%, 12/15/26§ | | | 220,000 | | | | 207,702 | |
Madison IAQ LLC
5.875%, 6/30/29 (x)§ | | | 182,000 | | | | 141,050 | |
Matthews International Corp.
5.250%, 12/1/25§ | | | 645,000 | | | | 615,169 | |
Neptune Bidco US, Inc.
9.290%, 4/15/29§ | | | 280,000 | | | | 246,176 | |
OPENLANE, Inc.
5.125%, 6/1/25§ | | | 61,000 | | | | 58,865 | |
Williams Scotsman, Inc.
6.125%, 6/15/25§ | | | 116,000 | | | | 113,680 | |
7.375%, 10/1/31§ | | | 267,000 | | | | 261,660 | |
| | | | | | | | |
| | | | | | | 3,921,714 | |
| | | | | | | | |
Construction & Engineering (1.0%) | | | | | |
Brand Industrial Services, Inc.
10.375%, 8/1/30§ | | | 50,000 | | | | 49,562 | |
Dycom Industries, Inc.
4.500%, 4/15/29 (x)§ | | | 218,000 | | | | 187,650 | |
Pike Corp.
5.500%, 9/1/28§ | | | 295,000 | | | | 250,750 | |
Weekley Homes LLC
4.875%, 9/15/28§ | | | 172,000 | | | | 147,275 | |
| | | | | | | | |
| | | | | | | 635,237 | |
| | | | | | | | |
Ground Transportation (2.3%) | | | | | |
EquipmentShare.com, Inc.
9.000%, 5/15/28 (x)§ | | | 200,000 | | | | 187,750 | |
NESCO Holdings II, Inc.
5.500%, 4/15/29§ | | | 417,000 | | | | 357,578 | |
Watco Cos. LLC
6.500%, 6/15/27§ | | | 503,000 | | | | 470,305 | |
XPO Escrow Sub LLC
7.500%, 11/15/27§ | | | 198,000 | | | | 197,528 | |
XPO, Inc.
7.125%, 6/1/31§ | | | 230,000 | | | | 223,675 | |
| | | | | | | | |
| | | | | | | 1,436,836 | |
| | | | | | | | |
Machinery (0.8%) | | | | | |
ATS Corp.
4.125%, 12/15/28§ | | | 217,000 | | | | 185,264 | |
Chart Industries, Inc.
7.500%, 1/1/30§ | | | 291,000 | | | | 285,907 | |
| | | | | | | | |
| | | | | | | 471,171 | |
| | | | | | | | |
Professional Services (0.9%) | | | | | |
Dun & Bradstreet Corp. (The)
5.000%, 12/15/29 (x)§ | | | 244,000 | | | | 209,230 | |
Science Applications International Corp.
4.875%, 4/1/28§ | | | 178,000 | | | | 157,975 | |
VT Topco, Inc.
8.500%, 8/15/30§ | | | 172,000 | | | | 166,840 | |
| | | | | | | | |
| | | | | | | 534,045 | |
| | | | | | | | |
Trading Companies & Distributors (0.8%) | | | | | |
Beacon Roofing Supply, Inc.
6.500%, 8/1/30§ | | | 162,000 | | | | 153,552 | |
WESCO Distribution, Inc.
7.250%, 6/15/28 (x)§ | | | 326,000 | | | | 323,245 | |
| | | | | | | | |
| | | | | | | 476,797 | |
| | | | | | | | |
Total Industrials | | | | | | | 9,014,384 | |
| | | | | | | | |
Information Technology (13.6%) | | | | | | | | |
Communications Equipment (1.2%) | | | | | |
CommScope Technologies LLC
6.000%, 6/15/25§ | | | 150,000 | | | | 94,875 | |
CommScope, Inc.
6.000%, 3/1/26 (x)§ | | | 330,000 | | | | 277,200 | |
8.250%, 3/1/27 (x)§ | | | 242,000 | | | | 100,733 | |
4.750%, 9/1/29§ | | | 361,000 | | | | 241,870 | |
| | | | | | | | |
| | | | | | | 714,678 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.3%) | |
Likewize Corp.
9.750%, 10/15/25§ | | | 194,000 | | | | 191,575 | |
| | | | | | | | |
IT Services (1.9%) | | | | | |
Ahead DB Holdings LLC
6.625%, 5/1/28§ | | | 202,000 | | | | 165,226 | |
ION Trading Technologies Sarl
5.750%, 5/15/28 (x)§ | | | 400,000 | | | | 332,000 | |
Northwest Fiber LLC
6.000%, 2/15/28§ | | | 258,000 | | | | 210,270 | |
Presidio Holdings, Inc.
8.250%, 2/1/28§ | | | 190,000 | | | | 179,787 | |
See Notes to Financial Statements.
47
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Unisys Corp.
6.875%, 11/1/27§ | | $ | 348,000 | | | $ | 255,432 | |
| | | | | | | | |
| | | | | | | 1,142,715 | |
| | | | | | | | |
Software (9.8%) | | | | | |
ACI Worldwide, Inc.
5.750%, 8/15/26§ | | | 437,000 | | | | 416,592 | |
Alteryx, Inc.
8.750%, 3/15/28§ | | | 252,000 | | | | 247,590 | |
AthenaHealth Group, Inc.
6.500%, 2/15/30 (x)§ | | | 372,000 | | | | 303,180 | |
Boxer Parent Co., Inc.
7.125%, 10/2/25 (x)§ | | | 305,000 | | | | 300,044 | |
Camelot Finance SA
4.500%, 11/1/26§ | | | 296,000 | | | | 273,301 | |
Capstone Borrower, Inc.
8.000%, 6/15/30 (x)§ | | | 131,000 | | | | 127,070 | |
Central Parent LLC
8.000%, 6/15/29§ | | | 143,000 | | | | 141,213 | |
Central Parent, Inc.
7.250%, 6/15/29§ | | | 164,000 | | | | 157,440 | |
Clarivate Science Holdings Corp.
4.875%, 7/1/29§ | | | 442,000 | | | | 371,832 | |
Cloud Software Group, Inc.
6.500%, 3/31/29§ | | | 163,000 | | | | 142,584 | |
9.000%, 9/30/29§ | | | 352,000 | | | | 300,080 | |
Gen Digital, Inc.
5.000%, 4/15/25§ | | | 328,000 | | | | 316,599 | |
7.125%, 9/30/30 (x)§ | | | 251,000 | | | | 243,407 | |
Helios Software Holdings, Inc.
4.625%, 5/1/28§ | | | 200,000 | | | | 168,000 | |
McAfee Corp.
7.375%, 2/15/30§ | | | 312,000 | | | | 249,600 | |
NCR Voyix Corp.
5.000%, 10/1/28§ | | | 245,000 | | | | 211,675 | |
5.125%, 4/15/29 (x)§ | | | 344,000 | | | | 294,808 | |
Open Text Corp.
6.900%, 12/1/27§ | | | 160,000 | | | | 158,800 | |
Open Text Holdings, Inc.
4.125%, 12/1/31§ | | | 402,000 | | | | 314,063 | |
Rocket Software, Inc.
6.500%, 2/15/29§ | | | 326,000 | | | | 264,914 | |
SS&C Technologies, Inc.
5.500%, 9/30/27§ | | | 536,000 | | | | 502,060 | |
ZoomInfo Technologies LLC
3.875%, 2/1/29§ | | | 638,000 | | | | 526,350 | |
| | | | | | | | |
| | | | | | | 6,031,202 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (0.4%) | |
NCR Atleos Escrow Corp.
9.500%, 4/1/29§ | | | 247,000 | | | | 242,117 | |
| | | | | | | | |
Total Information Technology | | | | | | | 8,322,287 | |
| | | | | | | | |
Materials (11.4%) | | | | | | | | |
Chemicals (5.2%) | |
Avient Corp.
7.125%, 8/1/30§ | | | 248,000 | | | | 238,080 | |
Axalta Coating Systems LLC
4.750%, 6/15/27§ | | | 178,000 | | | | 163,093 | |
HB Fuller Co.
4.250%, 10/15/28 | | | 218,000 | | | | 188,302 | |
Illuminate Buyer LLC
9.000%, 7/1/28§ | | | 590,000 | | | | 547,962 | |
INEOS Quattro Finance 2 plc
3.375%, 1/15/26§ | | | 200,000 | | | | 191,000 | |
LSF11 A5 HoldCo LLC
6.625%, 10/15/29§ | | | 233,000 | | | | 188,853 | |
Minerals Technologies, Inc.
5.000%, 7/1/28§ | | | 320,000 | | | | 280,000 | |
NOVA Chemicals Corp.
4.875%, 6/1/24§ | | | 144,000 | | | | 140,940 | |
Nufarm Australia Ltd.
5.000%, 1/27/30§ | | | 360,000 | | | | 313,200 | |
Olin Corp.
5.625%, 8/1/29 (x) | | | 214,000 | | | | 194,205 | |
Olympus Water US Holding Corp.
4.250%, 10/1/28§ | | | 343,000 | | | | 273,114 | |
6.250%, 10/1/29§ | | | 200,000 | | | | 149,500 | |
WR Grace Holdings LLC
5.625%, 8/15/29§ | | | 416,000 | | | | 322,358 | |
| | | | | | | | |
| | | | | | | 3,190,607 | |
| | | | | | | | |
Containers & Packaging (5.9%) | |
ARD Finance SA
6.500%, 6/30/27 PIK§ | | | 400,000 | | | | 232,000 | |
Ardagh Metal Packaging Finance USA LLC
4.000%, 9/1/29 (x)§ | | | 400,000 | | | | 301,092 | |
Ardagh Packaging Finance plc
4.125%, 8/15/26§ | | | 200,000 | | | | 176,520 | |
Clydesdale Acquisition Holdings, Inc.
8.750%, 4/15/30§ | | | 319,000 | | | | 253,446 | |
Crown Americas LLC
5.250%, 4/1/30 (x) | | | 163,000 | | | | 146,768 | |
Intelligent Packaging Ltd. Finco, Inc.
6.000%, 9/15/28§ | | | 248,000 | | | | 205,840 | |
LABL, Inc.
6.750%, 7/15/26§ | | | 219,000 | | | | 200,659 | |
10.500%, 7/15/27§ | | | 438,000 | | | | 377,775 | |
5.875%, 11/1/28 (x)§ | | | 158,000 | | | | 133,905 | |
Mauser Packaging Solutions Holding Co.
7.875%, 8/15/26§ | | | 210,000 | | | | 197,883 | |
9.250%, 4/15/27 (x)§ | | | 670,000 | | | | 557,775 | |
Owens-Brockway Glass Container, Inc.
6.625%, 5/13/27 (x)§ | | | 210,000 | | | | 198,975 | |
7.250%, 5/15/31 (x)§ | | | 206,000 | | | | 188,233 | |
Sealed Air Corp.
6.125%, 2/1/28 (x)§ | | | 103,000 | | | | 98,107 | |
Trivium Packaging Finance BV
5.500%, 8/15/26 (e)§ | | | 400,000 | | | | 361,840 | |
| | | | | | | | |
| | | | | | | 3,630,818 | |
| | | | | | | | |
Metals & Mining (0.3%) | |
Kaiser Aluminum Corp.
4.500%, 6/1/31§ | | | 212,000 | | | | 156,880 | |
| | | | | | | | |
Total Materials | | | | | | | 6,978,305 | |
| | | | | | | | |
Real Estate (3.2%) | | | | | | | | |
Diversified REITs (0.3%) | |
VICI Properties LP (REIT)
4.625%, 6/15/25§ | | | 192,000 | | | | 183,554 | |
| | | | | | | | |
See Notes to Financial Statements.
48
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
Hotel & Resort REITs (1.2%) | |
Park Intermediate Holdings LLC (REIT)
5.875%, 10/1/28§ | | $ | 204,000 | | | $ | 182,490 | |
4.875%, 5/15/29§ | | | 304,000 | | | | 253,840 | |
XHR LP (REIT)
6.375%, 8/15/25 (x)§ | | | 214,000 | | | | 208,650 | |
4.875%, 6/1/29§ | | | 125,000 | | | | 105,938 | |
| | | | | | | | |
| | | | | | | 750,918 | |
| | | | | | | | |
Real Estate Management & Development (1.3%) | |
Cushman & Wakefield US Borrower LLC
6.750%, 5/15/28§ | | | 280,000 | | | | 254,450 | |
Greystar Real Estate Partners LLC
7.750%, 9/1/30§ | | | 291,000 | | | | 285,908 | |
Howard Hughes Corp. (The)
4.375%, 2/1/31§ | | | 291,000 | | | | 221,887 | |
| | | | | | | | |
| | | | | | | 762,245 | |
| | | | | | | | |
Specialized REITs (0.4%) | |
Iron Mountain, Inc. (REIT)
5.000%, 7/15/28§ | | | 300,000 | | | | 268,500 | |
| | | | | | | | |
Total Real Estate | | | | | | | 1,965,217 | |
| | | | | | | | |
Utilities (0.6%) | | | | | | | | |
Water Utilities (0.6%) | | | | | |
Solaris Midstream Holdings LLC
7.625%, 4/1/26§ | | | 384,000 | | | | 365,023 | |
| | | | | | | | |
Total Utilities | | | | | | | 365,023 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 59,586,172 | |
| | | | | | | | |
Total Long-Term Debt Securities (97.1%)
(Cost $65,557,672) | | | | | | | 59,586,172 | |
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (11.8%) | | | | | | | | |
BlackRock Liquidity FedFund, Institutional Shares 5.24% (7 day yield) (xx) | | | 1,000,000 | | | | 1,000,000 | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 700,000 | | | | 700,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 4,550,753 | | | | 4,550,753 | |
Morgan Stanley Institutional Liquidity Fund – Government Portfolio 5.25% (7 day yield) (xx) | | | 1,000,000 | | | | 1,000,000 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 7,250,753 | |
| | | | | | | | |
Total Short-Term Investments (11.8%)
(Cost $7,250,753) | | | | 7,250,753 | |
| | | | | | | | |
Total Investments in Securities (108.9%)
(Cost $72,808,425) | | | | 66,836,925 | |
Other Assets Less Liabilities (-8.9%) | | | | (5,448,691 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 61,388,234 | |
| | | | | | | | |
| § | 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, 2023, the market value of these securities amounted to $54,996,701 or 89.6% of net assets. |
| (e) | Step Bond - Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2023. Maturity date disclosed is the ultimate maturity date. |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $7,110,406. This was collateralized by $56,396 of various U.S. Government Treasury Securities, ranging from 0.000% - 6.625%, maturing 11/16/23 - 11/15/52 and by cash of $7,250,753 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | PIK | — Payment-in Kind Security |
| | REIT | — Real Estate Investment Trust |
See Notes to Financial Statements.
49
1290 FUNDS
1290 HIGH YIELD BOND FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
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, 2023:
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 | | $ | — | | | $ | 6,281,190 | | | $ | — | | | $ | 6,281,190 | |
Consumer Discretionary | | | — | | | | 9,632,340 | | | | — | | | | 9,632,340 | |
Consumer Staples | | | — | | | | 2,891,952 | | | | — | | | | 2,891,952 | |
Energy | | | — | | | | 5,163,289 | | | | — | | | | 5,163,289 | |
Financials | | | — | | | | 3,975,612 | | | | — | | | | 3,975,612 | |
Health Care | | | — | | | | 4,996,573 | | | | — | | | | 4,996,573 | |
Industrials | | | — | | | | 9,014,384 | | | | — | | | | 9,014,384 | |
Information Technology | | | — | | | | 8,322,287 | | | | — | | | | 8,322,287 | |
Materials | | | — | | | | 6,978,305 | | | | — | | | | 6,978,305 | |
Real Estate | | | — | | | | 1,965,217 | | | | — | | | | 1,965,217 | |
Utilities | | | — | | | | 365,023 | | | | — | | | | 365,023 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 7,250,753 | | | | — | | | | — | | | | 7,250,753 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 7,250,753 | | | $ | 59,586,172 | | | $ | — | | | $ | 66,836,925 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,250,753 | | | $ | 59,586,172 | | | $ | — | | | $ | 66,836,925 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 26,890,884 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 20,031,365 | |
As of October 31, 2023, 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 | | $ | 300,640 | |
Aggregate gross unrealized depreciation | | | (7,064,130 | ) |
| | | | |
Net unrealized depreciation | | $ | (6,763,490 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 73,600,415 | |
| | | | |
See Notes to Financial Statements.
50
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x) (Cost $72,808,425) | | $ | 66,836,925 | |
Cash | | | 547,753 | |
Dividends, interest and other receivables | | | 1,118,920 | |
Receivable for securities sold | | | 405,780 | |
Receivable for Fund shares sold | | | 29,574 | |
Prepaid registration and filing fees | | | 22,639 | |
Securities lending income receivable | | | 3,517 | |
Other assets | | | 340 | |
| | | | |
Total assets | | | 68,965,448 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 7,250,753 | |
Payable for securities purchased | | | 110,000 | |
Payable for Fund shares repurchased | | | 80,223 | |
Dividends and distributions payable | | | 33,259 | |
Transfer agent fees payable | | | 11,134 | |
Administrative fees payable | | | 4,327 | |
Distribution fees payable – Class A | | | 391 | |
Distribution fees payable – Class R | | | 162 | |
Trustees’ fees payable | | | 72 | |
Distribution fees payable – Class T** | | | 24 | |
Accrued expenses | | | 86,869 | |
| | | | |
Total liabilities | | | 7,577,214 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 61,388,234 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 74,657,194 | |
Total distributable earnings (loss) | | | (13,268,960 | ) |
| | | | |
Net assets | | $ | 61,388,234 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $1,819,438 / 232,939 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.81 | |
Maximum sales charge (4.50% of offering price) | | | 0.37 | |
| | | | |
Maximum offering price per share | | $ | 8.18 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $59,090,728 / 7,559,398 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.82 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $367,154 / 47,030 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.81 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $110,914 / 14,192 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 7.82 | |
Maximum sales charge (2.50% of offering price) | | | 0.20 | |
| | | | |
Maximum offering price per share | | $ | 8.02 | |
| | | | |
| (x) | Includes value of securities on loan of $7,110,406. |
| ^ | See Note 2 in Notes to the Financial Statements. |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | |
Interest | | $ | 3,972,197 | |
Dividends | | | 40,453 | |
Securities lending (net) | | | 35,962 | |
| | | | |
Total income | | | 4,048,612 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 355,167 | |
Professional fees | | | 120,638 | |
Administrative fees | | | 88,791 | |
Transfer agent fees | | | 80,100 | |
Registration and filing fees | | | 39,009 | |
Printing and mailing expenses | | | 31,492 | |
Custodian fees | | | 10,900 | |
Distribution fees – Class A | | | 4,876 | |
Distribution fees – Class R | | | 1,762 | |
Trustees’ fees | | | 1,691 | |
Distribution fees – Class T** | | | 286 | |
Miscellaneous | | | 16,080 | |
| | | | |
Gross expenses | | | 750,792 | |
Waiver from investment adviser | | | (299,929 | ) |
Waiver from distributor | | | (286 | ) |
| | | | |
Net expenses | | | 450,577 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 3,598,035 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Net realized gain (loss) on investments in securities | | | (2,469,007 | ) |
| | | | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 1,457,603 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | (1,011,404 | ) |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 2,586,631 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
51
1290 FUNDS
1290 HIGH YIELD BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 3,598,035 | | | $ | 3,167,270 | |
Net realized gain (loss) | | | (2,469,007 | ) | | | (1,392,297 | ) |
Net change in unrealized appreciation (depreciation) | | | 1,457,603 | | | | (8,653,409 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 2,586,631 | | | | (6,878,436 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (115,750 | ) | | | (93,582 | ) |
Class I | | | (3,515,387 | ) | | | (3,116,946 | ) |
Class R | | | (20,122 | ) | | | (24,103 | ) |
Class T** | | | (7,073 | ) | | | (6,029 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (3,658,332 | ) | | | (3,240,660 | ) |
| | | | | | | | |
Tax return of capital: | | | | | | | | |
Class A | | | (1,006 | ) | | | (3,520 | ) |
Class I | | | (30,566 | ) | | | (117,255 | ) |
Class R | | | (175 | ) | | | (907 | ) |
Class T** | | | (62 | ) | | | (227 | ) |
| | | | | | | | |
Total tax return of capital | | | (31,809 | ) | | | (121,909 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 37,137 and 31,851 shares, respectively ] | | | 302,809 | | | | 278,951 | |
Capital shares issued in reinvestment of dividends [ 12,500 and 10,296 shares, respectively ] | | | 100,543 | | | | 87,004 | |
Capital shares repurchased [ (48,706) and (42,273) shares , respectively] | | | (391,667 | ) | | | (367,373 | ) |
| | | | | | | | |
Total Class A transactions | | | 11,685 | | | | (1,418 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 3,843,263 and 3,722,474 shares, respectively ] | | | 30,919,225 | | | | 32,049,122 | |
Capital shares issued in reinvestment of dividends [ 397,864 and 269,055 shares, respectively ] | | | 3,202,134 | | | | 2,268,148 | |
Capital shares repurchased [ (3,447,821) and (4,415,555) shares , respectively] | | | (27,793,519 | ) | | | (37,127,471 | ) |
| | | | | | | | |
Total Class I transactions | | | 6,327,840 | | | | (2,810,201 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 16,648 and 11,772 shares, respectively ] | | | 133,797 | | | | 103,048 | |
Capital shares issued in reinvestment of dividends [ 1,284 and 1,916 shares, respectively ] | | | 10,316 | | | | 16,423 | |
Capital shares repurchased [ (18,057) and (43,232) shares , respectively] | | | (144,395 | ) | | | (371,473 | ) |
| | | | | | | | |
Total Class R transactions | | | (282 | ) | | | (252,002 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 6,339,243 | | | | (3,063,621 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 5,235,733 | | | | (13,304,626 | ) |
NET ASSETS: | |
Beginning of year | | | 56,152,501 | | | | 69,457,127 | |
| | | | | | | | |
End of year | | $ | 61,388,234 | | | $ | 56,152,501 | |
| | | | | | | | |
** Class T shares currently are not offered for sale. | |
See Notes to Financial Statements.
52
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 7.95 | | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.47 | | | | 0.40 | | | | 0.39 | | | | 0.44 | | | | 0.47 | |
Net realized and unrealized gain (loss) | | | (0.13 | ) | | | (1.27 | ) | | | 0.26 | | | | (0.03 | ) | | | 0.14 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.34 | | | | (0.87 | ) | | | 0.65 | | | | 0.41 | | | | 0.61 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.48 | ) | | | (0.40 | ) | | | (0.42 | ) | | | (0.46 | ) | | | (0.47 | ) |
Return of capital | | | — | # | | | (0.02 | ) | | | — | # | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.48 | ) | | | (0.42 | ) | | | (0.42 | ) | | | (0.46 | ) | | | (0.48 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.81 | | | $ | 7.95 | | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.30 | % | | | (9.60 | )% | | | 7.27 | % | | | 4.72 | % | | | 6.97 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 1,819 | | | $ | 1,844 | | | $ | 2,145 | | | $ | 2,115 | | | $ | 1,623 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % | | | 1.00 | % |
Before waivers and reimbursements (f) | | | 1.50 | % | | | 1.43 | % | | | 1.44 | % | | | 1.68 | % | | | 1.79 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 5.83 | % | | | 4.61 | % | | | 4.24 | % | | | 4.97 | % | | | 5.27 | % |
Before waivers and reimbursements (f) | | | 5.33 | % | | | 4.18 | % | | | 3.80 | % | | | 4.29 | % | | | 4.48 | % |
Portfolio turnover rate^ | | | 35 | % | | | 43 | % | | | 39 | % | | | 59 | % | | | 54 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 7.95 | | | $ | 9.25 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.94 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.49 | | | | 0.42 | | | | 0.42 | | | | 0.47 | | | | 0.50 | |
Net realized and unrealized gain (loss) | | | (0.12 | ) | | | (1.28 | ) | | | 0.26 | | | | (0.04 | ) | | | 0.12 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.37 | | | | (0.86 | ) | | | 0.68 | | | | 0.43 | | | | 0.62 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.50 | ) | | | (0.42 | ) | | | (0.44 | ) | | | (0.48 | ) | | | (0.49 | ) |
Return of capital | | | — | # | | | (0.02 | ) | | | — | # | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.50 | ) | | | (0.44 | ) | | | (0.44 | ) | | | (0.48 | ) | | | (0.50 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.82 | | | $ | 7.95 | | | $ | 9.25 | | | $ | 9.01 | | | $ | 9.06 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.69 | % | | | (9.47 | )% | | | 7.65 | % | | | 4.98 | % | | | 7.12 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 59,091 | | | $ | 53,821 | | | $ | 66,473 | | | $ | 42,159 | | | $ | 35,453 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % |
Before waivers and reimbursements (f) | | | 1.26 | % | | | 1.18 | % | | | 1.18 | % | | | 1.43 | % | | | 1.53 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 6.09 | % | | | 4.84 | % | | | 4.47 | % | | | 5.22 | % | | | 5.50 | % |
Before waivers and reimbursements (f) | | | 5.58 | % | | | 4.42 | % | | | 4.04 | % | | | 4.54 | % | | | 4.71 | % |
Portfolio turnover rate^ | | | 35 | % | | | 43 | % | | | 39 | % | | | 59 | % | | | 54 | % |
See Notes to Financial Statements.
53
1290 FUNDS
1290 HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 7.95 | | | $ | 9.23 | | | $ | 9.00 | | | $ | 9.05 | | | $ | 8.93 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.45 | | | | 0.37 | | | | 0.37 | | | | 0.42 | | | | 0.45 | |
Net realized and unrealized gain (loss) | | | (0.13 | ) | | | (1.25 | ) | | | 0.25 | | | | (0.03 | ) | | | 0.13 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.32 | | | | (0.88 | ) | | | 0.62 | | | | 0.39 | | | | 0.58 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.46 | ) | | | (0.38 | ) | | | (0.39 | ) | | | (0.44 | ) | | | (0.45 | ) |
Return of capital | | | — | # | | | (0.02 | ) | | | — | # | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.46 | ) | | | (0.40 | ) | | | (0.39 | ) | | | (0.44 | ) | | | (0.46 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.81 | | | $ | 7.95 | | | $ | 9.23 | | | $ | 9.00 | | | $ | 9.05 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.04 | % | | | (9.72 | )% | | | 7.01 | % | | | 4.46 | % | | | 6.59 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 367 | | | $ | 375 | | | $ | 708 | | | $ | 638 | | | $ | 307 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % | | | 1.25 | % |
Before waivers and reimbursements (f) | | | 1.76 | % | | | 1.67 | % | | | 1.69 | % | | | 1.92 | % | | | 2.03 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 5.59 | % | | | 4.29 | % | | | 3.98 | % | | | 4.69 | % | | | 5.00 | % |
Before waivers and reimbursements (f) | | | 5.08 | % | | | 3.87 | % | | | 3.54 | % | | | 4.01 | % | | | 4.22 | % |
Portfolio turnover rate^ | | | 35 | % | | | 43 | % | | | 39 | % | | | 59 | % | | | 54 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 7.95 | | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | | | $ | 8.93 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.49 | | | | 0.42 | | | | 0.42 | | | | 0.47 | | | | 0.50 | |
Net realized and unrealized gain (loss) | | | (0.12 | ) | | | (1.27 | ) | | | 0.25 | | | | (0.04 | ) | | | 0.13 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.37 | | | | (0.85 | ) | | | 0.67 | | | | 0.43 | | | | 0.63 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.50 | ) | | | (0.42 | ) | | | (0.44 | ) | | | (0.48 | ) | | | (0.49 | ) |
Return of capital | | | — | # | | | (0.02 | ) | | | — | # | | | — | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.50 | ) | | | (0.44 | ) | | | (0.44 | ) | | | (0.48 | ) | | | (0.50 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 7.82 | | | $ | 7.95 | | | $ | 9.24 | | | $ | 9.01 | | | $ | 9.06 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.69 | % | | | (9.37 | )% | | | 7.53 | % | | | 4.98 | % | | | 7.24 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 111 | | | $ | 113 | | | $ | 131 | | | $ | 128 | | | $ | 129 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % | | | 0.75 | % |
Before waivers and reimbursements (f) | | | 1.51 | % | | | 1.43 | % | | | 1.44 | % | | | 1.68 | % | | | 1.78 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 6.08 | % | | | 4.86 | % | | | 4.49 | % | | | 5.23 | % | | | 5.50 | % |
Before waivers and reimbursements (f) | | | 5.33 | % | | | 4.18 | % | | | 3.80 | % | | | 4.30 | % | | | 4.47 | % |
Portfolio turnover rate^ | | | 35 | % | | | 43 | % | | | 39 | % | | | 59 | % | | | 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.
54
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | Loomis, Sayles & Company, L.P. (Loomis Sayles) |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | without Sales Charge | | | 5.53 | % | | | 5.66 | % | | | 5.77 | % |
| | | with Sales Charge (a) | | | 0.76 | | | | 4.47 | | | | 4.99 | |
Fund – Class I Shares* | | | | | 5.77 | | | | 5.89 | | | | 6.02 | |
Fund – Class R Shares* | | | | | 5.18 | | | | 5.39 | | | | 5.50 | |
20% MSCI World High Dividend Yield Index/ 20% Cboe S&P 500 BuyWrite IndexSM/ 30% Bloomberg U.S. Corporate High Yield Index/ 30% Bloomberg U.S. Aggregate Bond Index | | | | | 4.40 | | | | 2.87 | | | | 4.01 | |
Bloomberg U.S. Aggregate Bond Index | | | | | 0.36 | | | | (0.06 | ) | | | 0.22 | |
| |
* Date of inception 3/7/16. (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 Loomis Sayles Multi-Asset Income Fund and the 20% MSCI World High Dividend Yield Index/20% Cboe S&P 500 BuyWrite IndexSM/30% Bloomberg U.S. Corporate High Yield Index/30% Bloomberg U.S. Aggregate Bond Index and the Bloomberg U.S. Aggregate Bond Index from 3/7/16 to 10/31/23. 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 20% MSCI World High Dividend Yield Index/20% Cboe S&P 500 BuyWrite IndexSM/30% Bloomberg U.S. Corporate High Yield Index/30% Bloomberg U.S. Aggregate Bond 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, 2023, the gross expense ratios for Class A, I and R shares were 1.64%, 1.36% and 1.89%, respectively. The net expense ratios for Class A, I and R shares were 1.05%, 0.80% and 1.30%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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.
55
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND (Unaudited)
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 5.77% for the year ended October 31, 2023. The Fund’s benchmarks, the 20% MSCI World High Dividend Yield Index/20% Cboe S&P 500 BuyWrite IndexSM/30% Bloomberg U.S. Corporate High Yield Index/30% Bloomberg U.S. Aggregate Bond Index and the Bloomberg U.S. Aggregate Bond Index returned 4.40% and 0.36%, respectively, over the same year.
Overview — Loomis, Sayles & Company, L.P. (Loomis Sayles)
What helped performance during the period?
| • | | The Fund was positioned defensively throughout the period. As market risk increased, we monitored interest-rate and equity volatility, and asset allocation helped performance by being biased toward quality and dividend-paying equities. |
| • | | As the U.S. Federal Reserve is committed to breaking inflation and keeping rates higher for longer, our shorter duration stance in comparison to the benchmark provided meaningful value. |
What hurt performance during the period?
| • | | An underweight allocation to high-yield corporates detracted on an excess basis. Cash equivalents that were held as dry powder also detracted marginally. |
| | | | |
| | |
Fund Characteristics
As of October 31, 2023 | | | |
Weighted Average Life (Years) | | | 8.16 | |
Weighted Average Coupon (%) | | | 3.78 | |
Weighted Average Effective Duration (Years)* | | | 5.97 | |
Weighted Average Rating** | | | AA3 | |
| |
* 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, 2023 | | % of
Net Assets | |
Financials | | | 20.4 | % |
Industrials | | | 11.3 | |
Energy | | | 9.9 | |
U.S. Treasury Obligations | | | 9.6 | |
Information Technology | | | 9.5 | |
Consumer Discretionary | | | 9.3 | |
Communication Services | | | 6.5 | |
Health Care | | | 6.2 | |
Consumer Staples | | | 4.6 | |
Materials | | | 2.6 | |
Utilities | | | 2.1 | |
Asset-Backed Securities | | | 1.8 | |
Foreign Government Securities | | | 1.3 | |
Investment Companies | | | 1.3 | |
Real Estate | | | 1.1 | |
Cash and Other | | | 2.5 | |
| | | | | |
| | | | 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, 2023 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.
56
1290 LOOMIS SAYLES MULTI-ASSET INCOME 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $981.60 | | | | $5.24 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.91 | | | | 5.35 | |
Class I | |
Actual | | | 1,000.00 | | | | 981.80 | | | | 4.00 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,021.17 | | | | 4.08 | |
Class R | |
Actual | | | 1,000.00 | | | | 980.30 | | | | 6.49 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.65 | | | | 6.62 | |
| |
* Expenses are equal to the Fund’s A, I and R shares annualized expense ratio of 1.05%, 0.80% and 1.30%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
57
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
LONG-TERM DEBT SECURITIES: | |
Asset-Backed Securities (1.8%) | |
Anchorage Capital CLO 17 Ltd., | | | | | | | | |
Series 2021-17A A1
6.825%, 7/15/34 (l)§ | | $ | 250,000 | | | $ | 246,531 | |
Magnetite XXVII Ltd., | | | | | | | | |
Series 2020-27A AR
6.817%, 10/20/34 (l)§ | | | 335,000 | | | | 332,343 | |
Sound Point CLO XXVII Ltd., | | | | | | | | |
Series 2020-2A AR
6.820%, 10/25/34 (l)§ | | | 340,000 | | | | 333,631 | |
United Airlines Pass-Through Trust, | | | | | | | | |
Series 2020-1 A
5.875%, 10/15/27 | | | 22,644 | | | | 22,165 | |
| | | | | | | | |
Total Asset-Backed Securities | | | | | | | 934,670 | |
| | | | | | | | |
Convertible Bonds (0.8%) | |
Communication Services (0.1%) | | | | | |
Interactive Media & Services (0.1%) | |
Liberty TripAdvisor Holdings, Inc.
0.500%, 6/30/51§ | | | 70,000 | | | | 54,950 | |
| | | | | | | | |
Total Communication Services | | | | | | | 54,950 | |
| | | | | | | | |
Consumer Staples (0.2%) | | | | | |
Personal Care Products (0.2%) | |
Beauty Health Co. (The)
1.250%, 10/1/26§ | | | 160,000 | | | | 119,780 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 119,780 | |
| | | | | | | | |
Financials (0.1%) | | | | | |
Financial Services (0.1%) | |
Block, Inc.
0.125%, 3/1/25 | | | 55,000 | | | | 50,655 | |
| | | | | | | | |
Total Financials | | | | | | | 50,655 | |
| | | | | | | | |
Industrials (0.4%) | | | | | |
Electrical Equipment (0.4%) | |
Stem, Inc.
0.500%, 12/1/28§ | | | 390,000 | | | | 203,952 | |
| | | | | | | | |
Total Industrials | | | | | | | 203,952 | |
| | | | | | | | |
Total Convertible Bonds | | | | | | | 429,337 | |
| | | | | | | | |
Corporate Bonds (45.2%) | |
Communication Services (3.4%) | | | | | |
Diversified Telecommunication Services (0.6%) | |
AT&T, Inc.
5.400%, 2/15/34 | | | 250,000 | | | | 229,119 | |
CCO Holdings LLC
5.125%, 5/1/27§ | | | 11,000 | | | | 10,088 | |
6.375%, 9/1/29§ | | | 11,000 | | | | 10,027 | |
4.500%, 6/1/33§ | | | 13,000 | | | | 9,701 | |
Consolidated Communications, Inc.
6.500%, 10/1/28§ | | | 67,000 | | | | 52,930 | |
Frontier Communications Holdings LLC
6.750%, 5/1/29§ | | | 38,000 | | | | 29,925 | |
5.875%, 11/1/29 | | | 14,057 | | | | 10,560 | |
| | | | | | | | |
| | | | | | | 352,350 | |
| | | | | | | | |
| | | | | | | | |
Entertainment (0.1%) | |
Lions Gate Capital Holdings LLC
5.500%, 4/15/29§ | | | 51,000 | | | | 33,405 | |
Live Nation Entertainment, Inc.
3.750%, 1/15/28§ | | | 11,000 | | | | 9,625 | |
| | | | | | | | |
| | | | | | | 43,030 | |
| | | | | | | | |
Interactive Media & Services (0.3%) | |
TripAdvisor, Inc. 7.000%, 7/15/25§ | | | 150,000 | | | | 148,688 | |
| | | | | | | | |
Media (1.1%) | |
Advantage Sales & Marketing, Inc.
6.500%, 11/15/28§ | | | 63,000 | | | | 51,109 | |
AMC Networks, Inc.
4.250%, 2/15/29 | | | 65,000 | | | | 39,975 | |
CMG Media Corp.
8.875%, 12/15/27§ | | | 46,000 | | | | 35,650 | |
Cumulus Media New Holdings, Inc.
6.750%, 7/1/26§ | | | 58,000 | | | | 41,470 | |
DISH DBS Corp.
5.875%, 11/15/24 | | | 180,000 | | | | 165,600 | |
Gannett Holdings LLC
6.000%, 11/1/26§ | | | 64,000 | | | | 53,120 | |
News Corp.
5.125%, 2/15/32§ | | | 132,000 | | | | 113,559 | |
Sinclair Television Group, Inc.
5.500%, 3/1/30§ | | | 41,000 | | | | 21,730 | |
Urban One, Inc.
7.375%, 2/1/28§ | | | 67,000 | | | | 55,379 | |
| | | | | | | | |
| | | | | | | 577,592 | |
| | | | | | | | |
Wireless Telecommunication Services (1.3%) | |
Kenbourne Invest SA
6.875%, 11/26/24§ | | | 200,000 | | | | 150,000 | |
Millicom International Cellular SA
4.500%, 4/27/31 (m) | | | 245,000 | | | | 182,598 | |
T-Mobile USA, Inc.
4.800%, 7/15/28 | | | 260,000 | | | | 247,626 | |
United States Cellular Corp.
6.700%, 12/15/33 | | | 103,000 | | | | 97,464 | |
| | | | | | | | |
| | | | | | | 677,688 | |
| | | | | | | | |
Total Communication Services | | | | | | | 1,799,348 | |
| | | | | | | | |
Consumer Discretionary (5.8%) | | | | | |
Automobile Components (1.3%) | |
Allison Transmission, Inc.
3.750%, 1/30/31§ | | | 145,000 | | | | 114,369 | |
Clarios Global LP
8.500%, 5/15/27§ | | | 55,000 | | | | 54,197 | |
Goodyear Tire & Rubber Co. (The)
9.500%, 5/31/25 (x) | | | 131,000 | | | | 132,146 | |
Magna International, Inc.
5.980%, 3/21/26 | | | 265,000 | | | | 264,927 | |
Patrick Industries, Inc.
4.750%, 5/1/29§ | | | 67,000 | | | | 54,605 | |
Tenneco, Inc.
8.000%, 11/17/28§ | | | 66,000 | | | | 52,965 | |
| | | | | | | | |
| | | | | | | 673,209 | |
| | | | | | | | |
Automobiles (0.4%) | |
Hyundai Capital America
6.250%, 11/3/25§ | | | 110,000 | | | | 109,987 | |
See Notes to Financial Statements.
58
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
PM General Purchaser LLC
9.500%, 10/1/28§ | | $ | 55,000 | | | $ | 51,425 | |
Thor Industries, Inc.
4.000%, 10/15/29§ | | | 67,000 | | | | 54,294 | |
| | | | | | | | |
| | | | | | | 215,706 | |
| | | | | | | | |
Broadline Retail (0.1%) | |
Millennium Escrow Corp.
6.625%, 8/1/26§ | | | 38,000 | | | | 28,120 | |
NMG Holding Co., Inc.
7.125%, 4/1/26§ | | | 38,000 | | | | 35,545 | |
| | | | | | | | |
| | | | | | | 63,665 | |
| | | | | | | | |
Distributors (0.1%) | |
American Builders & Contractors Supply Co., Inc.
4.000%, 1/15/28§ | | | 68,000 | | | | 60,890 | |
| | | | | | | | |
Diversified Consumer Services (0.3%) | |
Grand Canyon University
4.125%, 10/1/24 | | | 121,000 | | | | 114,684 | |
WW International, Inc.
4.500%, 4/15/29§ | | | 68,000 | | | | 42,500 | |
| | | | | | | | |
| | | | | | | 157,184 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (1.3%) | |
Carnival Corp.
5.750%, 3/1/27§ | | | 200,000 | | | | 178,000 | |
Expedia Group, Inc.
2.950%, 3/15/31 | | | 265,000 | | | | 208,284 | |
GPS Hospitality Holding Co. LLC
7.000%, 8/15/28§ | | | 30,000 | | | | 20,400 | |
NCL Corp. Ltd.
3.625%, 12/15/24§ | | | 52,000 | | | | 49,205 | |
7.750%, 2/15/29§ | | | 11,000 | | | | 9,600 | |
NCL Finance Ltd.
6.125%, 3/15/28§ | | | 12,000 | | | | 9,990 | |
Royal Caribbean Cruises Ltd.
7.500%, 10/15/27 | | | 142,000 | | | | 139,543 | |
Viking Cruises Ltd.
5.875%, 9/15/27§ | | | 51,000 | | | | 45,946 | |
| | | | | | | | |
| | | | | | | 660,968 | |
| | | | | | | | |
Household Durables (1.2%) | |
Ashton Woods USA LLC
4.625%, 8/1/29§ | | | 61,000 | | | | 49,410 | |
Beazer Homes USA, Inc.
5.875%, 10/15/27 (x) | | | 64,000 | | | | 57,280 | |
Dream Finders Homes, Inc.
8.250%, 8/15/28§ | | | 108,000 | | | | 106,521 | |
KB Home
4.800%, 11/15/29 | | | 94,000 | | | | 81,192 | |
4.000%, 6/15/31 | | | 20,000 | | | | 15,600 | |
M/I Homes, Inc.
4.950%, 2/1/28 | | | 117,000 | | | | 104,715 | |
Taylor Morrison Communities, Inc.
5.875%, 6/15/27§ | | | 117,000 | | | | 109,688 | |
Tempur Sealy International, Inc.
4.000%, 4/15/29§ | | | 135,000 | | | | 110,194 | |
| | | | | | | | |
| | | | | | | 634,600 | |
| | | | | | | | |
Specialty Retail (1.0%) | |
Evergreen Acqco 1 LP
9.750%, 4/26/28§ | | | 55,000 | | | | 55,319 | |
| | | | | | | | |
Gap, Inc. (The)
3.625%, 10/1/29§ | | | 82,000 | | | | 62,730 | |
Group 1 Automotive, Inc.
4.000%, 8/15/28§ | | | 16,000 | | | | 13,760 | |
Guitar Center, Inc.
8.500%, 1/15/26§ | | | 33,000 | | | | 27,802 | |
GYP Holdings III Corp.
4.625%, 5/1/29§ | | | 65,000 | | | | 53,138 | |
LSF9 Atlantis Holdings LLC
7.750%, 2/15/26§ | | | 62,000 | | | | 55,877 | |
Murphy Oil USA, Inc.
4.750%, 9/15/29 | | | 124,000 | | | | 109,740 | |
Specialty Building Products Holdings LLC
6.375%, 9/30/26§ | | | 55,000 | | | | 51,288 | |
Upbound Group, Inc.
6.375%, 2/15/29§ | | | 60,000 | | | | 51,600 | |
White Cap Buyer LLC
6.875%, 10/15/28§ | | | 37,000 | | | | 32,183 | |
| | | | | | | | |
| | | | | | | 513,437 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.1%) | |
G-III Apparel Group Ltd.
7.875%, 8/15/25 (x)§ | | | 57,000 | | | | 56,430 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 3,036,089 | |
| | | | | | | | |
Consumer Staples (0.3%) | | | | | |
Household Products (0.2%) | |
Central Garden & Pet Co.
4.125%, 4/30/31§ | | | 133,000 | | | | 106,194 | |
| | | | | | | | |
Personal Care Products (0.1%) | |
BellRing Brands, Inc.
7.000%, 3/15/30§ | | | 51,000 | | | | 48,960 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 155,154 | |
| | | | | | | | |
Energy (6.2%) | | | | | |
Energy Equipment & Services (0.8%) | |
Noble Finance II LLC
8.000%, 4/15/30§ | | | 104,000 | | | | 102,960 | |
Oceaneering International, Inc.
6.000%, 2/1/28 | | | 110,000 | | | | 101,034 | |
USA Compression Partners LP
6.875%, 4/1/26 | | | 10,000 | | | | 9,683 | |
6.875%, 9/1/27 | | | 55,000 | | | | 52,525 | |
Valaris Ltd.
8.375%, 4/30/30§ | | | 108,000 | | | | 105,586 | |
Weatherford International Ltd.
8.625%, 4/30/30§ | | | 69,000 | | | | 69,517 | |
| | | | | | | | |
| | | | | | | 441,305 | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (5.4%) | |
Alliance Resource Operating Partners LP
7.500%, 5/1/25§ | | | 123,000 | | | | 122,846 | |
Antero Midstream Partners LP
5.750%, 3/1/27§ | | | 135,000 | | | | 128,851 | |
Calumet Specialty Products Partners LP
8.125%, 1/15/27§ | | | 19,000 | | | | 17,741 | |
9.750%, 7/15/28§ | | | 17,000 | | | | 15,853 | |
See Notes to Financial Statements.
59
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
Chesapeake Energy Corp.
5.500%, 2/1/26§ | | $ | 10,000 | | | $ | 9,678 | |
Chord Energy Corp.
6.375%, 6/1/26§ | | | 111,000 | | | | 108,641 | |
CNX Midstream Partners LP
4.750%, 4/15/30§ | | | 64,000 | | | | 52,579 | |
CNX Resources Corp.
6.000%, 1/15/29§ | | | 126,000 | | | | 115,605 | |
Crescent Energy Finance LLC
9.250%, 2/15/28§ | | | 115,000 | | | | 116,438 | |
CVR Energy, Inc.
5.250%, 2/15/25§ | | | 160,000 | | | | 156,435 | |
5.750%, 2/15/28§ | | | 65,000 | | | | 57,850 | |
Delek Logistics Partners LP
7.125%, 6/1/28§ | | | 108,000 | | | | 97,740 | |
Encino Acquisition Partners Holdings LLC
8.500%, 5/1/28§ | | | 61,000 | | | | 59,235 | |
Energy Transfer LP
6.400%, 12/1/30 | | | 265,000 | | | | 262,137 | |
EnLink Midstream LLC
6.500%, 9/1/30§ | | | 10,000 | | | | 9,562 | |
EQM Midstream Partners LP
4.750%, 1/15/31§ | | | 12,000 | | | | 10,080 | |
Hess Midstream Operations LP
5.625%, 2/15/26§ | | | 93,000 | | | | 90,326 | |
4.250%, 2/15/30§ | | | 300,000 | | | | 257,250 | |
Holly Energy Partners LP
5.000%, 2/1/28§ | | | 122,000 | | | | 112,599 | |
Martin Midstream Partners LP
11.500%, 2/15/28§ | | | 56,000 | | | | 54,600 | |
Moss Creek Resources Holdings, Inc.
7.500%, 1/15/26§ | | | 57,000 | | | | 54,293 | |
New Fortress Energy, Inc.
6.500%, 9/30/26§ | | | 140,000 | | | | 124,600 | |
Northern Oil and Gas, Inc.
8.750%, 6/15/31§ | | | 37,000 | | | | 36,630 | |
Northriver Midstream Finance LP
5.625%, 2/15/26§ | | | 11,000 | | | | 10,422 | |
NuStar Logistics LP
5.750%, 10/1/25 | | | 10,000 | | | | 9,669 | |
6.000%, 6/1/26 | | | 10,000 | | | | 9,644 | |
PBF Holding Co. LLC
6.000%, 2/15/28 | | | 28,000 | | | | 25,900 | |
7.875%, 9/15/30§ | | | 10,000 | | | | 9,650 | |
Rockies Express Pipeline LLC
3.600%, 5/15/25§ | | | 105,000 | | | | 99,159 | |
SM Energy Co.
5.625%, 6/1/25 | | | 10,000 | | | | 9,750 | |
6.500%, 7/15/28 (x) | | | 10,000 | | | | 9,606 | |
Southwestern Energy Co.
5.700%, 1/23/25 (e) | | | 150,000 | | | | 147,580 | |
4.750%, 2/1/32 | | | 12,000 | | | | 10,290 | |
Strathcona Resources Ltd.
6.875%, 8/1/26§ | | | 59,000 | | | | 54,354 | |
Sunoco LP
4.500%, 4/30/30 | | | 12,000 | | | | 10,231 | |
Tallgrass Energy Partners LP
6.000%, 12/31/30 (x)§ | | | 120,000 | | | | 101,400 | |
Targa Resources Corp.
6.125%, 3/15/33 | | | 70,000 | | | | 66,911 | |
Venture Global LNG, Inc.
8.125%, 6/1/28§ | | | 153,000 | | | | 147,946 | |
| | | | | | | | |
Western Midstream Operating LP
6.150%, 4/1/33 | | | 20,000 | | | | 18,876 | |
| | | | | | | | |
| | | | | | | 2,812,957 | |
| | | | | | | | |
Total Energy | | | | | | | 3,254,262 | |
| | | | | | | | |
Financials (16.1%) | | | | | |
Banks (10.4%) | |
ABN AMRO Bank NV | | | | | | | | |
(United States SOFR Compounded Index + 1.78%),
7.124%, 9/18/27 (k)§ | | | 300,000 | | | | 300,153 | |
Banco Bilbao Vizcaya Argentaria SA | | | | | | | | |
(USD Swap Semi 5 Year + 3.87%),
6.125%, 11/16/27 (k)(y) | | | 400,000 | | | | 318,000 | |
Banco Santander SA | | | | | | | | |
(USD SOFR Spread-Adjusted ICE Swap Rate 5 Year + 4.99%),
7.500%, 2/8/24 (k)(m)(y) | | | 200,000 | | | | 193,500 | |
Bank of America Corp. | | | | | | | | |
(SOFR + 1.63%),
5.202%, 4/25/29 (k) | | | 270,000 | | | | 256,809 | |
Bank of Ireland Group plc | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 2.65%),
6.253%, 9/16/26 (k)§ | | | 200,000 | | | | 198,193 | |
Barclays plc | | | | | | | | |
(SOFR + 3.57%),
7.119%, 6/27/34 (k) | | | 265,000 | | | | 245,381 | |
Credit Agricole SA | | | | | | | | |
(USD Swap Semi 5 Year + 4.32%),
6.875%, 9/23/24 (k)(y)§ | | | 200,000 | | | | 194,250 | |
DNB Bank ASA | | | | | | | | |
(United States SOFR Compounded Index + 1.95%),
5.896%, 10/9/26 (k)§ | | | 250,000 | | | | 248,267 | |
Fifth Third Bancorp | | | | | | | | |
(SOFR + 2.34%),
6.339%, 7/27/29 (k)(x) | | | 80,000 | | | | 77,323 | |
HSBC Holdings plc 4.250%, 3/14/24 | | | 250,000 | | | | 247,758 | |
(USD ICE Swap Rate 5 Year + 3.75%),
6.000%, 5/22/27 (k)(y) | | | 280,000 | | | | 243,250 | |
(USD ICE Swap Rate 5 Year + 3.61%),
6.500%, 3/23/28 (k)(y) | | | 230,000 | | | | 201,137 | |
HSBC USA, Inc.
5.625%, 3/17/25 | | | 200,000 | | | | 198,525 | |
ING Groep NV | | | | | | | | |
(USD Swap Semi 5 Year + 4.45%),
6.500%, 4/16/25 (k)(y) | | | 200,000 | | | | 186,000 | |
(SOFR + 1.56%),
6.899%, 9/11/27 (k) | | | 270,000 | | | | 270,348 | |
Intesa Sanpaolo SpA | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 3.90%),
7.778%, 6/20/54 (k)§ | | | 265,000 | | | | 229,415 | |
JPMorgan Chase & Co. | | | | | | | | |
(SOFR + 2.58%),
5.717%, 9/14/33 (k) | | | 185,000 | | | | 173,141 | |
See Notes to Financial Statements.
60
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
Lloyds Banking Group plc | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 5 Year + 3.91%),
8.000%, 9/27/29 (k)(y) | | $ | 260,000 | | | $ | 227,825 | |
NatWest Group plc | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 2.10%),
6.016%, 3/2/34 (k) | | | 200,000 | | | | 186,098 | |
Santander Holdings USA, Inc.
3.450%, 6/2/25 | | | 170,000 | | | | 160,652 | |
Standard Chartered plc | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 1 Year + 0.95%),
1.822%, 11/23/25 (k)§ | | | 270,000 | | | | 255,894 | |
Truist Financial Corp. | | | | | | | | |
(SOFR + 2.05%),
6.047%, 6/8/27 (k) | | | 200,000 | | | | 195,986 | |
UniCredit SpA | | | | | | | | |
(USD ICE Swap Rate 5 Year + 4.91%),
7.296%, 4/2/34 (k)§ | | | 240,000 | | | | 222,158 | |
Wells Fargo & Co. | | | | | | | | |
(SOFR + 1.79%),
6.303%, 10/23/29 (k) | | | 270,000 | | | | 267,916 | |
(SOFR + 2.02%),
5.389%, 4/24/34 (k) | | | 157,000 | | | | 142,197 | |
| | | | | | | | |
| | | | | | | 5,440,176 | |
| | | | | | | | |
Capital Markets (3.6%) | |
BGC Group, Inc.
4.375%, 12/15/25 | | | 345,000 | | | | 318,694 | |
Blue Owl Credit Income Corp.
5.500%, 3/21/25 | | | 230,000 | | | | 222,489 | |
Coinbase Global, Inc.
3.375%, 10/1/28§ | | | 88,000 | | | | 64,240 | |
Credit Suisse AG
4.750%, 8/9/24 | | | 500,000 | | | | 493,369 | |
7.950%, 1/9/25 | | | 250,000 | | | | 253,784 | |
Deutsche Bank AG | | | | | | | | |
(SOFR + 1.87%),
2.129%, 11/24/26 (k) | | | 230,000 | | | | 206,921 | |
(SOFR + 3.65%),
7.079%, 2/10/34 (k) | | | 200,000 | | | | 176,226 | |
Morgan Stanley | | | | | | | | |
(SOFR + 1.59%),
5.164%, 4/20/29 (k) | | | 145,000 | | | | 137,460 | |
Osaic Holdings, Inc.
10.750%, 8/1/27§ | | | 32,000 | | | | 31,760 | |
| | | | | | | | |
| | | | | | | 1,904,943 | |
| | | | | | | | |
Consumer Finance (0.7%) | |
General Motors Financial Co., Inc.
5.400%, 4/6/26 | | | 260,000 | | | | 254,062 | |
Navient Corp.
5.625%, 8/1/33 | | | 82,000 | | | | 55,760 | |
Synchrony Financial
7.250%, 2/2/33 | | | 66,000 | | | | 56,186 | |
World Acceptance Corp.
7.000%, 11/1/26§ | | | 29,000 | | | | 23,635 | |
| | | | | | | | |
| | | | | | | 389,643 | |
| | | | | | | | |
| | | | | | | | |
Financial Services (0.3%) | |
Armor Holdco, Inc.
8.500%, 11/15/29§ | | | 11,000 | | | | 9,571 | |
MPH Acquisition Holdings LLC
5.750%, 11/1/28§ | | | 55,000 | | | | 40,998 | |
Sabre GLBL, Inc.
11.250%, 12/15/27§ | | | 65,000 | | | | 57,668 | |
Verscend Escrow Corp.
9.750%, 8/15/26§ | | | 30,000 | | | | 29,775 | |
| | | | | | | | |
| | | | | | | 138,012 | |
| | | | | | | | |
Insurance (0.7%) | |
Allianz SE | | | | | | | | |
(US Treasury Yield Curve Rate T Note Constant Maturity 5 Year + 3.23%),
6.350%, 9/6/53 (k)§ | | | 200,000 | | | | 189,554 | |
Liberty Mutual Group, Inc.
4.300%, 2/1/61§ | | | 330,000 | | | | 170,775 | |
USI, Inc.
6.875%, 5/1/25§ | | | 25,000 | | | | 24,698 | |
| | | | | | | | |
| | | | | | | 385,027 | |
| | | | | | | | |
Mortgage Real Estate Investment Trusts (REITs) (0.4%) | |
Blackstone Mortgage Trust, Inc. (REIT)
3.750%, 1/15/27§ | | | 128,000 | | | | 105,875 | |
Ladder Capital Finance Holdings LLLP (REIT)
4.750%, 6/15/29§ | | | 100,000 | | | | 80,500 | |
| | | | | | | | |
| | | | | | | 186,375 | |
| | | | | | | | |
Total Financials | | | | | | | 8,444,176 | |
| | | | | | | | |
Health Care (0.7%) | | | | | |
Health Care Equipment & Supplies (0.2%) | |
Medtronic Global Holdings SCA
4.250%, 3/30/28 | | | 95,000 | | | | 90,374 | |
| | | | | | | | |
Health Care Providers & Services (0.2%) | |
DaVita, Inc.
3.750%, 2/15/31§ | | | 14,000 | | | | 10,019 | |
Encompass Health Corp.
4.625%, 4/1/31 | | | 81,000 | | | | 67,432 | |
HealthEquity, Inc.
4.500%, 10/1/29§ | | | 51,000 | | | | 43,590 | |
| | | | | | | | |
| | | | | | | 121,041 | |
| | | | | | | | |
Pharmaceuticals (0.3%) | |
Eli Lilly and Co.
4.700%, 2/27/33 (x) | | | 130,000 | | | | 122,280 | |
| | | | | | | | |
Total Health Care | | | | | | | 333,695 | |
| | | | | | | | |
Industrials (6.7%) | | | | | |
Aerospace & Defense (1.0%) | |
HEICO Corp.
5.350%, 8/1/33 | | | 270,000 | | | | 248,975 | |
Howmet Aerospace, Inc.
5.900%, 2/1/27 | | | 12,000 | | | | 11,839 | |
6.750%, 1/15/28 | | | 102,000 | | | | 101,621 | |
TransDigm, Inc.
4.625%, 1/15/29 | | | 185,000 | | | | 159,008 | |
| | | | | | | | |
| | | | | | | 521,443 | |
| | | | | | | | |
See Notes to Financial Statements.
61
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
Air Freight & Logistics (0.1%) | |
Rand Parent LLC
8.500%, 2/15/30 (x)§ | | $ | 86,000 | | | $ | 77,897 | |
| | | | | | | | |
Building Products (1.2%) | |
AmeriTex HoldCo Intermediate LLC
10.250%, 10/15/28§ | | | 58,000 | | | | 54,810 | |
Builders FirstSource, Inc.
4.250%, 2/1/32§ | | | 140,000 | | | | 111,475 | |
Cornerstone Building Brands, Inc.
6.125%, 1/15/29§ | | | 46,000 | | | | 33,695 | |
Eco Material Technologies, Inc.
7.875%, 1/31/27§ | | | 50,000 | | | | 47,375 | |
JELD-WEN, Inc.
4.875%, 12/15/27§ | | | 59,000 | | | | 50,150 | |
MIWD Holdco II LLC
5.500%, 2/1/30§ | | | 60,000 | | | | 47,625 | |
Oscar AcquisitionCo LLC
9.500%, 4/15/30§ | | | 30,000 | | | | 26,475 | |
Smyrna Ready Mix Concrete LLC
6.000%, 11/1/28§ | | | 121,000 | | | | 111,465 | |
Standard Industries, Inc.
5.000%, 2/15/27§ | | | 144,000 | | | | 132,497 | |
| | | | | | | | |
| | | | | | | 615,567 | |
| | | | | | | | |
Commercial Services & Supplies (0.9%) | |
APX Group, Inc.
5.750%, 7/15/29§ | | | 74,000 | | | | 61,420 | |
Deluxe Corp.
8.000%, 6/1/29§ | | | 35,000 | | | | 27,694 | |
Enviri Corp.
5.750%, 7/31/27§ | | | 60,000 | | | | 50,850 | |
Garda World Security Corp.
9.500%, 11/1/27§ | | | 49,000 | | | | 44,387 | |
Interface, Inc.
5.500%, 12/1/28 (x)§ | | | 64,000 | | | | 53,602 | |
Neptune Bidco US, Inc.
9.290%, 4/15/29§ | | | 11,000 | | | | 9,671 | |
Pitney Bowes, Inc.
6.875%, 3/15/27§ | | | 69,000 | | | | 57,116 | |
Republic Services, Inc.
5.000%, 4/1/34 | | | 50,000 | | | | 45,937 | |
Steelcase, Inc.
5.125%, 1/18/29 | | | 114,000 | | | | 100,463 | |
Waste Pro USA, Inc.
5.500%, 2/15/26 (x)§ | | | 25,000 | | | | 22,912 | |
| | | | | | | | |
| | | | | | | 474,052 | |
| | | | | | | | |
Construction & Engineering (1.0%) | |
Artera Services LLC
9.033%, 12/4/25§ | | | 55,000 | | | | 49,500 | |
Brand Industrial Services, Inc.
10.375%, 8/1/30 (x)§ | | | 63,000 | | | | 62,449 | |
Global Infrastructure Solutions, Inc.
5.625%, 6/1/29§ | | | 50,000 | | | | 40,250 | |
Great Lakes Dredge & Dock Corp.
5.250%, 6/1/29§ | | | 34,000 | | | | 27,795 | |
IHS Netherlands Holdco BV
8.000%, 9/18/27§ | | | 235,000 | | | | 191,701 | |
Pike Corp.
5.500%, 9/1/28§ | | | 30,000 | | | | 25,500 | |
| | | | | | | | |
Weekley Homes LLC
4.875%, 9/15/28§ | | | 122,000 | | | | 104,462 | |
| | | | | | | | |
| | | | | | | 501,657 | |
| | | | | | | | |
Electrical Equipment (0.2%) | |
EnerSys
4.375%, 12/15/27§ | | | 113,000 | | | | 99,864 | |
| | | | | | | | |
Ground Transportation (0.4%) | |
Carriage Purchaser, Inc.
7.875%, 10/15/29§ | | | 35,000 | | | | 25,550 | |
Uber Technologies, Inc.
7.500%, 5/15/25§ | | | 99,000 | | | | 99,257 | |
Watco Cos. LLC
6.500%, 6/15/27§ | | | 25,000 | | | | 23,375 | |
XPO CNW, Inc.
6.700%, 5/1/34 (x) | | | 80,000 | | | | 73,400 | |
| | | | | | | | |
| | | | | | | 221,582 | |
| | | | | | | | |
Machinery (0.4%) | |
Amsted Industries, Inc.
5.625%, 7/1/27§ | | | 117,000 | | | | 107,847 | |
Titan International, Inc.
7.000%, 4/30/28 (x) | | | 58,000 | | | | 52,925 | |
Werner FinCo LP
11.500%, 6/15/28§ | | | 30,000 | | | | 30,037 | |
| | | | | | | | |
| | | | | | | 190,809 | |
| | | | | | | | |
Passenger Airlines (0.8%) | |
American Airlines Group, Inc.
3.750%, 3/1/25§ | | | 180,000 | | | | 168,000 | |
Mileage Plus Holdings LLC
6.500%, 6/20/27§ | | | 198,750 | | | | 195,689 | |
VistaJet Malta Finance plc
9.500%, 6/1/28§ | | | 63,000 | | | | 48,195 | |
| | | | | | | | |
| | | | | | | 411,884 | |
| | | | | | | | |
Professional Services (0.2%) | |
TriNet Group, Inc.
3.500%, 3/1/29§ | | | 125,000 | | | | 103,281 | |
| | | | | | | | |
Trading Companies & Distributors (0.4%) | |
Beacon Roofing Supply, Inc.
4.125%, 5/15/29§ | | | 73,000 | | | | 61,289 | |
BlueLinx Holdings, Inc.
6.000%, 11/15/29§ | | | 55,000 | | | | 46,062 | |
Boise Cascade Co.
4.875%, 7/1/30§ | | | 125,000 | | | | 107,187 | |
| | | | | | | | |
| | | | | | | 214,538 | |
| | | | | | | | |
Transportation Infrastructure (0.1%) | |
Seaspan Corp.
5.500%, 8/1/29§ | | | 75,000 | | | | 57,457 | |
| | | | | | | | |
Total Industrials | | | | | | | 3,490,031 | |
| | | | | | | | |
Information Technology (3.4%) | | | | | |
Communications Equipment (0.2%) | |
CommScope Technologies LLC
6.000%, 6/15/25§ | | | 160,000 | | | | 101,200 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.1%) | |
Jabil, Inc.
5.450%, 2/1/29 | | | 25,000 | | | | 24,022 | |
See Notes to Financial Statements.
62
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
| | | | | | | | |
TTM Technologies, Inc.
4.000%, 3/1/29§ | | $ | 12,000 | | | $ | 9,810 | |
| | | | | | | | |
| | | | | | | 33,832 | |
| | | | | | | | |
IT Services (0.1%) | |
Arches Buyer, Inc.
6.125%, 12/1/28§ | | | 37,000 | | | | 29,886 | |
Unisys Corp.
6.875%, 11/1/27§ | | | 57,000 | | | | 41,838 | |
| | | | | | | | |
| | | | | | | 71,724 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (1.1%) | |
Broadcom, Inc.
4.150%, 4/15/32§ | | | 240,000 | | | | 203,432 | |
Entegris, Inc.
4.375%, 4/15/28§ | | | 11,000 | | | | 9,784 | |
3.625%, 5/1/29§ | | | 99,000 | | | | 82,522 | |
Micron Technology, Inc.
6.750%, 11/1/29 | | | 190,000 | | | | 190,475 | |
ON Semiconductor Corp.
3.875%, 9/1/28§ | | | 122,000 | | | | 104,462 | |
| | | | | | | | |
| | | | | | | 590,675 | |
| | | | | | | | |
Software (0.9%) | |
Crowdstrike Holdings, Inc.
3.000%, 2/15/29 | | | 133,000 | | | | 111,421 | |
Fair Isaac Corp.
5.250%, 5/15/26§ | | | 111,000 | | | | 106,817 | |
Oracle Corp.
2.875%, 3/25/31 | | | 270,000 | | | | 216,350 | |
PTC, Inc.
4.000%, 2/15/28§ | | | 33,000 | | | | 29,246 | |
Veritas US, Inc.
7.500%, 9/1/25§ | | | 12,000 | | | | 9,780 | |
| | | | | | | | |
| | | | | | | 473,614 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (1.0%) | |
Dell International LLC
5.750%, 2/1/33 (x) | | | 155,000 | | | | 146,394 | |
Seagate HDD Cayman
9.625%, 12/1/32§ | | | 126,000 | | | | 134,347 | |
Xerox Corp.
6.750%, 12/15/39 | | | 50,000 | | | | 32,365 | |
Xerox Holdings Corp.
5.000%, 8/15/25§ | | | 160,000 | | | | 146,800 | |
5.500%, 8/15/28§ | | | 86,000 | | | | 66,597 | |
| | | | | | | | |
| | | | | | | 526,503 | |
| | | | | | | | |
Total Information Technology | | | | | | | 1,797,548 | |
| | | | | | | | |
Materials (1.2%) | | | | | |
Chemicals (0.4%) | |
Braskem Netherlands Finance BV
4.500%, 1/31/30§ | | | 255,000 | | | | 195,381 | |
| | | | | | | | |
Construction Materials (0.4%) | |
Cemex SAB de CV
3.875%, 7/11/31§ | | | 260,000 | | | | 209,950 | |
| | | | | | | | |
Metals & Mining (0.4%) | |
FMG Resources August 2006 Pty. Ltd.
5.875%, 4/15/30§ | | | 25,000 | | | | 22,375 | |
| | | | | | | | |
Infrabuild Australia Pty. Ltd.
12.000%, 10/1/24§ | | | 25,000 | | | | 24,687 | |
Northern Star Resources Ltd.
6.125%, 4/11/33§ | | | 180,000 | | | | 164,331 | |
SunCoke Energy, Inc.
4.875%, 6/30/29§ | | | 12,000 | | | | 10,044 | |
| | | | | | | | |
| | | | | | | 221,437 | |
| | | | | | | | |
Total Materials | | | | | | | 626,768 | |
| | | | | | | | |
Real Estate (0.6%) | | | | | |
Real Estate Management & Development (0.3%) | |
Forestar Group, Inc.
5.000%, 3/1/28§ | | | 123,000 | | | | 107,933 | |
Realogy Group LLC
5.750%, 1/15/29§ | | | 67,000 | | | | 41,875 | |
| | | | | | | | |
| | | | | | | 149,808 | |
| | | | | | | | |
Specialized REITs (0.3%) | |
Iron Mountain, Inc. (REIT)
4.875%, 9/15/29§ | | | 193,000 | | | | 168,151 | |
| | | | | | | | |
Total Real Estate | | | | | | | 317,959 | |
| | | | | | | | |
Utilities (0.8%) | | | | | |
Electric Utilities (0.7%) | |
NextEra Energy Capital Holdings, Inc.
6.051%, 3/1/25 | | | 65,000 | | | | 64,942 | |
NRG Energy, Inc.
3.375%, 2/15/29§ | | | 148,000 | | | | 119,325 | |
3.875%, 2/15/32§ | | | 24,000 | | | | 17,782 | |
Vistra Operations Co. LLC
4.375%, 5/1/29§ | | | 176,000 | | | | 149,600 | |
| | | | | | | | |
| | | | | | | 351,649 | |
| | | | | | | | |
Water Utilities (0.1%) | |
Solaris Midstream Holdings LLC
7.625%, 4/1/26 (x)§ | | | 58,000 | | | | 55,134 | |
| | | | | | | | |
Total Utilities | | | | | | | 406,783 | |
| | | | | | | | |
Total Corporate Bonds | | | | | | | 23,661,813 | |
| | | | | | | | |
Foreign Government Securities (1.3%) | |
Oriental Republic of Uruguay
9.750%, 7/20/33 | | UYU | 12,005,000 | | | | 297,570 | |
Republic of Costa Rica
7.000%, 4/4/44 (m) | | $ | 200,000 | | | | 183,100 | |
7.158%, 3/12/45 (m) | | | 240,000 | | | | 223,320 | |
| | | | | | | | |
Total Foreign Government Securities | | | | | | | 703,990 | |
| | | | | | | | |
U.S. Treasury Obligations (6.1%) | |
U.S. Treasury Bonds
3.625%, 2/15/53 | | | 2,055,000 | | | | 1,613,557 | |
U.S. Treasury Notes
0.375%, 4/15/24 | | | 1,615,000 | | | | 1,578,494 | |
| | | | | | | | |
Total U.S. Treasury Obligations | | | | | | | 3,192,051 | |
| | | | | | | | |
Total Long-Term Debt Securities (55.2%)
(Cost $30,083,181) | | | | 28,921,861 | |
| | | | | | | | |
See Notes to Financial Statements.
63
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
COMMON STOCKS: | |
Communication Services (3.0%) | |
Diversified Telecommunication Services (0.5%) | |
AT&T, Inc. | | | 2,385 | | | $ | 36,729 | |
Nippon Telegraph & Telephone Corp. | | | 28,900 | | | | 33,709 | |
Telstra Group Ltd. | | | 10,128 | | | | 24,478 | |
Verizon Communications, Inc. | | | 4,989 | | | | 175,264 | |
| | | | | | | | |
| | | | | | | 270,180 | |
| | | | | | | | |
Entertainment (0.3%) | |
Netflix, Inc.* | | | 161 | | | | 66,282 | |
Nintendo Co. Ltd. | | | 1,000 | | | | 41,042 | |
Walt Disney Co. (The)* | | | 479 | | | | 39,082 | |
| | | | | | | | |
| | | | | | | 146,406 | |
| | | | | | | | |
Interactive Media & Services (1.3%) | |
Alphabet, Inc., Class A (s)* | | | 2,098 | | | | 260,320 | |
Alphabet, Inc., Class C (s)* | | | 1,821 | | | | 228,171 | |
Meta Platforms, Inc., Class A (s)* | | | 698 | | | | 210,287 | |
| | | | | | | | |
| | | | | | | 698,778 | |
| | | | | | | | |
Media (0.7%) | |
Comcast Corp., Class A (s) | | | 7,049 | | | | 291,053 | |
Omnicom Group, Inc. | | | 411 | | | | 30,788 | |
Publicis Groupe SA | | | 400 | | | | 30,355 | |
| | | | | | | | |
| | | | | | | 352,196 | |
| | | | | | | | |
Wireless Telecommunication Services (0.2%) | |
KDDI Corp. | | | 1,400 | | | | 41,443 | |
SoftBank Corp. | | | 3,100 | | | | 34,871 | |
| | | | | | | | |
| | | | | | | 76,314 | |
| | | | | | | | |
Total Communication Services | | | | | | | 1,543,874 | |
| | | | | | | | |
Consumer Discretionary (3.5%) | |
Automobile Components (0.1%) | |
Cie Generale des Etablissements Michelin SCA | | | 1,163 | | | | 34,481 | |
| | | | | | | | |
Automobiles (0.9%) | |
Bayerische Motoren Werke AG | | | 429 | | | | 39,777 | |
Honda Motor Co. Ltd. | | | 5,100 | | | | 50,689 | |
Stellantis NV | | | 2,679 | | | | 49,890 | |
Tesla, Inc. (s)* | | | 799 | | | | 160,471 | |
Toyota Motor Corp. | | | 9,200 | | | | 157,203 | |
| | | | | | | | |
| | | | | | | 458,030 | |
| | | | | | | | |
Broadline Retail (0.9%) | |
Amazon.com, Inc. (s)* | | | 2,944 | | | | 391,817 | |
Wesfarmers Ltd. | | | 1,903 | | | | 60,986 | |
| | | | | | | | |
| | | | | | | 452,803 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (0.4%) | |
Booking Holdings, Inc.* | | | 14 | | | | 39,054 | |
Hilton Worldwide Holdings, Inc. | | | 445 | | | | 67,431 | |
McDonald’s Corp. | | | 201 | | | | 52,696 | |
Starbucks Corp. | | | 460 | | | | 42,430 | |
Yum! Brands, Inc. | | | 307 | | | | 37,104 | |
| | | | | | | | |
| | | | | | | 238,715 | |
| | | | | | | | |
Household Durables (0.1%) | |
DR Horton, Inc. | | | 363 | | | | 37,897 | |
Sekisui House Ltd. | | | 2,000 | | | | 38,780 | |
| | | | | | | | |
| | | | | | | 76,677 | |
| | | | | | | | |
| | | | | | | | |
Specialty Retail (1.0%) | |
Home Depot, Inc. (The) (s) | | | 1,111 | | | | 316,291 | |
Lowe’s Cos., Inc. | | | 183 | | | | 34,874 | |
O’Reilly Automotive, Inc.* | | | 45 | | | | 41,870 | |
TJX Cos., Inc. (The) | | | 1,577 | | | | 138,886 | |
| | | | | | | | |
| | | | | | | 531,921 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.1%) | |
NIKE, Inc., Class B | | | 504 | | | | 51,796 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 1,844,423 | |
| | | | | | | | |
Consumer Staples (4.1%) | |
Beverages (1.2%) | |
Brown-Forman Corp., Class B | | | 573 | | | | 32,180 | |
Carlsberg A/S, Class B | | | 186 | | | | 22,150 | |
Coca-Cola Co. (The) | | | 4,229 | | | | 238,896 | |
Constellation Brands, Inc., Class A | | | 173 | | | | 40,508 | |
Kirin Holdings Co. Ltd. | | | 2,400 | | | | 33,560 | |
PepsiCo, Inc. (s) | | | 1,504 | | | | 245,573 | |
| | | | | | | | |
| | | | | | | 612,867 | |
| | | | | | | | |
Consumer Staples Distribution & Retail (0.5%) | |
Coles Group Ltd. | | | 2,596 | | | | 25,146 | |
Costco Wholesale Corp. (s) | | | 154 | | | | 85,076 | |
Dollar General Corp. | | | 189 | | | | 22,498 | |
Koninklijke Ahold Delhaize NV | | | 1,136 | | | | 33,656 | |
Target Corp. | | | 267 | | | | 29,581 | |
Walmart, Inc. (s) | | | 480 | | | | 78,437 | |
| | | | | | | | |
| | | | | | | 274,394 | |
| | | | | | | | |
Food Products (0.7%) | |
Archer-Daniels-Midland Co. | | | 457 | | | | 32,707 | |
Danone SA | | | 826 | | | | 49,074 | |
General Mills, Inc. | | | 609 | | | | 39,731 | |
Nestle SA (Registered) | | | 2,139 | | | | 230,584 | |
Tyson Foods, Inc., Class A | | | 656 | | | | 30,406 | |
| | | | | | | | |
| | | | | | | 382,502 | |
| | | | | | | | |
Household Products (1.0%) | |
Colgate-Palmolive Co. | | | 781 | | | | 58,669 | |
Essity AB, Class B | | | 1,061 | | | | 24,171 | |
Kimberly-Clark Corp. | | | 364 | | | | 43,549 | |
Procter & Gamble Co. (The) (s) | | | 2,433 | | | | 365,023 | |
Reckitt Benckiser Group plc | | | 716 | | | | 47,882 | |
| | | | | | | | |
| | | | | | | 539,294 | |
| | | | | | | | |
Personal Care Products (0.2%) | |
Estee Lauder Cos., Inc. (The), Class A | | | 168 | | | | 21,650 | |
Unilever plc | | | 2,094 | | | | 98,981 | |
| | | | | | | | |
| | | | | | | 120,631 | |
| | | | | | | | |
Tobacco (0.5%) | |
Altria Group, Inc. | | | 1,561 | | | | 62,706 | |
Philip Morris International, Inc. | | | 1,839 | | | | 163,965 | |
| | | | | | | | |
| | | | | | | 226,671 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 2,156,359 | |
| | | | | | | | |
Energy (3.7%) | |
Energy Equipment & Services (0.3%) | |
Schlumberger NV | | | 2,567 | | | | 142,879 | |
| | | | | | | | |
See Notes to Financial Statements.
64
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Oil, Gas & Consumable Fuels (3.4%) | |
Chevron Corp. (s) | | | 1,908 | | | $ | 278,053 | |
ConocoPhillips | | | 1,412 | | | | 167,746 | |
EOG Resources, Inc. | | | 1,143 | | | | 144,304 | |
Exxon Mobil Corp. (s) | | | 5,311 | | | | 562,169 | |
Hess Corp. | | | 282 | | | | 40,721 | |
Kinder Morgan, Inc. | | | 2,717 | | | | 44,015 | |
Marathon Petroleum Corp. (s) | | | 1,220 | | | | 184,525 | |
Phillips 66 | | | 483 | | | | 55,096 | |
Suncor Energy, Inc. | | | 1,500 | | | | 48,578 | |
TotalEnergies SE | | | 2,026 | | | | 135,482 | |
Valero Energy Corp. | | | 674 | | | | 85,598 | |
Woodside Energy Group Ltd. | | | 2,242 | | | | 48,725 | |
| | | | | | | | |
| | | | | | | 1,795,012 | |
| | | | | | | | |
Total Energy | | | | | | | 1,937,891 | |
| | | | | | | | |
Financials (4.2%) | |
Banks (0.8%) | |
Bank of America Corp. | | | 1,944 | | | | 51,205 | |
Citigroup, Inc. | | | 821 | | | | 32,421 | |
JPMorgan Chase & Co. (s) | | | 772 | | | | 107,354 | |
M&T Bank Corp. | | | 126 | | | | 14,207 | |
Oversea-Chinese Banking Corp. Ltd. | | | 5,300 | | | | 49,085 | |
PNC Financial Services Group, Inc. (The) | | | 187 | | | | 21,406 | |
Truist Financial Corp. | | | 517 | | | | 14,662 | |
United Overseas Bank Ltd. | | | 2,300 | | | | 45,390 | |
US Bancorp | | | 803 | | | | 25,600 | |
Wells Fargo & Co. | | | 1,094 | | | | 43,508 | |
| | | | | | | | |
| | | | | | | 404,838 | |
| | | | | | | | |
Capital Markets (1.2%) | |
3i Group plc | | | 1,597 | | | | 37,550 | |
BlackRock, Inc. | | | 202 | | | | 123,681 | |
Blackstone, Inc. | | | 708 | | | | 65,384 | |
Charles Schwab Corp. (The) | | | 508 | | | | 26,436 | |
CME Group, Inc. | | | 332 | | | | 70,869 | |
Goldman Sachs Group, Inc. (The) | | | 139 | | | | 42,202 | |
Moody’s Corp. | | | 157 | | | | 48,356 | |
Morgan Stanley | | | 499 | | | | 35,339 | |
MSCI, Inc., Class A | | | 81 | | | | 38,195 | |
Partners Group Holding AG | | | 38 | | | | 39,970 | |
S&P Global, Inc. | | | 131 | | | | 45,760 | |
State Street Corp. | | | 476 | | | | 30,764 | |
T. Rowe Price Group, Inc. | | | 351 | | | | 31,765 | |
| | | | | | | | |
| | | | | | | 636,271 | |
| | | | | | | | |
Financial Services (0.8%) | |
Berkshire Hathaway, Inc., Class B (s)* | | | 449 | | | | 153,257 | |
Fiserv, Inc.* | | | 375 | | | | 42,656 | |
Mastercard, Inc., Class A (s) | | | 239 | | | | 89,948 | |
PayPal Holdings, Inc.* | | | 496 | | | | 25,693 | |
Visa, Inc., Class A (s) | | | 460 | | | | 108,146 | |
| | | | | | | | |
| | | | | | | 419,700 | |
| | | | | | | | |
Insurance (1.4%) | |
Aflac, Inc. | | | 749 | | | | 58,504 | |
Allianz SE (Registered) | | | 423 | | | | 98,870 | |
American International Group, Inc. | | | 744 | | | | 45,615 | |
Arch Capital Group Ltd.* | | | 798 | | | | 69,171 | |
Arthur J Gallagher & Co. | | | 239 | | | | 56,282 | |
| | | | | | | | |
AXA SA | | | 2,015 | | | | 59,602 | |
Everest Group Ltd. | | | 118 | | | | 46,683 | |
Marsh & McLennan Cos., Inc. | | | 223 | | | | 42,292 | |
MetLife, Inc. | | | 826 | | | | 49,568 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | | | 165 | | | | 66,081 | |
Swiss Re AG | | | 412 | | | | 44,893 | |
Tokio Marine Holdings, Inc. | | | 1,900 | | | | 41,905 | |
Zurich Insurance Group AG | | | 141 | | | | 66,745 | |
| | | | | | | | |
| | | | | | | 746,211 | |
| | | | | | | | |
Total Financials | | | | | | | 2,207,020 | |
| | | | | | | | |
Health Care (5.5%) | |
Biotechnology (0.9%) | |
AbbVie, Inc. (s) | | | 1,940 | | | | 273,889 | |
Amgen, Inc. | | | 667 | | | | 170,552 | |
Gilead Sciences, Inc. | | | 621 | | | | 48,773 | |
| | | | | | | | |
| | | | | | | 493,214 | |
| | | | | | | | |
Health Care Equipment & Supplies (0.7%) | |
Abbott Laboratories | | | 496 | | | | 46,897 | |
Becton Dickinson & Co. | | | 150 | | | | 37,917 | |
Boston Scientific Corp.* | | | 884 | | | | 45,252 | |
Edwards Lifesciences Corp.* | | | 504 | | | | 32,115 | |
Intuitive Surgical, Inc.* | | | 153 | | | | 40,120 | |
Medtronic plc | | | 1,659 | | | | 117,059 | |
Stryker Corp. | | | 170 | | | | 45,937 | |
| | | | | | | | |
| | | | | | | 365,297 | |
| | | | | | | | |
Health Care Providers & Services (0.7%) | |
Centene Corp.* | | | 460 | | | | 31,731 | |
Cigna Group (The) | | | 190 | | | | 58,748 | |
CVS Health Corp. | | | 1,679 | | | | 115,868 | |
Elevance Health, Inc. | | | 111 | | | | 49,960 | |
UnitedHealth Group, Inc. (s) | | | 224 | | | | 119,965 | |
| | | | | | | | |
| | | | | | | 376,272 | |
| | | | | | | | |
Life Sciences Tools & Services (0.3%) | |
Agilent Technologies, Inc. | | | 278 | | | | 28,737 | |
Danaher Corp. | | | 223 | | | | 42,820 | |
Thermo Fisher Scientific, Inc. | | | 131 | | | | 58,265 | |
| | | | | | | | |
| | | | | | | 129,822 | |
| | | | | | | | |
Pharmaceuticals (2.9%) | |
Astellas Pharma, Inc. | | | 2,300 | | | | 28,831 | |
Bristol-Myers Squibb Co. | | | 780 | | | | 40,193 | |
Eli Lilly and Co. (s) | | | 247 | | | | 136,821 | |
Johnson & Johnson (s) | | | 2,626 | | | | 389,541 | |
Merck & Co., Inc. (s) | | | 2,772 | | | | 284,684 | |
Novartis AG (Registered) | | | 1,591 | | | | 147,862 | |
Pfizer, Inc. | | | 6,094 | | | | 186,233 | |
Roche Holding AG | | | 572 | | | | 147,048 | |
Sandoz Group AG* | | | 318 | | | | 8,268 | |
Sanofi SA | | | 938 | | | | 85,057 | |
Zoetis, Inc., Class A | | | 290 | | | | 45,530 | |
| | | | | | | | |
| | | | | | | 1,500,068 | |
| | | | | | | | |
Total Health Care | | | | | | | 2,864,673 | |
| | | | | | | | |
See Notes to Financial Statements.
65
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Industrials (4.2%) | |
Aerospace & Defense (1.6%) | |
BAE Systems plc | | | 3,140 | | | $ | 42,134 | |
Boeing Co. (The)* | | | 216 | | | | 40,353 | |
General Dynamics Corp. | | | 1,308 | | | | 315,634 | |
Lockheed Martin Corp. | | | 186 | | | | 84,563 | |
Northrop Grumman Corp. | | | 104 | | | | 49,029 | |
RTX Corp. | | | 3,911 | | | | 318,316 | |
| | | | | | | | |
| | | | | | | 850,029 | |
| | | | | | | | |
Air Freight & Logistics (0.3%) | |
Deutsche Post AG | | | 1,196 | | | | 46,519 | |
United Parcel Service, Inc., Class B | | | 914 | | | | 129,103 | |
| | | | | | | | |
| | | | | | | 175,622 | |
| | | | | | | | |
Building Products (0.2%) | |
Cie de Saint-Gobain SA | | | 663 | | | | 36,058 | |
Trane Technologies plc | | | 236 | | | | 44,913 | |
| | | | | | | | |
| | | | | | | 80,971 | |
| | | | | | | | |
Commercial Services & Supplies (0.1%) | |
Cintas Corp. | | | 100 | | | | 50,712 | |
| | | | | | | | |
Construction & Engineering (0.1%) | |
Vinci SA | | | 525 | | | | 58,039 | |
| | | | | | | | |
Electrical Equipment (0.3%) | |
ABB Ltd. (Registered) | | | 1,715 | | | | 57,390 | |
Eaton Corp. plc | | | 236 | | | | 49,066 | |
Emerson Electric Co. | | | 603 | | | | 53,649 | |
| | | | | | | | |
| | | | | | | 160,105 | |
| | | | | | | | |
Ground Transportation (0.2%) | |
Norfolk Southern Corp. | | | 181 | | | | 34,533 | |
Union Pacific Corp. | | | 236 | | | | 48,996 | |
| | | | | | | | |
| | | | | | | 83,529 | |
| | | | | | | | |
Industrial Conglomerates (0.3%) | |
3M Co. | | | 870 | | | | 79,126 | |
General Electric Co. | | | 636 | | | | 69,089 | |
Honeywell International, Inc. | | | 189 | | | | 34,636 | |
| | | | | | | | |
| | | | | | | 182,851 | |
| | | | | | | | |
Machinery (0.7%) | |
Caterpillar, Inc. | | | 182 | | | | 41,141 | |
Cummins, Inc. | | | 172 | | | | 37,204 | |
Deere & Co. | | | 100 | | | | 36,536 | |
Dover Corp. | | | 382 | | | | 49,641 | |
Komatsu Ltd. | | | 1,400 | | | | 31,985 | |
Kone OYJ, Class B | | | 654 | | | | 28,296 | |
PACCAR, Inc. | | | 600 | | | | 49,518 | |
Parker-Hannifin Corp. | | | 143 | | | | 52,754 | |
Volvo AB, Class B | | | 2,176 | | | | 43,062 | |
| | | | | | | | |
| | | | | | | 370,137 | |
| | | | | | | | |
Professional Services (0.2%) | |
Automatic Data Processing, Inc. | | | 181 | | | | 39,498 | |
RELX plc | | | 2,195 | | | | 76,516 | |
| | | | | | | | |
| | | | | | | 116,014 | |
| | | | | | | | |
Trading Companies & Distributors (0.2%) | |
ITOCHU Corp. | | | 1,200 | | | | 42,537 | |
Mitsui & Co. Ltd. | | | 1,300 | | | | 46,460 | |
| | | | | | | | |
| | | | | | | 88,997 | |
| | | | | | | | |
Total Industrials | | | | | | | 2,217,006 | |
| | | | | | | | |
| | | | | | | | |
Information Technology (6.1%) | |
Communications Equipment (0.4%) | |
Cisco Systems, Inc. (s) | | | 4,530 | | | | 236,149 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (0.3%) | |
Amphenol Corp., Class A | | | 600 | | | | 48,330 | |
Corning, Inc. | | | 1,080 | | | | 28,901 | |
Keysight Technologies, Inc.* | | | 198 | | | | 24,166 | |
TE Connectivity Ltd. | | | 347 | | | | 40,894 | |
| | | | | | | | |
| | | | | | | 142,291 | |
| | | | | | | | |
IT Services (0.5%) | |
Accenture plc, Class A (s) | | | 329 | | | | 97,742 | |
International Business Machines Corp. | | | 1,095 | | | | 158,381 | |
| | | | | | | | |
| | | | | | | 256,123 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (2.5%) | |
Advanced Micro Devices, Inc.* | | | 631 | | | | 62,153 | |
Analog Devices, Inc. | | | 231 | | | | 36,343 | |
Applied Materials, Inc. (s) | | | 508 | | | | 67,234 | |
Broadcom, Inc. (s) | | | 449 | | | | 377,775 | |
Intel Corp. | | | 1,341 | | | | 48,946 | |
KLA Corp. | | | 104 | | | | 48,849 | |
NVIDIA Corp. (s) | | | 766 | | | | 312,375 | |
QUALCOMM, Inc. | | | 1,302 | | | | 141,905 | |
Texas Instruments, Inc. | | | 992 | | | | 140,874 | |
Tokyo Electron Ltd. | | | 400 | | | | 52,133 | |
| | | | | | | | |
| | | | | | | 1,288,587 | |
| | | | | | | | |
Software (2.3%) | |
Adobe, Inc. (s)* | | | 161 | | | | 85,662 | |
Intuit, Inc. | | | 126 | | | | 62,364 | |
Microsoft Corp. (s) | | | 2,403 | | | | 812,478 | |
Oracle Corp. (s) | | | 816 | | | | 84,374 | |
Roper Technologies, Inc. | | | 83 | | | | 40,551 | |
Salesforce, Inc. (s)* | | | 380 | | | | 76,316 | |
ServiceNow, Inc.* | | | 100 | | | | 58,185 | |
| | | | | | | | |
| | | | | | | 1,219,930 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (0.1%) | |
Hewlett Packard Enterprise Co. | | | 2,074 | | | | 31,898 | |
HP, Inc. | | | 1,187 | | | | 31,254 | |
| | | | | | | | |
| | | | | | | 63,152 | |
| | | | | | | | |
Total Information Technology | | | | | | | 3,206,232 | |
| | | | | | | | |
Materials (1.4%) | |
Chemicals (0.7%) | |
Air Products and Chemicals, Inc. | | | 205 | | | | 57,900 | |
Asahi Kasei Corp. | | | 5,600 | | | | 34,115 | |
Dow, Inc. | | | 937 | | | | 45,294 | |
Linde plc | | | 154 | | | | 58,853 | |
LyondellBasell Industries NV, Class A | | | 836 | | | | 75,441 | |
Nutrien Ltd. | | | 600 | | | | 32,225 | |
Sherwin-Williams Co. (The) | | | 184 | | | | 43,831 | |
| | | | | | | | |
| | | | | | | 347,659 | |
| | | | | | | | |
Construction Materials (0.1%) | |
Holcim AG | | | 674 | | | | 41,552 | |
| | | | | | | | |
Containers & Packaging (0.0%)† | |
Amcor plc | | | 3,451 | | | | 30,679 | |
| | | | | | | | |
See Notes to Financial Statements.
66
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
Metals & Mining (0.6%) | |
Anglo American plc | | | 1,353 | | | $ | 34,477 | |
BHP Group Ltd. | | | 3,949 | | | | 111,475 | |
Freeport-McMoRan, Inc. | | | 970 | | | | 32,767 | |
Glencore plc | | | 9,722 | | | | 51,420 | |
Rio Tinto Ltd. | | | 436 | | | | 32,520 | |
Rio Tinto plc | | | 973 | | | | 62,147 | |
| | | | | | | | |
| | | | | | | 324,806 | |
| | | | | | | | |
Total Materials | | | | | | | 744,696 | |
| | | | | | | | |
Real Estate (0.5%) | |
Health Care REITs (0.0%)† | |
Healthpeak Properties, Inc. (REIT) | | | 1,918 | | | | 29,825 | |
| | | | | | | | |
Industrial REITs (0.1%) | |
Prologis, Inc. (REIT) | | | 359 | | | | 36,169 | |
| | | | | | | | |
Real Estate Management & Development (0.1%) | |
CK Asset Holdings Ltd. | | | 8,000 | | | | 39,973 | |
| | | | | | | | |
Residential REITs (0.2%) | |
AvalonBay Communities, Inc. (REIT) | | | 285 | | | | 47,236 | |
Camden Property Trust (REIT) | | | 445 | | | | 37,772 | |
Equity Residential (REIT) | | | 686 | | | | 37,956 | |
| | | | | | | | |
| | | | | | | 122,964 | |
| | | | | | | | |
Specialized REITs (0.1%) | |
American Tower Corp. (REIT) | | | 168 | | | | 29,936 | |
| | | | | | | | |
Total Real Estate | | | | | | | 258,867 | |
| | | | | | | | |
Utilities (1.3%) | |
Electric Utilities (0.8%) | |
Alliant Energy Corp. | | | 798 | | | | 38,934 | |
American Electric Power Co., Inc. | | | 611 | | | | 46,155 | |
Duke Energy Corp. | | | 728 | | | | 64,712 | |
Evergy, Inc. | | | 536 | | | | 26,339 | |
Eversource Energy | | | 283 | | | | 15,222 | |
Exelon Corp. | | | 685 | | | | 26,674 | |
Fortis, Inc. | | | 1,400 | | | | 55,586 | |
Iberdrola SA | | | 5,341 | | | | 59,339 | |
NextEra Energy, Inc. | | | 350 | | | | 20,405 | |
Xcel Energy, Inc. | | | 691 | | | | 40,956 | |
| | | | | | | | |
| | | | | | | 394,322 | |
| | | | | | | | |
Gas Utilities (0.0%)† | |
Atmos Energy Corp. | | | 184 | | | | 19,809 | |
| | | | | | | | |
Multi-Utilities (0.5%) | |
CMS Energy Corp. | | | 645 | | | | 35,049 | |
DTE Energy Co. | | | 658 | | | | 63,418 | |
National Grid plc | | | 4,473 | | | | 53,204 | |
NiSource, Inc. | | | 1,578 | | | | 39,703 | |
Public Service Enterprise Group, Inc. | | | 625 | | | | 38,531 | |
Sempra | | | 666 | | | | 46,640 | |
| | | | | | | | |
| | | | | | | 276,545 | |
| | | | | | | | |
Water Utilities (0.0%)† | |
Veralto Corp.* | | | 74 | | | | 5,106 | |
| | | | | | | | |
Total Utilities | | | | | | | 695,782 | |
| | | | | | | | |
Total Common Stocks (37.5%)
(Cost $19,707,976) | | | | 19,676,823 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (1.3%) | | | | | |
BlackRock Liquidity FedFund, Institutional Shares 5.24% (7 day yield) (xx) | | | 100,000 | | | | 100,000 | |
| | | | | | | | |
Goldman Sachs Financial Square Government Fund 5.26% (7 day yield) (xx) | | | 100,000 | | | | 100,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 503,184 | | | | 503,184 | |
| | | | | | | | |
Total Investment Companies | | | | 703,184 | |
| | | | | |
| | | |
| | | Principal
Amount | | | Value
(Note 1) | |
U.S. Treasury Obligation (3.5%) | | | | | |
U.S. Treasury Bills 5.40%, 3/21/24 (p) | | $ | 1,830,000 | | | | 1,791,810 | |
| | | | | | | | |
Total Short-Term Investments (4.8%)
(Cost $2,495,086) | | | | | | | 2,494,994 | |
| | | | | | | | |
Total Investments in Securities (97.5%)
(Cost $52,286,243) | | | | | | | 51,093,678 | |
Other Assets Less Liabilities (2.5%) | | | | 1,303,932 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 52,397,610 | |
| | | | | | | | |
| † | Percent shown is less than 0.05%. |
| § | 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, 2023, the market value of these securities amounted to $14,181,091 or 27.1% of net assets. |
| (e) | Step Bond - Coupon rate increases or decreases in increments to maturity. Rate disclosed is as of October 31, 2023. 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, 2023. |
| (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, 2023. |
| (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, 2023, the market value or fair value, as applicable, of these securities amounted to $782,518 or 1.5% of net assets. |
| (s) | All, or a portion of security held by broker as collateral for option contracts, with a total collateral value of $2,913,499. |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $688,346. This was collateralized by cash of $703,184 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
| (y) | Securities are perpetual and, thus, do not have a predetermined maturity date. The coupon rate for these securities are fixed for a period of time and may be structured to adjust thereafter. The date shown, if applicable, reflects the next call date. The coupon rate shown is the rate in effect as of October 31, 2023. |
See Notes to Financial Statements.
67
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Glossary:
| | CLO | — Collateralized Loan Obligation |
| | ICE | — Intercontinental Exchange |
| | REIT | — Real Estate Investment Trust |
| | SOFR | — Secured Overnight Financing Rate |
| | USD | — United States Dollar |
| | | | |
| |
Country Diversification As a Percentage of Total Net Assets | |
Australia | | | 1.2 | % |
Brazil | | | 0.4 | |
Canada | | | 1.0 | |
Cayman Islands | | | 1.7 | |
Chile | | | 0.3 | |
Costa Rica | | | 0.8 | |
Denmark | | | 0.0 | # |
Finland | | | 0.0 | # |
France | | | 1.1 | |
Germany | | | 1.6 | |
Guatemala | | | 0.3 | |
Hong Kong | | | 0.2 | |
Ireland | | | 0.4 | |
Italy | | | 0.9 | |
Japan | | | 1.3 | |
Mexico | | | 0.4 | |
Netherlands | | | 1.5 | |
Nigeria | | | 0.4 | |
Norway | | | 0.5 | |
Singapore | | | 0.2 | |
South Africa | | | 0.1 | |
Spain | | | 1.1 | |
Sweden | | | 0.1 | |
Switzerland | | | 2.1 | |
United Kingdom | | | 3.7 | |
United States | | | 75.6 | |
Uruguay | | | 0.6 | |
Cash and Other | | | 2.5 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
| # | Percent shown is less than 0.05%. |
Written Call Options Contracts as of October 31, 2023 (Note 1):
| | | | | | | | | | | | | | | | | | | | | | | | |
Description | | Counterparty | | | Number of
Contracts | | | Notional
Amount | | | Exercise
Price | | | Expiration
Date | | | Value ($) | |
S&P 500 Index | | | Exchange Traded | | | | 22 | | | | USD (2,200 | ) | | | USD 4,245.00 | | | | 11/17/2023 | | | | (77,220 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Written Options Contracts (Premiums Received ($197,606)) | | | | (77,220 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
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, 2023:
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 | | $ | — | | | $ | 934,670 | | | $ | — | | | $ | 934,670 | |
Common Stocks | | | | | | | | | | | | | | | | |
Communication Services | | | 1,337,976 | | | | 205,898 | | | | — | | | | 1,543,874 | |
Consumer Discretionary | | | 1,412,617 | | | | 431,806 | | | | — | | | | 1,844,423 | |
Consumer Staples | | | 1,591,155 | | | | 565,204 | | | | — | | | | 2,156,359 | |
Energy | | | 1,753,684 | | | | 184,207 | | | | — | | | | 1,937,891 | |
Financials | | | 1,656,929 | | | | 550,091 | | | | — | | | | 2,207,020 | |
Health Care | | | 2,447,607 | | | | 417,066 | | | | — | | | | 2,864,673 | |
Industrials | | | 1,708,010 | | | | 508,996 | | | | — | | | | 2,217,006 | |
Information Technology | | | 3,154,099 | | | | 52,133 | | | | — | | | | 3,206,232 | |
Materials | | | 376,990 | | | | 367,706 | | | | — | | | | 744,696 | |
Real Estate | | | 218,894 | | | | 39,973 | | | | — | | | | 258,867 | |
Utilities | | | 583,239 | | | | 112,543 | | | | — | | | | 695,782 | |
See Notes to Financial Statements.
68
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | | | | | | | | | |
| | | | | |
| 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 | |
Convertible Bonds | | | | | | | | | | | | | | | | |
Communication Services | | $ | — | | | $ | 54,950 | | | $ | — | | | $ | 54,950 | |
Consumer Staples | | | — | | | | 119,780 | | | | — | | | | 119,780 | |
Financials | | | — | | | | 50,655 | | | | — | | | | 50,655 | |
Industrials | | | — | | | | 203,952 | | | | — | | | | 203,952 | |
Corporate Bonds | | | | | | | | | | | | | | | | |
Communication Services | | | — | | | | 1,799,348 | | | | — | | | | 1,799,348 | |
Consumer Discretionary | | | — | | | | 3,036,089 | | | | — | | | | 3,036,089 | |
Consumer Staples | | | — | | | | 155,154 | | | | — | | | | 155,154 | |
Energy | | | — | | | | 3,254,262 | | | | — | | | | 3,254,262 | |
Financials | | | — | | | | 8,444,176 | | | | — | | | | 8,444,176 | |
Health Care | | | — | | | | 333,695 | | | | — | | | | 333,695 | |
Industrials | | | — | | | | 3,490,031 | | | | — | | | | 3,490,031 | |
Information Technology | | | — | | | | 1,797,548 | | | | — | | | | 1,797,548 | |
Materials | | | — | | | | 626,768 | | | | — | | | | 626,768 | |
Real Estate | | | — | | | | 317,959 | | | | — | | | | 317,959 | |
Utilities | | | — | | | | 406,783 | | | | ��� | | | | 406,783 | |
Foreign Government Securities | | | — | | | | 703,990 | | | | — | | | | 703,990 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 703,184 | | | | — | | | | — | | | | 703,184 | |
U.S. Treasury Obligation | | | — | | | | 1,791,810 | | | | — | | | | 1,791,810 | |
U.S. Treasury Obligations | | | — | | | | 3,192,051 | | | | — | | | | 3,192,051 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 16,944,384 | | | $ | 34,149,294 | | | $ | — | | | $ | 51,093,678 | |
| | | | | | | | | | | | | | | | |
Liabilities: | |
Options Written | | | | | | | | | | | | | | | | |
Call Options Written | | $ | (77,220 | ) | | $ | — | | | $ | — | | | $ | (77,220 | ) |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | (77,220 | ) | | $ | — | | | $ | — | | | $ | (77,220 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 16,867,164 | | | $ | 34,149,294 | | | $ | — | | | $ | 51,016,458 | |
| | | | | | | | | | | | | | | | |
Fair Values of Derivative Instruments as of October 31, 2023:
| | | | | | |
| | | Statement of Assets and Liabilities | |
Derivatives Contracts^ | | Liability Derivatives | | Fair Value | |
Equity contracts | | Payables, Net assets – Unrealized depreciation | | $ | (77,220 | ) |
| | | | | | |
Total | | | | $ | (77,220 | ) |
| | | | | | |
The Effect of Derivative Instruments on the Statement of Operations for the year ended October 31, 2023:
| | | | | | | | | | | | |
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Options
Written | | | Forward
Foreign
Currency
Contracts | | | Total | |
Foreign exchange contracts | | $ | — | | | $ | (12,551 | ) | | $ | (12,551 | ) |
Equity contracts | | | (303,013 | ) | | | — | | | | (303,013 | ) |
| | | | | | | | | | | | |
Total | | $ | (303,013 | ) | | $ | (12,551 | ) | | $ | (315,564 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements.
69
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| Amount of Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income | |
Derivatives Contracts^ | | Options
Written | | | Total | |
Equity contracts | | $ | 120,386 | | | $ | 120,386 | |
| | | | | | | | |
Total | | $ | 120,386 | | | $ | 120,386 | |
| | | | | | | | |
^ The Fund held option contracts as a substitute for investing in conventional securities, hedging and in an attempt to enhance returns.
| | | | |
| Average Balances of Outstanding Derivative Financial Instruments | | | |
Forward foreign currency exchange contracts | | | | |
Average amounts purchased — in USD | | $ | 429,000 | |
Options | | | | |
Average value of option contracts written | | $ | 200,000 | |
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 90,243,880 | |
Long-term U.S. government debt securities | | | 11,278,926 | |
| | | | |
| | $ | 101,522,806 | |
| | | | |
| |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 91,237,591 | |
Long-term U.S. government debt securities | | | 11,798,580 | |
| | | | |
| | $ | 103,036,171 | |
| | | | |
As of October 31, 2023, 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 | | $ | 1,356,186 | |
Aggregate gross unrealized depreciation | | | (2,945,940 | ) |
| | | | |
Net unrealized depreciation | | $ | (1,589,754 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 52,606,212 | |
| | | | |
For the year ended October 31, 2023, the Fund incurred approximately $287 as brokerage commissions with Sanford C. Bernstein & Co., LLC, an affiliated broker/dealer.
See Notes to Financial Statements.
70
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x) (Cost $52,286,243) | | $ | 51,093,678 | |
Cash | | | 905,115 | |
Foreign cash (Cost $138,597) | | | 137,142 | |
Receivable for securities sold | | | 1,269,001 | |
Dividends, interest and other receivables | | | 424,086 | |
Prepaid registration and filing fees | | | 9,921 | |
Securities lending income receivable | | | 1,799 | |
Receivable for Fund shares sold | | | 91 | |
Other assets | | | 22,791 | |
| | | | |
Total assets | | | 53,863,624 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 703,184 | |
Payable for securities purchased | | | 421,235 | |
Dividends and distributions payable | | | 167,898 | |
Options written, at value (Premiums received $197,606) | | | 77,220 | |
Payable for Fund shares repurchased | | | 8,000 | |
Administrative fees payable | | | 4,797 | |
Transfer agent fees payable | | | 4,264 | |
Distribution fees payable – Class A | | | 1,110 | |
Trustees’ fees payable | | | 250 | |
Distribution fees payable – Class R | | | 72 | |
Accrued expenses | | | 77,984 | |
| | | | |
Total liabilities | | | 1,466,014 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 52,397,610 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 54,169,991 | |
Total distributable earnings (loss) | | | (1,772,381 | ) |
| | | | |
Net assets | | $ | 52,397,610 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $4,717,201 / 479,069 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.85 | |
Maximum sales charge (4.50% of offering price) | | | 0.46 | |
| | | | |
Maximum offering price per share | | $ | 10.31 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $47,512,168 / 4,821,119 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.86 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $168,241 / 17,101 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.84 | |
| | | | |
| (x) | Includes value of securities on loan of $688,346. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Interest (net of $4,470 foreign withholding tax) | | $ | 2,255,194 | |
Dividends (net of $24,165 foreign withholding tax) | | | 707,612 | |
Securities lending (net) | | | 17,219 | |
| | | | |
Total income | | | 2,980,025 | |
| | | | |
EXPENSES | | | | |
Investment advisory fees | | | 346,154 | |
Professional fees | | | 106,799 | |
Administrative fees | | | 79,883 | |
Custodian fees | | | 53,700 | |
Registration and filing fees | | | 37,851 | |
Transfer agent fees | | | 36,201 | |
Printing and mailing expenses | | | 24,031 | |
Distribution fees – Class A | | | 12,561 | |
Trustees’ fees | | | 1,543 | |
Distribution fees – Class R | | | 869 | |
Miscellaneous | | | 21,066 | |
| | | | |
Gross expenses | | | 720,658 | |
Waiver from investment adviser | | | (282,902 | ) |
| | | | |
Net expenses | | | 437,756 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 2,542,269 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | (423,241 | ) |
Forward foreign currency contracts | | | (12,551 | ) |
Foreign currency transactions | | | 10,577 | |
Options written | | | (303,013 | ) |
| | | | |
Net realized gain (loss) | | | (728,228 | ) |
| | | | |
Change in unrealized appreciation (depreciation) on: | | | | |
Investments in securities | | | 938,895 | |
Foreign currency translations | | | (342 | ) |
Options written | | | 120,386 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 1,058,939 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 330,711 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 2,872,980 | |
| | | | |
See Notes to Financial Statements.
71
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 2,542,269 | | | $ | 1,034,956 | |
Net realized gain (loss) | | | (728,228 | ) | | | 1,479,876 | |
Net change in unrealized appreciation (depreciation) | | | 1,058,939 | | | | (9,957,838 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 2,872,980 | | | | (7,443,006 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (312,109 | ) | | | (540,321 | ) |
Class I | | | (3,146,117 | ) | | | (7,375,626 | ) |
Class R | | | (10,601 | ) | | | (20,118 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (3,468,827 | ) | | | (7,936,065 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 131,157 and 108,775 shares, respectively ] | | | 1,338,627 | | | | 1,197,094 | |
Capital shares issued in reinvestment of dividends [ 29,795 and 47,161 shares, respectively ] | | | 304,713 | | | | 527,259 | |
Capital shares repurchased [ (131,295) and (113,366) shares , respectively] | | | (1,318,618 | ) | | | (1,232,204 | ) |
| | | | | | | | |
Total Class A transactions | | | 324,722 | | | | 492,149 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 350,088 and 112,024 shares, respectively ] | | | 3,576,903 | | | | 1,187,510 | |
Capital shares issued in reinvestment of dividends [ 30,352 and 67,812 shares, respectively ] | | | 310,310 | | | | 762,467 | |
Capital shares repurchased [ (217,232) and (1,089,258) shares , respectively] | | | (2,211,946 | ) | | | (11,392,348 | ) |
| | | | | | | | |
Total Class I transactions | | | 1,675,267 | | | | (9,442,371 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 194 and 352 shares, respectively ] | | | 1,982 | | | | 3,719 | |
Capital shares issued in reinvestment of dividends [ 428 and 675 shares, respectively ] | | | 4,367 | | | | 7,552 | |
Capital shares repurchased [ (402) and (71) shares , respectively] | | | (4,111 | ) | | | (823 | ) |
| | | | | | | | |
Total Class R transactions | | | 2,238 | | | | 10,448 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 2,002,227 | | | | (8,939,774 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,406,380 | | | | (24,318,845 | ) |
NET ASSETS: | |
Beginning of year | | | 50,991,230 | | | | 75,310,075 | |
| | | | | | | | |
End of year | | $ | 52,397,610 | | | $ | 50,991,230 | |
| | | | | | | | |
See Notes to Financial Statements.
72
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 9.94 | | | $ | 12.54 | | | $ | 11.47 | | | $ | 11.23 | | | $ | 10.61 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.46 | | | | 0.16 | | | | 0.07 | | | | 0.12 | | | | 0.18 | |
Net realized and unrealized gain (loss) | | | 0.10 | | | | (1.46 | ) | | | 1.91 | | | | 0.70 | | | | 0.91 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.56 | | | | (1.30 | ) | | | 1.98 | | | | 0.82 | | | | 1.09 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.45 | ) | | | (0.24 | ) | | | (0.12 | ) | | | (0.18 | ) | | | (0.17 | ) |
Distributions from net realized gains | | | (0.20 | ) | | | (1.06 | ) | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.65 | ) | | | (1.30 | ) | | | (0.91 | ) | | | (0.58 | ) | | | (0.47 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.85 | | | $ | 9.94 | | | $ | 12.54 | | | $ | 11.47 | | | $ | 11.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 5.53 | % | | | (11.35 | )% | | | 18.12 | % | | | 7.64 | % | | | 10.73 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 4,717 | | | $ | 4,469 | | | $ | 5,104 | | | $ | 3,520 | | | $ | 2,081 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.05 | % | | | 1.14 | %(j) | | | 1.16 | %(k) | | | 1.16 | %(k) | | | 1.15 | %(k) |
Before waivers (f) | | | 1.58 | % | | | 1.68 | % | | | 1.48 | % | | | 1.61 | % | | | 1.67 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 4.55 | % | | | 1.52 | %(x) | | | 0.59 | %(x) | | | 1.05 | %(x) | | | 1.70 | %(x) |
Before waivers (f) | | | 4.01 | % | | | 0.98 | %(x) | | | 0.28 | %(x) | | | 0.60 | %(x) | | | 1.19 | %(x) |
Portfolio turnover rate^ | | | 202 | % | | | 255 | %* | | | 106 | % | | | 131 | % | | | 63 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 9.95 | | | $ | 12.57 | | | $ | 11.49 | | | $ | 11.25 | | | $ | 10.63 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.49 | | | | 0.18 | | | | 0.10 | | | | 0.15 | | | | 0.21 | |
Net realized and unrealized gain (loss) | | | 0.09 | | | | (1.45 | ) | | | 1.92 | | | | 0.70 | | | | 0.91 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.58 | | | | (1.27 | ) | | | 2.02 | | | | 0.85 | | | | 1.12 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.47 | ) | | | (0.29 | ) | | | (0.15 | ) | | | (0.21 | ) | | | (0.20 | ) |
Distributions from net realized gains | | | (0.20 | ) | | | (1.06 | ) | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.67 | ) | | | (1.35 | ) | | | (0.94 | ) | | | (0.61 | ) | | | (0.50 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.86 | | | $ | 9.95 | | | $ | 12.57 | | | $ | 11.49 | | | $ | 11.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 5.77 | % | | | (11.10 | )% | | | 18.47 | % | | | 7.89 | % | | | 11.00 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 47,512 | | | $ | 46,354 | | | $ | 70,007 | | | $ | 62,303 | | | $ | 59,997 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 0.80 | % | | | 0.89 | %(j) | | | 0.91 | %(k) | | | 0.91 | %(k) | | | 0.90 | %(k) |
Before waivers (f) | | | 1.33 | % | | | 1.40 | % | | | 1.23 | % | | | 1.36 | % | | | 1.42 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 4.80 | % | | | 1.66 | %(x) | | | 0.85 | %(x) | | | 1.35 | %(x) | | | 1.95 | %(x) |
Before waivers (f) | | | 4.27 | % | | | 1.15 | %(x) | | | 0.53 | %(x) | | | 0.89 | %(x) | | | 1.43 | %(x) |
Portfolio turnover rate^ | | | 202 | % | | | 255 | %* | | | 106 | % | | | 131 | % | | | 63 | % |
See Notes to Financial Statements.
73
1290 FUNDS
1290 LOOMIS SAYLES MULTI-ASSET INCOME FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 9.94 | | | $ | 12.51 | | | $ | 11.44 | | | $ | 11.21 | | | $ | 10.59 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.44 | | | | 0.13 | | | | 0.04 | | | | 0.09 | | | | 0.15 | |
Net realized and unrealized gain (loss) | | | 0.08 | | | | (1.45 | ) | | | 1.92 | | | | 0.70 | | | | 0.91 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.52 | | | | (1.32 | ) | | | 1.96 | | | | 0.79 | | | | 1.06 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.42 | ) | | | (0.19 | ) | | | (0.10 | ) | | | (0.16 | ) | | | (0.14 | ) |
Distributions from net realized gains | | | (0.20 | ) | | | (1.06 | ) | | | (0.79 | ) | | | (0.40 | ) | | | (0.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.62 | ) | | | (1.25 | ) | | | (0.89 | ) | | | (0.56 | ) | | | (0.44 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.84 | | | $ | 9.94 | | | $ | 12.51 | | | $ | 11.44 | | | $ | 11.21 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 5.18 | % | | | (11.52 | )% | | | 17.87 | % | | | 7.30 | % | | | 10.46 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 168 | | | $ | 168 | | | $ | 199 | | | $ | 179 | | | $ | 168 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 1.30 | % | | | 1.39 | %(j) | | | 1.41 | %(k) | | | 1.41 | %(k) | | | 1.40 | %(k) |
Before waivers (f) | | | 1.83 | % | | | 1.93 | % | | | 1.73 | % | | | 1.86 | % | | | 1.92 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers (f) | | | 4.30 | % | | | 1.26 | %(x) | | | 0.35 | %(x) | | | 0.84 | %(x) | | | 1.44 | %(x) |
Before waivers (f) | | | 3.77 | % | | | 0.72 | %(x) | | | 0.03 | %(x) | | | 0.39 | %(x) | | | 0.93 | %(x) |
Portfolio turnover rate^ | | | 202 | % | | | 255 | %* | | | 106 | % | | | 131 | % | | | 63 | % |
| * | The portfolio turnover rate calculation includes purchase and sales made as a result of the replacement of the sub-adviser. |
| ^ | 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 1.17% for Class A, 0.92% for Class I and 1.42% for Class R. |
| (k) | 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. |
| (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.
74
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | 1.48 | % | | | 0.25 | % | | | 0.35 | % |
| | | | with Sales Charge (a) | | | | (4.11 | ) | | | (0.87 | ) | | | (0.33 | ) |
Fund – Class I Shares* | | | | | | | 1.63 | | | | 0.48 | | | | 0.59 | |
Fund – Class R Shares* | | | | | | | 1.10 | | | | 0.00 | | | | 0.09 | |
ICE BofA U.S. 3-Month
Treasury Bill Index | | | | | | | 4.80 | | | | 1.78 | | | | 1.39 | |
| |
* 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 10/31/23. 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 March 1, 2023, the gross expense ratios for Class A, I and R shares were 2.31%, 2.06% and 2.56%, respectively. The net expense ratios for Class A, I and R shares were 1.10%, 0.85% and 1.35%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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 1.63% for the year ended October 31, 2023. The Fund’s benchmark, the ICE BofA U.S. 3-Month Treasury Bill Index, returned 4.80% over the same year.
Overview
The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven recovery from the stresses of COVID-19.
Alternative sectors and strategies reflected the same pressures faced by conventional equities and bonds, as concerns vacillated between optimism over the direction of inflation and interest rates, and concern over the impact of higher interest rates on economic activity. On balance, the Fund’s gains from sectors that benefitted from robust economic activity were offset by losses in those that were hampered by higher inflation and interest rates.
Fund Highlights
What helped performance during the year?
| • | | The Fund’s allocation to commodities (mainly precious metals) was the top contributor as investors sought out protection from geopolitical events and industrial demand drove prices higher. |
| • | | The Fund’s allocation to Long/Short Equity added to performance with the main contributor coming from long exposure to large, online technology retailers. |
What hurt performance during the year?
| • | | Managed futures exposure detracted as price action reversals and uncertainty across global markets made trend-following difficult. |
| • | | Exposure to global real estate detracted as higher interest rates, inflation, and volatility drove up risk premiums throughout the asset class. |
75
1290 MULTI-ALTERNATIVE STRATEGIES FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) | |
| |
| As of October 31, 2023 | |
Fixed Income | | | 26.3 | % |
Equity | | | 26.2 | |
Alternatives | | | 24.7 | |
Commodity | | | 12.2 | |
Investment Company | | | 10.6 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| |
| As of October 31, 2023 | |
iShares Convertible Bond ETF | | | 14.1 | % |
iMGP DBi Managed Futures Strategy ETF | | | 13.0 | |
Vanguard Short-Term Inflation-Protected Securities ETF | | | 12.2 | |
IQ Merger Arbitrage ETF | | | 11.8 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 10.1 | |
JPMorgan Equity Premium Income ETF | | | 10.1 | |
Invesco DB Precious Metals Fund | | | 6.4 | |
iShares Core US REIT ETF | | | 5.5 | |
Vanguard Global ex-U.S. Real Estate ETF | | | 5.5 | |
JPMorgan Nasdaq Equity Premium Income ETF | | | 5.1 | |
| |
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 (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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses Paid
During
Period*
5/1/23 -
10/31/23 | |
Class A | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $998.80 | | | | $5.54 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.66 | | | | 5.60 | |
Class I | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 998.80 | | | | 4.28 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | |
Class R | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 996.50 | | | | 6.78 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.41 | | | | 6.86 | |
| |
* Expenses are equal to the Fund’s A, I and R shares annualized expense ratio of 1.10%, 0.85% and 1.35%, respectively, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
76
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Alternatives (27.5%) | |
iMGP DBi Managed Futures Strategy ETF (x) | | | 69,260 | | | $ | 1,993,995 | |
IQ Merger Arbitrage ETF* | | | 57,370 | | | | 1,805,434 | |
| | | | | | | | |
Total Alternatives | | | | | | | 3,799,429 | |
| | | | | | | | |
Commodity (13.6%) | |
Invesco DB Agriculture Fund | | | 20,750 | | | | 456,708 | |
Invesco DB Energy Fund | | | 19,500 | | | | 437,385 | |
Invesco DB Precious Metals Fund | | | 19,380 | | | | 980,240 | |
| | | | | | | | |
Total Commodity | | | | | | | 1,874,333 | |
| | | | | | | | |
Equity (29.0%) | |
iShares Core US REIT ETF (x) | | | 18,710 | | | | 843,447 | |
JPMorgan Equity Premium Income ETF (x) | | | 29,550 | | | | 1,554,921 | |
JPMorgan Nasdaq Equity Premium Income ETF (x) | | | 16,840 | | | | 777,334 | |
Vanguard Global ex-U.S. Real Estate ETF (x) | | | 22,440 | | | | 839,032 | |
| | | | | | | | |
Total Equity | | | | | | | 4,014,734 | |
| | | | | | | | |
Fixed Income (29.2%) | |
iShares Convertible Bond ETF | | | 30,480 | | | | 2,160,423 | |
Vanguard Short-Term Inflation-Protected Securities ETF | | | 39,710 | | | | 1,871,929 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 4,032,352 | |
| | | | | | | | |
Total Exchange Traded Funds (99.3%)
(Cost $14,591,176) | | | | 13,720,848 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (11.8%) | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 68,519 | | | | 68,519 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 1,555,763 | | | | 1,555,763 | |
| | | | | | | | |
Total Investment Companies | | | | 1,624,282 | |
| | | | | |
Total Short-Term Investments (11.8%)
(Cost $1,624,282) | | | | 1,624,282 | |
| | | | | | | | |
Total Investments in Securities (111.1%)
(Cost $16,215,458) | | | | 15,345,130 | |
Other Assets Less Liabilities (-11.1%) | | | | (1,533,570 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 13,811,560 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,702,363. This was collateralized by $104,888 of various U.S. Government Treasury Securities, ranging from 0.125% - 5.538%, maturing 1/15/24 - 2/15/51 and by cash of $1,624,282 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | REIT | — Real Estate Investment Trust |
Investments in companies which were affiliates for the year ended October 31, 2023, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Security Description | | Shares at
October 31,
2023 | | | Market Value
October 31,
2022 ($) | | | Purchases
at Cost ($) | | | Proceeds
from
Sales ($) | | | Net
Realized
Gain
(Loss) ($) | | | Change in
Unrealized
Appreciation/
(Depreciation)
($) | | | Market Value
October 31,
2023 ($) | | | Dividend/
Interest
Income
($) | | | Capital Gain
Distributions
($) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Alternatives | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ProShares Long Online/Short Stores ETF | | | — | | | | 739,937 | | | | — | | | | (879,050 | ) | | | (424,659 | ) | | | 563,772 | | | | — | | | | — | | | | — | |
See Notes to Financial Statements.
77
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
|
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, 2023: 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 | | $ | 13,720,848 | | | $ | — | | | $ | — | | | $ | 13,720,848 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 1,624,282 | | | | — | | | | — | | | | 1,624,282 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 15,345,130 | | | $ | — | | | $ | — | | | $ | 15,345,130 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 15,345,130 | | | $ | — | | | $ | — | | | $ | 15,345,130 | |
| | | | | | | | | | | | | | | | |
|
| The Fund held no derivatives contracts during the year ended October 31, 2023. |
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 9,809,352 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 8,653,407 | |
As of October 31, 2023, 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 | | $ | 159,449 | |
Aggregate gross unrealized depreciation | | | (1,764,641 | ) |
| | | | |
Net unrealized depreciation | | $ | (1,605,192 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 16,950,322 | |
| | | | |
See Notes to Financial Statements.
78
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | | | | |
Investments in Securities, at value (x) (Cost $16,215,458) | | $ | 15,345,130 | |
Cash | | | 106,491 | |
Prepaid registration and filing fees | | | 14,885 | |
Receivable for Fund shares sold | | | 7,908 | |
Receivable from investment adviser | | | 3,223 | |
Securities lending income receivable | | | 444 | |
Other assets | | | 100 | |
| | | | |
Total assets | | | 15,478,181 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 1,624,282 | |
Transfer agent fees payable | | | 1,303 | |
Distribution fees payable – Class A | | | 71 | |
Distribution fees payable – Class R | | | 49 | |
Trustees’ fees payable | | | 44 | |
Accrued expenses | | | 40,872 | |
| | | | |
Total liabilities | | | 1,666,621 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 13,811,560 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 16,015,939 | |
Total distributable earnings (loss) | | | (2,204,379 | ) |
| | | | |
Net assets | | $ | 13,811,560 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $334,537 / 38,695 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.65 | |
Maximum sales charge (5.50% of offering price) | | | 0.50 | |
| | | | |
Maximum offering price per share | | $ | 9.15 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $13,361,381 / 1,542,382 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.66 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $115,642 / 13,452 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 8.60 | |
| | | | |
| (x) | Includes value of securities on loan of $1,702,363. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 258,704 | |
Interest | | | 4,469 | |
Securities lending (net) | | | 11,349 | |
| | | | |
Total income | | | 274,522 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 66,126 | |
Professional fees | | | 49,936 | |
Registration and filing fees | | | 31,498 | |
Administrative fees | | | 30,000 | |
Transfer agent fees | | | 28,200 | |
Printing and mailing expenses | | | 15,955 | |
Custodian fees | | | 6,000 | |
Distribution fees – Class A | | | 989 | |
Distribution fees – Class R | | | 628 | |
Trustees’ fees | | | 380 | |
Miscellaneous | | | 7,154 | |
| | | | |
Gross expenses | | | 236,866 | |
Less: Waiver from investment adviser | | | (96,126 | ) |
Reimbursement from investment adviser | | | (26,715 | ) |
| | | | |
Net expenses | | | 114,025 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 160,497 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities ($(424,659) realized gain (loss) from affiliates) | | | (950,553 | ) |
Net change in unrealized appreciation (depreciation) on investments in securities ($563,772 of change in unrealized appreciation (depreciation) from affiliates) | | | 995,666 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 45,113 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 205,610 | |
| | | | |
See Notes to Financial Statements.
79
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 160,497 | | | $ | 251,984 | |
Net realized gain (loss) | | | (950,553 | ) | | | (229,458 | ) |
Net change in unrealized appreciation (depreciation) | | | 995,666 | | | | (2,219,996 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 205,610 | | | | (2,197,470 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (11,013 | ) | | | (61,473 | ) |
Class I | | | (335,910 | ) | | | (1,528,806 | ) |
Class R | | | (2,987 | ) | | | (14,470 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (349,910 | ) | | | (1,604,749 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 8,423 and 1,395 shares, respectively ] | | | 72,435 | | | | 12,851 | |
Capital shares issued in reinvestment of dividends [ 1,008 and 5,213 shares, respectively ] | | | 8,798 | | | | 51,140 | |
Capital shares repurchased [ (21,036) and (15,796) shares, respectively] | | | (185,838 | ) | | | (152,199 | ) |
| | | | | | | | |
Total Class A transactions | | | (104,605 | ) | | | (88,208 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 363,062 and 167,874 shares, respectively ] | | | 3,174,290 | | | | 1,614,312 | |
Capital shares issued in reinvestment of dividends [ 10,989 and 50,070 shares, respectively ] | | | 95,937 | | | | 491,182 | |
Capital shares repurchased [ (208,932) and (262,372) shares, respectively] | | | (1,836,161 | ) | | | (2,468,330 | ) |
| | | | | | | | |
Total Class I transactions | | | 1,434,066 | | | | (362,836 | ) |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 1,098 and 3,306 shares, respectively ] | | | 9,495 | | | | 30,745 | |
Capital shares issued in reinvestment of dividends [ 116 and 449 shares, respectively ] | | | 1,005 | | | | 4,393 | |
Capital shares repurchased [ (2,826) and (5,334) shares, respectively] | | | (24,515 | ) | | | (52,577 | ) |
| | | | | | | | |
Total Class R transactions | | | (14,015 | ) | | | (17,439 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 1,315,446 | | | | (468,483 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,171,146 | | | | (4,270,702 | ) |
NET ASSETS: | |
Beginning of year | | | 12,640,414 | | | | 16,911,116 | |
| | | | | | | | |
End of year | | $ | 13,811,560 | | | $ | 12,640,414 | |
| | | | | | | | |
See Notes to Financial Statements.
80
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.74 | | | $ | 11.27 | | | $ | 9.92 | | | $ | 10.32 | | | $ | 10.02 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.09 | | | | 0.15 | | | | 0.26 | | | | 0.10 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | 0.04 | | | | (1.65 | ) | | | 1.15 | | | | (0.30 | ) | | | 0.28 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.13 | | | | (1.50 | ) | | | 1.41 | | | | (0.20 | ) | | | 0.39 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.22 | ) | | | (0.16 | ) | | | (0.06 | ) | | | (0.20 | ) | | | (0.04 | ) |
Distributions from net realized gains | | | — | | | | (0.87 | ) | | | — | | | | — | | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.22 | ) | | | (1.03 | ) | | | (0.06 | ) | | | (0.20 | ) | | | (0.09 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 8.65 | | | $ | 8.74 | | | $ | 11.27 | | | $ | 9.92 | | | $ | 10.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 1.48 | % | | | (14.28 | )% | | | 14.24 | % | | | (2.01 | )% | | | 3.98 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 335 | | | $ | 440 | | | $ | 670 | | | $ | 556 | | | $ | 627 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.10 | % | | | 1.10 | % | | | 1.13 | %(j) | | | 1.06 | ***(k) | | | 1.07 | %**(o) |
Before waivers and reimbursements (f) | | | 2.01 | % | | | 1.86 | % | | | 1.78 | % | | | 1.97 | % | | | 1.89 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.07 | % | | | 1.55 | % | | | 2.34 | %(x) | | | 1.03 | %(x) | | | 1.12 | %(x) |
Before waivers and reimbursements (f) | | | 0.16 | % | | | 0.79 | % | | | 1.69 | %(x) | | | 0.12 | %(x) | | | 0.30 | %(x) |
Portfolio turnover rate^ | | | 66 | % | | | 26 | % | | | 66 | % | | | 15 | % | | | 8 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.76 | | | $ | 11.29 | | | $ | 9.94 | | | $ | 10.34 | | | $ | 10.04 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.11 | | | | 0.17 | | | | 0.27 | | | | 0.13 | | | | 0.13 | |
Net realized and unrealized gain (loss) | | | 0.03 | | | | (1.64 | ) | | | 1.16 | | | | (0.31 | ) | | | 0.29 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.14 | | | | (1.47 | ) | | | 1.43 | | | | (0.18 | ) | | | 0.42 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.24 | ) | | | (0.19 | ) | | | (0.08 | ) | | | (0.22 | ) | | | (0.07 | ) |
Distributions from net realized gains | | | — | | | | (0.87 | ) | | | — | | | | — | | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.24 | ) | | | (1.06 | ) | | | (0.08 | ) | | | (0.22 | ) | | | (0.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 8.66 | | | $ | 8.76 | | | $ | 11.29 | | | $ | 9.94 | | | $ | 10.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 1.63 | % | | | (14.04 | )% | | | 14.48 | % | | | (1.76 | )% | | | 4.25 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 13,361 | | | $ | 12,070 | | | $ | 16,054 | | | $ | 13,776 | | | $ | 17,783 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.85 | % | | | 0.85 | % | | | 0.88 | %(j) | | | 0.81 | ***(k) | | | 0.82 | %**(o) |
Before waivers and reimbursements (f) | | | 1.78 | % | | | 1.61 | % | | | 1.53 | % | | | 1.71 | % | | | 1.63 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.22 | % | | | 1.75 | % | | | 2.45 | %(x) | | | 1.36 | %(x) | | | 1.32 | %(x) |
Before waivers and reimbursements (f) | | | 0.29 | % | | | 0.99 | % | | | 1.80 | %(x) | | | 0.46 | %(x) | | | 0.50 | %(x) |
Portfolio turnover rate^ | | | 66 | % | | | 26 | % | | | 66 | % | | | 15 | % | | | 8 | % |
See Notes to Financial Statements.
81
1290 FUNDS
1290 MULTI-ALTERNATIVE STRATEGIES FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 8.70 | | | $ | 11.21 | | | $ | 9.87 | | | $ | 10.27 | | | $ | 9.97 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.07 | | | | 0.12 | | | | 0.21 | | | | 0.06 | | | | 0.08 | |
Net realized and unrealized gain (loss) | | | 0.03 | | | | (1.62 | ) | | | 1.16 | | | | (0.29 | ) | | | 0.29 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.10 | | | | (1.50 | ) | | | 1.37 | | | | (0.23 | ) | | | 0.37 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.20 | ) | | | (0.14 | ) | | | (0.03 | ) | | | (0.17 | ) | | | (0.02 | ) |
Distributions from net realized gains | | | — | | | | (0.87 | ) | | | — | | | | — | | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.20 | ) | | | (1.01 | ) | | | (0.03 | ) | | | (0.17 | ) | | | (0.07 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 8.60 | | | $ | 8.70 | | | $ | 11.21 | | | $ | 9.87 | | | $ | 10.27 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 1.10 | % | | | (14.39 | )% | | | 13.95 | % | | | (2.27 | )% | | | 3.74 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 116 | | | $ | 131 | | | $ | 187 | | | $ | 136 | | | $ | 116 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.35 | % | | | 1.35 | % | | | 1.38 | %(j) | | | 1.31 | ***(k) | | | 1.32 | %**(o) |
Before waivers and reimbursements (f) | | | 2.27 | % | | | 2.11 | % | | | 2.03 | % | | | 2.23 | % | | | 2.13 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.77 | % | | | 1.25 | % | | | 1.96 | %(x) | | | 0.65 | %(x) | | | 0.78 | %(x) |
Before waivers and reimbursements (f) | | | (0.15 | )% | | | 0.48 | % | | | 1.31 | %(x) | | | (0.26 | )%(x) | | | (0.04 | )%(x) |
Portfolio turnover rate ^ | | | 66 | % | | | 26 | % | | | 66 | % | | | 15 | % | | | 8 | % |
| ** | Includes Tax expense of 0.04. |
| *** | Includes Tax expense of 0.01. |
| ^ | 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. |
| (k) | 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 |
| (o) | 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. |
| (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.
82
1290 RETIREMENT 2020 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 2.52 | % | | | 3.07 | % | | | 3.31 | % |
S&P Target Date 2020 Index | | | 4.80 | | | | 3.90 | | | | 3.97 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 1.96%. 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, 2024. 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 2.52% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2020 Index, returned 4.80% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s 46% allocation to equities contributed 86% of total return from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. |
| • | | The Fund’s 54% allocation to bonds contributed only 14% of total absolute return, mainly from exposure to U.S. high-yield bonds and short-duration government and corporate securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding less exposure to short duration securities than the benchmark in a rising rate environment hurt relative performance. |
83
1290 RETIREMENT 2020 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) | |
| |
| As of October 31, 2023 | |
Fixed Income | | | 49.7 | % |
Equity | | | 39.3 | |
Investment Company | | | 11.0 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| |
| As of October 31, 2023 | |
iShares Core U.S. Aggregate Bond ETF | | | 28.0 | % |
iShares Core S&P Total US Stock Market ETF | | | 13.8 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 7.7 | |
iShares TIPS Bond ETF | | | 7.5 | |
Vanguard Short-Term Bond ETF | | | 6.5 | |
iShares Core MSCI EAFE ETF | | | 5.1 | |
iShares MSCI USA Min Vol Factor ETF | | | 4.8 | |
Invesco S&P 500 Low Volatility ETF | | | 4.8 | |
Vanguard Total International Bond ETF | | | 4.2 | |
iShares Broad USD High Yield Corporate Bond ETF | | | 3.6 | |
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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | |
Actual | | | $1,000.00 | | | | $958.10 | | | | $2.73 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.41 | | | | 2.82 | |
| |
* Expenses are equal to the Fund’s I shares annualized expense ratio of 0.55%, 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 2020 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (44.0%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 6,140 | | | $ | 358,453 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 1,170 | | | | 25,740 | |
Invesco S&P International Developed Low Volatility ETF | | | 7,530 | | | | 194,349 | |
Invesco S&P MidCap Low Volatility ETF | | | 4,010 | | | | 193,331 | |
Invesco S&P SmallCap Low Volatility ETF | | | 1,860 | | | | 71,331 | |
iShares Core MSCI EAFE ETF | | | 6,090 | | | | 379,773 | |
iShares Core MSCI Emerging Markets ETF | | | 1,050 | | | | 48,237 | |
iShares Core S&P Total US Stock Market ETF | | | 11,240 | | | | 1,030,371 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 2,960 | | | | 189,618 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 450 | | | | 23,274 | |
iShares MSCI USA Min Vol Factor ETF | | | 5,000 | | | | 358,750 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 770 | | | | 73,051 | |
| | | | | | | | |
Total Equity | | | | | | | 2,946,278 | |
| | | | | | | | |
Fixed Income (55.6%) | | | | | | | | |
iShares Broad USD High Yield Corporate Bond ETF (x) | | | 7,910 | | | | 270,443 | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 22,670 | | | | 2,092,668 | |
iShares TIPS Bond ETF | | | 5,430 | | | | 558,204 | |
Vanguard Short-Term Bond ETF | | | 6,450 | | | | 483,879 | |
Vanguard Total International Bond ETF | | | 6,540 | | | | 311,827 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 3,717,021 | |
| | | | | | | | |
Total Exchange Traded Funds (99.6%)
(Cost $7,205,304) | | | | 6,663,299 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (12.3%) | | | | | | | | |
BlackRock Liquidity FedFund, Institutional Shares 5.24% (7 day yield) (xx) | | | 75,000 | | | | 75,000 | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 100,000 | | | | 100,000 | |
Goldman Sachs Financial Square Government Fund 5.26% (7 day yield) (xx) | | | 70,000 | | | | 70,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 574,452 | | | | 574,452 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 819,452 | |
| | | | | | | | |
Total Short-Term Investments (12.3%)
(Cost $819,452) | | | | 819,452 | |
| | | | | | | | |
Total Investments in Securities (111.9%)
(Cost $8,024,756) | | | | 7,482,751 | |
Other Assets Less Liabilities (-11.9%) | | | | (794,605 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 6,688,146 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,029,049. This was collateralized by $230,469 of various U.S. Government Treasury Securities, ranging from 0.000% - 6.125%, maturing 11/7/23 - 11/15/52 and by cash of $819,452 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 6,663,299 | | | $ | — | | | $ | — | | | $ | 6,663,299 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 819,452 | | | | — | | | | — | | | | 819,452 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 7,482,751 | | | $ | — | | | $ | — | | | $ | 7,482,751 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,482,751 | | | $ | — | | | $ | — | | | $ | 7,482,751 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
See Notes to Financial Statements.
85
1290 FUNDS
1290 RETIREMENT 2020 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 352,935 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,654,851 | |
As of October 31, 2023, 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 | | $ | 248,007 | |
Aggregate gross unrealized depreciation | | | (852,960 | ) |
| | | | |
Net unrealized depreciation | | $ | (604,953 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 8,087,704 | |
| | | | |
See Notes to Financial Statements.
86
1290 FUNDS
1290 RETIREMENT 2020 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | | | | |
Investments in Securities, at value (x) (Cost $8,024,756) | | $ | 7,482,751 | |
Cash | | | 52,471 | |
Receivable from investment adviser | | | 7,170 | |
Prepaid registration and filing fees | | | 4,640 | |
Receivable for Fund shares sold | | | 1,831 | |
Securities lending income receivable | | | 335 | |
Other assets | | | 86 | |
| | | | |
Total assets | | | 7,549,284 | |
| | | | |
LIABILITIES | | | | |
Payable for return of collateral on securities loaned | | | 819,452 | |
Accrued professional fees | | | 36,876 | |
Transfer agent fees payable | | | 1,750 | |
Trustees’ fees payable | | | 61 | |
Accrued expenses | | | 2,999 | |
| | | | |
Total liabilities | | | 861,138 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 6,688,146 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 7,085,410 | |
Total distributable earnings (loss) | | | (397,264 | ) |
| | | | |
Net assets | | $ | 6,688,146 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $6,688,146 / 696,683 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 9.60 | |
| | | | |
| (x) | Includes value of securities on loan of $1,029,049. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 206,461 | |
Interest | | | 1,810 | |
Securities lending (net) | | | 6,544 | |
| | | | |
Total income | | | 214,815 | |
| | | | |
EXPENSES | |
Professional fees | | | 45,904 | |
Investment advisory fees | | | 38,831 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,544 | |
Printing and mailing expenses | | | 12,523 | |
Transfer agent fees | | | 11,200 | |
Custodian fees | | | 5,800 | |
Trustees’ fees | | | 236 | |
Miscellaneous | | | 5,260 | |
| | | | |
Gross expenses | | | 169,298 | |
Less: Waiver from investment adviser | | | (68,831 | ) |
Reimbursement from investment adviser | | | (57,383 | ) |
| | | | |
Net expenses | | | 43,084 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 171,731 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 87,190 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 10,000 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 97,190 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 268,921 | |
| | | | |
See Notes to Financial Statements.
87
1290 FUNDS
1290 RETIREMENT 2020 FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | | 171,731 | | | $ | 210,786 | |
Net realized gain (loss) | | | 87,190 | | | | 560,795 | |
Net change in unrealized appreciation (depreciation) | | | 10,000 | | | | (2,153,728 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 268,921 | | | | (1,382,147 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (774,969 | ) | | | (629,769 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 39,358 and 128,678 shares, respectively ] | | | 390,126 | | | | 1,497,807 | |
Capital shares issued in reinvestment of dividends [ 66,431 and 39,292 shares, respectively ] | | | 653,020 | | | | 473,869 | |
Capital shares repurchased [ (174,676) and (418,154) shares, respectively] | | | (1,754,007 | ) | | | (4,864,426 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | (710,861 | ) | | | (2,892,750 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (1,216,909 | ) | | | (4,904,666 | ) |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 7,905,055 | | | | 12,809,721 | |
| | | | | | | | |
End of year | | $ | 6,688,146 | | | $ | 7,905,055 | |
| | | | | | | | |
See Notes to Financial Statements.
88
1290 FUNDS
1290 RETIREMENT 2020 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 10.33 | | | $ | 12.61 | | | $ | 11.30 | | | $ | 11.57 | | | $ | 10.49 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.22 | | | | 0.25 | | | | 0.17 | | | | 0.22 | | | | 0.23 | |
Net realized and unrealized gain (loss) | | | 0.07 | | | | (1.91 | ) | | | 1.60 | | | | (0.10 | ) | | | 1.05 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.29 | | | | (1.66 | ) | | | 1.77 | | | | 0.12 | | | | 1.28 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.27 | ) | | | (0.15 | ) | | | (0.20 | ) | | | (0.24 | ) | | | (0.15 | ) |
Distributions from net realized gains | | | (0.75 | ) | | | (0.47 | ) | | | (0.26 | ) | | | (0.15 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (1.02 | ) | | | (0.62 | ) | | | (0.46 | ) | | | (0.39 | ) | | | (0.20 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 9.60 | | | $ | 10.33 | | | $ | 12.61 | | | $ | 11.30 | | | $ | 11.57 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 2.52 | % | | | (13.85 | )% | | | 15.99 | % | | | 1.03 | % | | | 12.37 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 6,688 | | | $ | 7,905 | | | $ | 12,810 | | | $ | 12,168 | | | $ | 10,791 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.55 | %(j) | | | 0.55 | %(j) | | | 0.54 | %(j) | | | 0.53 | %**(j) | | | 0.54 | %(j) |
Before waivers and reimbursements (f) | | | 2.18 | % | | | 1.86 | % | | | 1.60 | % | | | 1.93 | % | | | 2.09 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 2.21 | % | | | 2.18 | % | | | 1.38 | % | | | 1.95 | % | | | 2.10 | % |
Before waivers and reimbursements (f)(x) | | | 0.59 | % | | | 0.87 | % | | | 0.31 | % | | | 0.56 | % | | | 0.55 | % |
Portfolio turnover rate^ | | | 5 | % | | | 13 | % | | | 17 | % | | | 32 | % | | | 18 | % |
| ** | Includes tax expense of 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 0.65% . |
| (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.
89
1290 RETIREMENT 2025 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 2.94 | % | | | 3.60 | % | | | 3.90 | % |
S&P Target Date 2025 Index | | | 5.09 | | | | 4.60 | | | | 4.66 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 1.36%. 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, 2024. 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 2.94% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2025 Index, returned 5.09% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s 56% allocation to equities contributed more than 92% of total return from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. |
| • | | The Fund’s 44% allocation to bonds contributed only around 8% of total absolute return, mainly from exposure to U.S. high-yield bonds and short-duration government and corporate securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding less exposure to short duration securities than the benchmark in a rising rate environment hurt relative performance. |
90
1290 RETIREMENT 2025 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total Investments
in Securities) As of October 31, 2023 | |
Equity | | | 46.5 | % |
Fixed Income | | | 39.2 | |
Investment Company | | | 14.3 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) As of October 31, 2023 | |
iShares Core U.S. Aggregate Bond ETF | | | 24.6 | % |
iShares Core S&P Total US Stock Market ETF | | | 16.0 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 12.3 | |
iShares TIPS Bond ETF | | | 5.9 | |
iShares Core MSCI EAFE ETF | | | 5.7 | |
iShares MSCI USA Min Vol Factor ETF | | | 5.3 | |
Invesco S&P 500 Low Volatility ETF | | | 5.3 | |
Vanguard Short-Term Bond ETF | | | 3.4 | |
Invesco S&P International Developed Low Volatility ETF | | | 3.0 | |
iShares MSCI EAFE Min Vol Factor 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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $959.00 | | | | $2.70 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.44 | | | | 2.79 | |
| |
* Expenses are equal to the Fund’s I shares annualized expense ratio of 0.55%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
91
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (53.9%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 15,520 | | | $ | 906,058 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 5,430 | | | | 119,460 | |
Invesco S&P International Developed Low Volatility ETF | | | 19,670 | | | | 507,683 | |
Invesco S&P MidCap Low Volatility ETF | | | 10,220 | | | | 492,730 | |
Invesco S&P SmallCap Low Volatility ETF | | | 6,140 | | | | 235,470 | |
iShares Core MSCI EAFE ETF | | | 15,710 | | | | 979,676 | |
iShares Core MSCI Emerging Markets ETF | | | 5,270 | | | | 242,104 | |
iShares Core S&P Total US Stock Market ETF | | | 30,170 | | | | 2,765,684 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 7,850 | | | | 502,871 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 2,300 | | | | 118,956 | |
iShares MSCI USA Min Vol Factor ETF | | | 12,770 | | | | 916,247 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2,420 | | | | 229,589 | |
| | | | | | | | |
Total Equity | | | | | | | 8,016,528 | |
| | | | | | | | |
Fixed Income (45.5%) | |
iShares Broad USD High Yield Corporate Bond ETF (x) | | | 13,050 | | | | 446,180 | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 45,940 | | | | 4,240,721 | |
iShares TIPS Bond ETF | | | 9,920 | | | | 1,019,776 | |
Vanguard Short-Term Bond ETF | | | 7,770 | | | | 582,905 | |
Vanguard Total International Bond ETF | | | 9,810 | | | | 467,741 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 6,757,323 | |
| | | | | | | | |
Total Exchange Traded Funds (99.4%)
(Cost $15,601,899) | | | | 14,773,851 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (16.6%) | | | | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 300,000 | | | | 300,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 2,119,882 | | | | 2,119,882 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 45,733 | | | | 45,751 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 2,465,633 | |
| | | | | | | | |
Total Short-Term Investments (16.6%)
(Cost $2,465,631) | | | | 2,465,633 | |
| | | | | | | | |
Total Investments in Securities (116.0%)
(Cost $18,067,530) | | | | 17,239,484 | |
Other Assets Less Liabilities (-16.0%) | | | | (2,372,358 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 14,867,126 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $2,371,180. This was collateralized by $2,192 of various U.S. Government Treasury Securities, ranging from 0.000% - 6.125%, maturing 11/7/23 - 11/15/52 and by cash of $2,419,882 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 14,773,851 | | | $ | — | | | $ | — | | | $ | 14,773,851 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 2,465,633 | | | | — | | | | — | | | | 2,465,633 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 17,239,484 | | | $ | — | | | $ | — | | | $ | 17,239,484 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 17,239,484 | | | $ | — | | | $ | — | | | $ | 17,239,484 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
92
1290 FUNDS
1290 RETIREMENT 2025 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,969,218 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 3,935,934 | |
As of October 31, 2023, 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 | | $ | 649,678 | |
Aggregate gross unrealized depreciation | | | (1,646,620 | ) |
| | | | |
Net unrealized depreciation | | $ | (996,942 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 18,236,426 | |
| | | | |
See Notes to Financial Statements.
93
1290 FUNDS
1290 RETIREMENT 2025 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | | | | |
Investments in Securities, at value (x) (Cost $18,067,530) | | $ | 17,239,484 | |
Cash | | | 74,999 | |
Receivable from investment adviser | | | 6,275 | |
Prepaid registration and filing fees | | | 5,026 | |
Receivable for Fund shares sold | | | 2,913 | |
Securities lending income receivable | | | 1,773 | |
Dividends, interest and other receivables | | | 114 | |
Other assets | | | 182 | |
| | | | |
Total assets | | | 17,330,766 | |
| | | | |
LIABILITIES | | | | |
Payable for return of collateral on securities loaned | | | 2,419,882 | |
Transfer agent fees payable | | | 1,338 | |
Trustees’ fees payable | | | 84 | |
Accrued expenses | | | 42,336 | |
| | | | |
Total liabilities | | | 2,463,640 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 14,867,126 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 15,309,888 | |
Total distributable earnings (loss) | | | (442,762 | ) |
| | | | |
Net assets | | $ | 14,867,126 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $14,867,126 / 1,446,875 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 10.28 | |
| | | | |
| (x) | Includes value of securities on loan of $2,371,180. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | |
Dividends | | $ | 425,015 | |
Interest | | | 2,627 | |
Securities lending (net) | | | 17,075 | |
| | | | |
Total income | | | 444,717 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 83,575 | |
Professional fees | | | 51,022 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 20,233 | |
Printing and mailing expenses | | | 13,610 | |
Transfer agent fees | | | 11,000 | |
Custodian fees | | | 8,700 | |
Trustees’ fees | | | 506 | |
Miscellaneous | | | 6,703 | |
| | | | |
Gross expenses | | | 225,349 | |
Less: Waiver from investment adviser | | | (113,575 | ) |
Reimbursement from investment adviser | | | (20,021 | ) |
| | | | |
Net expenses | | | 91,753 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 352,964 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 285,691 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | (78,351 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 207,340 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 560,304 | |
| | | | |
See Notes to Financial Statements.
94
1290 FUNDS
1290 RETIREMENT 2025 FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 352,964 | | | $ | 385,185 | |
Net realized gain (loss) | | | 285,691 | | | | 713,851 | |
Net change in unrealized appreciation (depreciation) | | | (78,351 | ) | | | (4,000,791 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 560,304 | | | | (2,901,755 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (1,124,758 | ) | | | (1,149,434 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 235,235 and 178,296 shares, respectively ] | | | 2,505,220 | | | | 2,067,080 | |
Capital shares issued in reinvestment of dividends [ 107,018 and 91,808 shares, respectively ] | | | 1,124,758 | | | | 1,149,434 | |
Capital shares repurchased [ (449,840) and (511,840) shares, respectively] | | | (4,795,626 | ) | | | (6,148,922 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | (1,165,648 | ) | | | (2,932,408 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (1,730,102 | ) | | | (6,983,597 | ) |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 16,597,228 | | | | 23,580,825 | |
| | | | | | | | |
End of year | | $ | 14,867,126 | | | $ | 16,597,228 | |
| | | | | | | | |
See Notes to Financial Statements.
95
1290 FUNDS
1290 RETIREMENT 2025 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 10.68 | | | $ | 13.13 | | | $ | 11.42 | | | $ | 11.81 | | | $ | 10.62 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.22 | | | | 0.23 | | | | 0.17 | | | | 0.21 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.11 | | | | (2.00 | ) | | | 1.96 | | | | (0.15 | ) | | | 1.14 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.33 | | | | (1.77 | ) | | | 2.13 | | | | 0.06 | | | | 1.36 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.25 | ) | | | (0.17 | ) | | | (0.20 | ) | | | (0.23 | ) | | | (0.14 | ) |
Distributions from net realized gains | | | (0.48 | ) | | | (0.51 | ) | | | (0.22 | ) | | | (0.22 | ) | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.73 | ) | | | (0.68 | ) | | | (0.42 | ) | | | (0.45 | ) | | | (0.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.28 | | | $ | 10.68 | | | $ | 13.13 | | | $ | 11.42 | | | $ | 11.81 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 2.94 | % | | | (14.20 | )% | | | 19.05 | % | | | 0.47 | % | | | 12.99 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 14,867 | | | $ | 16,597 | | | $ | 23,581 | | | $ | 20,456 | | | $ | 19,202 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.55 | %(j) | | | 0.55 | %(j) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) |
Before waivers and reimbursements (f) | | | 1.35 | % | | | 1.26 | % | | | 1.18 | % | | | 1.43 | % | | | 1.58 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 2.11 | % | | | 2.00 | % | | | 1.33 | % | | | 1.88 | % | | | 1.99 | % |
Before waivers and reimbursements (f)(x) | | | 1.31 | % | | | 1.29 | % | | | 0.68 | % | | | 0.99 | % | | | 0.95 | % |
Portfolio turnover rate^ | | | 12 | % | | | 7 | % | | | 17 | % | | | 34 | % | | | 23 | % |
| ** | Includes tax expense of 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 0.65% . |
| (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.
96
1290 RETIREMENT 2030 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 3.20 | % | | | 3.95 | % | | | 4.25 | % |
S&P Target Date 2030 Index | | | 5.95 | | | | 5.22 | | | | 5.26 | |
| |
* Date of inception 2/27/17. Returnsfor 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 1.96%. 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, 2024. 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 3.20% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2030 Index, returned 5.95% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 65% allocation to equities contributed 98% of total return from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. |
| • | | The Fund’s 35% allocation to bonds contributed only around 2% of total absolute return, mainly from a combination of U.S. high-yield bonds, and intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding less exposure to short duration securities than the benchmark in a rising rate environment hurt relative performance. |
97
1290 RETIREMENT 2030 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2023 | | | |
Equity | | | 60.2 | % |
Fixed Income | | | 33.3 | |
Investment Company | | | 6.5 | |
| | | | |
| | |
Top 10 Holdings (as a percentage of Total Investments in Securities) | | | |
| | |
| As of October 31, 2023 | | | |
iShares Core U.S. Aggregate Bond ETF | | | 25.0 | % |
iShares Core S&P Total US Stock Market ETF | | | 20.6 | |
iShares Core MSCI EAFE ETF | | | 7.7 | |
iShares MSCI USA Min Vol Factor ETF | | | 6.7 | |
Invesco S&P 500 Low Volatility ETF | | | 6.7 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 5.9 | |
iShares TIPS Bond ETF | | | 5.0 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 3.9 | |
Invesco S&P International Developed Low Volatility ETF | | | 3.9 | |
Invesco S&P MidCap Low Volatility ETF | | | 3.8 | |
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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | | | | | | | | | | | | |
Actual | | $ | 1,000.00 | | | | $955.90 | | | $ | 2.68 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.46 | | | | 2.78 | |
| |
* Expenses are equal to the Fund’s I shares annualized expense ratio of 0.55%, multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the one-half year period). | |
98
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (64.5%) | |
Invesco S&P 500 Low Volatility ETF | | | 11,060 | | | $ | 645,683 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,790 | | | | 83,380 | |
Invesco S&P International Developed Low Volatility ETF | | | 14,530 | | | | 375,019 | |
Invesco S&P MidCap Low Volatility ETF | | | 7,650 | | | | 368,824 | |
Invesco S&P SmallCap Low Volatility ETF | | | 4,330 | | | | 166,056 | |
iShares Core MSCI EAFE ETF | | | 11,800 | | | | 735,848 | |
iShares Core MSCI Emerging Markets ETF | | | 3,510 | | | | 161,249 | |
iShares Core S&P Total US Stock Market ETF | | | 21,610 | | | | 1,980,989 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5,870 | | | | 376,032 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,690 | | | | 87,407 | |
iShares MSCI USA Min Vol Factor ETF | | | 9,010 | | | | 646,468 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,690 | | | | 160,333 | |
| | | | | | | | |
Total Equity | | | | | | | 5,787,288 | |
| | | | | | | | |
Fixed Income (35.6%) | |
iShares Broad USD High Yield Corporate Bond ETF (x) | | | 2,790 | | | | 95,390 | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 26,070 | | | | 2,406,522 | |
iShares TIPS Bond ETF | | | 4,650 | | | | 478,020 | |
Vanguard Short-Term Bond ETF | | | 1,680 | | | | 126,033 | |
Vanguard Total International Bond ETF | | | 1,970 | | | | 93,930 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 3,199,895 | |
| | | | | | | | |
Total Exchange Traded Funds (100.1%)
(Cost $9,820,027) | | | | | | | 8,987,183 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (7.0%) | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 57,098 | | | | 57,098 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 569,390 | | | | 569,390 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 626,488 | |
| | | | | | | | |
Total Short-Term Investments (7.0%)
(Cost $626,488) | | | | | | | 626,488 | |
| | | | | | | | |
Total Investments in Securities (107.1%)
(Cost $10,446,515) | | | | | | | 9,613,671 | |
Other Assets Less Liabilities (-7.1%) | | | | | | | (636,239 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 8,977,432 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value $699,066. This was collateralized by $86,970 of various U.S. Government Treasury Securities, ranging from 0.000% - 6.125%, maturing 11/7/23 - 11/15/52 and by cash of $626,488 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 8,987,183 | | | $ | — | | | $ | — | | | $ | 8,987,183 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 626,488 | | | | — | | | | — | | | | 626,488 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 9,613,671 | | | $ | — | | | $ | — | | | $ | 9,613,671 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 9,613,671 | | | $ | — | | | $ | — | | | $ | 9,613,671 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
99
1290 FUNDS
1290 RETIREMENT 2030 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,278,041 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 857,294 | |
As of October 31, 2023, 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 | | $ | 27,543 | |
Aggregate gross unrealized depreciation | | | (918,814 | ) |
| | | | |
Net unrealized depreciation | | $ | (891,271 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 10,504,942 | |
| | | | |
See Notes to Financial Statements.
100
1290 FUNDS
1290 RETIREMENT 2030 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | | | | |
Investments in Securities, at value (x)
(Cost $10,446,515) | | $ | 9,613,671 | |
Cash | | | 19,953 | |
Receivable from investment adviser | | | 5,705 | |
Prepaid registration and filing fees | | | 4,692 | |
Receivable for Fund shares sold | | | 884 | |
Securities lending income receivable | | | 272 | |
Dividends, interest and other receivables | | | 33 | |
Other assets | | | 105 | |
| | | | |
Total assets | | | 9,645,315 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 626,488 | |
Transfer agent fees payable | | | 1,651 | |
Accrued expenses | | | 39,744 | |
| | | | |
Total liabilities | | | 667,883 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 8,977,432 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 9,666,891 | |
Total distributable earnings (loss) | | | (689,459 | ) |
| | | | |
Net assets | | $ | 8,977,432 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $8,977,432 / 845,820 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 10.61 | |
| | | | |
| (x) | Includes value of securities on loan of $699,066. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 227,220 | |
Interest | | | 2,603 | |
Securities lending (net) | | | 5,421 | |
| | | | |
Total income | | | 235,244 | |
| | | | |
EXPENSES | |
Professional fees | | | 47,092 | |
Investment advisory fees | | | 46,461 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,570 | |
Printing and mailing expenses | | | 12,800 | |
Transfer agent fees | | | 11,100 | |
Custodian fees | | | 5,400 | |
Trustees’ fees | | | 270 | |
Miscellaneous | | | 5,156 | |
| | | | |
Gross expenses | | | 177,849 | |
Less: Waiver from investment adviser | | | (76,461 | ) |
Reimbursement from investment adviser | | | (50,715 | ) |
| | | | |
Net expenses | | | 50,673 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 184,571 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 54,485 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 23,275 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 77,760 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 262,331 | |
| | | | |
See Notes to Financial Statements.
101
1290 FUNDS
1290 RETIREMENT 2030 FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 184,571 | | | $ | 189,462 | |
Net realized gain (loss) | | | 54,485 | | | | 513,771 | |
Net change in unrealized appreciation (depreciation) | | | 23,275 | | | | (2,171,060 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 262,331 | | | | (1,467,827 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (714,090 | ) | | | (251,074 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 142,572 and 232,188 shares, respectively ] | | | 1,577,098 | | | | 2,932,089 | |
Capital shares issued in reinvestment of dividends [ 55,551 and 13,805 shares, respectively ] | | | 603,279 | | | | 181,124 | |
Capital shares repurchased [ (117,723) and (284,398) shares , respectively] | | | (1,279,195 | ) | | | (3,563,883 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 901,182 | | | | (450,670 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 449,423 | | | | (2,169,571 | ) |
NET ASSETS: | |
Beginning of year | | | 8,528,009 | | | | 10,697,580 | |
| | | | | | | | |
End of year | | $ | 8,977,432 | | | $ | 8,528,009 | |
| | | | | | | | |
See Notes to Financial Statements.
102
1290 FUNDS
1290 RETIREMENT 2030 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 11.14 | | | $ | 13.31 | | | $ | 11.57 | | | $ | 11.89 | | | $ | 10.69 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.22 | | | | 0.24 | | | | 0.16 | | | | 0.22 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.16 | | | | (2.13 | ) | | | 2.30 | | | | (0.30 | ) | | | 1.20 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.38 | | | | (1.89 | ) | | | 2.46 | | | | (0.08 | ) | | | 1.42 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.25 | ) | | | (0.14 | ) | | | (0.20 | ) | | | (0.21 | ) | | | (0.18 | ) |
Distributions from net realized gains | | | (0.66 | ) | | | (0.14 | ) | | | (0.52 | ) | | | (0.03 | ) | | | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.91 | ) | | | (0.28 | ) | | | (0.72 | ) | | | (0.24 | ) | | | (0.22 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 10.61 | | | $ | 11.14 | | | $ | 13.31 | | | $ | 11.57 | | | $ | 11.89 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.20 | % | | | (14.52 | )% | | | 21.98 | % | | | (0.68 | )% | | | 13.56 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 8,977 | | | $ | 8,528 | | | $ | 10,698 | | | $ | 5,682 | | | $ | 6,724 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.55 | %(j) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) |
Before waivers and reimbursements (f) | | | 1.91 | % | | | 1.85 | % | | | 2.14 | % | | | 2.88 | % | | | 3.14 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.99 | % | | | 1.97 | % | | | 1.24 | % | | | 1.95 | % | | | 1.98 | % |
Before waivers and reimbursements (f)(x) | | | 0.62 | % | | | 0.66 | % | | | (0.36 | )% | | | (0.40 | )% | | | (0.62 | )% |
Portfolio turnover rate^ | | | 9 | % | | | 30 | % | | | 8 | % | | | 38 | % | | | 5 | % |
| ** | Includes tax expense of 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 0.65% . |
| (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.
103
1290 RETIREMENT 2035 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 3.42 | % | | | 4.27 | % | | | 4.59 | % |
S&P Target Date 2035 Index | | | 6.95 | | | | 5.87 | | | | 5.89 | |
| |
* 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 10/31/22. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 1.71%. 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, 2024. 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 3.42% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2035 Index, returned 6.95% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 73% allocation to equities contributed all the positive gains. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. |
| • | | The Fund’s 27% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding no dedicated exposure to short duration securities in a rising rate environment hurt relative performance. |
104
1290 RETIREMENT 2035 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2023 | | | |
Equity | | | 61.4 | % |
Fixed Income | | | 23.9 | |
Investment Company | | | 14.7 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2023 | | | |
iShares Core S&P Total US Stock Market ETF | | | 21.1 | % |
iShares Core U.S. Aggregate Bond ETF | | | 20.4 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 13.3 | |
iShares Core MSCI EAFE ETF | | | 7.7 | |
Invesco S&P 500 Low Volatility ETF | | | 7.0 | |
iShares MSCI USA Min Vol Factor ETF | | | 6.9 | |
Invesco S&P International Developed Low Volatility ETF | | | 4.0 | |
Invesco S&P MidCap Low Volatility ETF | | | 3.9 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 3.9 | |
iShares TIPS Bond ETF | | | 3.6 | |
| | |
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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $956.10 | | | | $2.67 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.48 | | | | 2.76 | |
| |
* Expenses are equal to the Fund’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). | |
105
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (71.5%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 14,230 | | | $ | 830,747 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 4,820 | | | | 106,040 | |
Invesco S&P International Developed Low Volatility ETF | | | 18,190 | | | | 469,484 | |
Invesco S&P MidCap Low Volatility ETF | | | 9,640 | | | | 464,766 | |
Invesco S&P SmallCap Low Volatility ETF | | | 5,350 | | | | 205,174 | |
iShares Core MSCI EAFE ETF | | | 14,770 | | | | 921,057 | |
iShares Core MSCI Emerging Markets ETF | | | 4,550 | | | | 209,027 | |
iShares Core S&P Total US Stock Market ETF | | | 27,380 | | | | 2,509,925 | |
iShares MSCI EAFE Min Vol Factor ETF (x) | | | 7,230 | | | | 463,154 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,960 | | | | 101,371 | |
iShares MSCI USA Min Vol Factor ETF | | | 11,420 | | | | 819,385 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2,150 | | | | 203,974 | |
| | | | | | | | |
Total Equity | | | | | | | 7,304,104 | |
| | | | | | | | |
Fixed Income (27.9%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 26,250 | | | | 2,423,138 | |
iShares TIPS Bond ETF | | | 4,150 | | | | 426,620 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 2,849,758 | |
| | | | | | | | |
Total Exchange Traded Funds (99.4%)
(Cost $10,217,128) | | | | 10,153,862 | |
| | | | | | | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (17.1%) | | | | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 100,000 | | | | 100,000 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 1,579,651 | | | | 1,579,651 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 64,253 | | | | 64,279 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 1,743,930 | |
| | | | | | | | |
Total Short-Term Investments (17.1%)
(Cost $1,743,928) | | | | 1,743,930 | |
| | | | | | | | |
Total Investments in Securities (116.5%)
(Cost $11,961,056) | | | | 11,897,792 | |
Other Assets Less Liabilities (-16.5%) | | | | (1,682,292 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 10,215,500 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,645,093. This was collateralized by cash of $1,679,651 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 10,153,862 | | | $ | — | | | $ | — | | | $ | 10,153,862 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 1,743,930 | | | | — | | | | — | | | | 1,743,930 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 11,897,792 | | | $ | — | | | $ | — | | | $ | 11,897,792 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 11,897,792 | | | $ | — | | | $ | — | | | $ | 11,897,792 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
106
1290 FUNDS
1290 RETIREMENT 2035 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,140,929 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,583,498 | |
As of October 31, 2023, 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 | | $ | 649,202 | |
Aggregate gross unrealized depreciation | | | (789,464 | ) |
| | | | |
Net unrealized depreciation | | $ | (140,262 | ) |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 12,038,054 | |
| | | | |
See Notes to Financial Statements.
107
1290 FUNDS
1290 RETIREMENT 2035 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | | | | |
Investments in Securities, at value (x)
(Cost $11,961,056) | | $ | 11,897,792 | |
Cash | | | 75,000 | |
Receivable from investment adviser | | | 5,903 | |
Prepaid registration and filing fees | | | 4,741 | |
Receivable for Fund shares sold | | | 2,976 | |
Securities lending income receivable | | | 366 | |
Dividends, interest and other receivables | | | 136 | |
Other assets | | | 77 | |
| | | | |
Total assets | | | 11,986,991 | |
| | | | |
LIABILITIES | | | | |
Payable for return of collateral on securities loaned | | | 1,679,651 | |
Payable for securities purchased | | | 49,821 | |
Transfer agent fees payable | | | 1,554 | |
Trustees’ fees payable | | | 1 | |
Accrued expenses | | | 40,464 | |
| | | | |
Total liabilities | | | 1,771,491 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 10,215,500 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 10,087,174 | |
Total distributable earnings (loss) | | | 128,326 | |
| | | | |
Net assets | | $ | 10,215,500 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $10,215,500 / 918,827 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 11.12 | |
| | | | |
| (x) | Includes value of securities on loan of $1,645,093. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 251,993 | |
Interest | | | 2,518 | |
Securities lending (net) | | | 6,490 | |
| | | | |
Total income | | | 261,001 | |
| | | | |
EXPENSES | | | | |
Investment advisory fees | | | 53,138 | |
Professional fees | | | 47,900 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,728 | |
Printing and mailing expenses | | | 12,776 | |
Transfer agent fees | | | 11,900 | |
Custodian fees | | | 6,000 | |
Trustees’ fees | | | 315 | |
Miscellaneous | | | 5,700 | |
| | | | |
Gross expenses | | | 187,457 | |
Less: Waiver from investment adviser | | | (83,138 | ) |
Reimbursement from investment adviser | | | (46,785 | ) |
| | | | |
Net expenses | | | 57,534 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 203,467 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 125,644 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 52,869 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 178,513 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 381,980 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 203,467 | | | $ | 234,478 | |
Net realized gain (loss) | | | 125,644 | | | | 554,515 | |
Net change in unrealized appreciation (depreciation) | | | 52,869 | | | | (2,701,949 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 381,980 | | | | (1,912,956 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (792,730 | ) | | | (166,168 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 140,589 and 139,063 shares, respectively ] | | | 1,619,563 | | | | 1,793,285 | |
Capital shares issued in reinvestment of dividends [ 60,436 and 9,201 shares, respectively ] | | | 687,149 | | | | 125,693 | |
Capital shares repurchased [ (183,636) and (282,034) shares , respectively] | | | (2,128,188 | ) | | | (3,586,965 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 178,524 | | | | (1,667,987 | ) |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (232,226 | ) | | | (3,747,111 | ) |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 10,447,726 | | | | 14,194,837 | |
| | | | | | | | |
End of year | | $ | 10,215,500 | | | $ | 10,447,726 | |
| | | | | | | | |
See Notes to Financial Statements.
108
1290 FUNDS
1290 RETIREMENT 2035 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
Class I | | Year Ended October 31, | |
| | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 11.59 | | | $ | 13.71 | | | $ | 11.62 | | | $ | 12.03 | | | $ | 10.76 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.22 | | | | 0.24 | | | | 0.16 | | | | 0.22 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.19 | | | | (2.20 | ) | | | 2.52 | | | | (0.32 | ) | | | 1.23 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.41 | | | | (1.96 | ) | | | 2.68 | | | | (0.10 | ) | | | 1.45 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.27 | ) | | | (0.16 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.16 | ) |
Distributions from net realized gains | | | (0.61 | ) | | | — | | | | (0.38 | ) | | | (0.09 | ) | | | (0.02 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.88 | ) | | | (0.16 | ) | | | (0.59 | ) | | | (0.31 | ) | | | (0.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.12 | | | $ | 11.59 | | | $ | 13.71 | | | $ | 11.62 | | | $ | 12.03 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.42 | % | | | (14.46 | )% | | | 23.70 | % | | | (0.87 | )% | | | 13.61 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 10,216 | | | $ | 10,448 | | | $ | 14,195 | | | $ | 9,521 | | | $ | 8,369 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.54 | %**(j) | | | 0.54 | %(j) |
Before waivers and reimbursements (f) | | | 1.76 | % | | | 1.60 | % | | | 1.63 | % | | | 2.17 | % | | | 2.50 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.92 | % | | | 1.91 | % | | | 1.23 | % | | | 1.92 | % | | | 1.98 | % |
Before waivers and reimbursements (f)(x) | | | 0.69 | % | | | 0.85 | % | | | 0.14 | % | | | 0.28 | % | | | 0.01 | % |
Portfolio turnover rate^ | | | 11 | % | | | 10 | % | | | 1 | % | | | 40 | % | | | 13 | % |
| ** | Includes tax expense of 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 0.65% . |
| (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.
109
1290 RETIREMENT 2040 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 3.70 | % | | | 4.86 | % | | | 5.15 | % |
S&P Target Date 2040 Index | | | 7.78 | | | | 6.38 | | | | 6.36 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 2.69%. 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, 2024. 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 3.70% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2040 Index, returned 7.78% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 77% allocation to equities contributed all the positive gains from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. |
| • | | The Fund’s 23% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Exposure to interest rate risk from intermediate-term maturity securities detracted in a rising rate environment. |
110
1290 RETIREMENT 2040 FUND (Unaudited)
| | | | |
| | |
Table by Asset Class (as a percentage of Total
Investments in Securities) As of October 31, 2023 | | | |
Equity | | | 66.5 | % |
Fixed Income | | | 19.8 | |
Investment Company | | | 13.7 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) As of October 31, 2023 | |
iShares Core S&P Total US Stock Market ETF | | | 22.9 | % |
iShares Core U.S. Aggregate Bond ETF | | | 16.7 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 13.3 | |
iShares Core MSCI EAFE ETF | | | 8.4 | |
Invesco S&P 500 Low Volatility ETF | | | 7.6 | |
iShares MSCI USA Min Vol Factor ETF | | | 7.6 | |
Invesco S&P International Developed Low Volatility ETF | | | 4.3 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4.2 | |
Invesco S&P MidCap Low Volatility ETF | | | 4.2 | |
iShares TIPS Bond ETF | | | 3.1 | |
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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $957.30 | | | | $2.65 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.50 | | | | 2.74 | |
| |
* Expenses are equal to the Fund’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). | |
111
1290 FUNDS
1290 RETIREMENT 2040 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (76.8%) | |
Invesco S&P 500 Low Volatility ETF | | | 10,120 | | | $ | 590,806 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,210 | | | | 70,620 | |
Invesco S&P International Developed Low Volatility ETF | | | 12,760 | | | | 329,335 | |
Invesco S&P MidCap Low Volatility ETF | | | 6,670 | | | | 321,576 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,730 | | | | 143,046 | |
iShares Core MSCI EAFE ETF | | | 10,370 | | | | 646,673 | |
iShares Core MSCI Emerging Markets ETF | | | 3,140 | | | | 144,252 | |
iShares Core S&P Total US Stock Market ETF | | | 19,330 | | | | 1,771,981 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5,030 | | | | 322,222 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,380 | | | | 71,374 | |
iShares MSCI USA Min Vol Factor ETF | | | 8,200 | | | | 588,350 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,500 | | | | 142,307 | |
| | | | | | | | |
Total Equity | | | | | | | 5,142,542 | |
| | | | | | | | |
Fixed Income (22.8%) | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 14,010 | | | | 1,293,263 | |
iShares TIPS Bond ETF | | | 2,290 | | | | 235,412 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 1,528,675 | |
| | | | | | | | |
Total Exchange Traded Funds (99.6%)
(Cost $6,552,867) | | | | 6,671,217 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (15.8%) | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 30,654 | | | | 30,654 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 1,029,282 | | | | 1,029,282 | |
| | | | | | | | |
Total Investment Companies | | | | 1,059,936 | |
| | | | | |
Total Short-Term Investments (15.8%)
(Cost $1,059,936) | | | | 1,059,936 | |
| | | | | | | | |
Total Investments in Securities (115.4%)
(Cost $7,612,803) | | | | 7,731,153 | |
Other Assets Less Liabilities (-15.4%) | | | | | | | (1,033,422 | ) |
| | | | | |
Net Assets (100%) | | | | | | $ | 6,697,731 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,038,118. This was collateralized by cash of $1,059,936 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 6,671,217 | | | $ | — | | | $ | — | | | $ | 6,671,217 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 1,059,936 | | | | — | | | | – | | | | 1,059,936 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 7,731,153 | | | $ | — | | | $ | — | | | $ | 7,731,153 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 7,731,153 | | | $ | — | | | $ | — | | | $ | 7,731,153 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
See Notes to Financial Statements.
112
1290 FUNDS
1290 RETIREMENT 2040 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 886,194 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 262,772 | |
As of October 31, 2023, 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 | | $ | 511,583 | |
Aggregate gross unrealized depreciation | | | (406,796 | ) |
| | | | |
Net unrealized appreciation | | $ | 104,787 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 7,626,366 | |
| | | | |
See Notes to Financial Statements.
113
1290 FUNDS
1290 RETIREMENT 2040 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x) (Cost $7,612,803) | | $ | 7,731,153 | |
Cash | | | 67,180 | |
Receivable from investment adviser | | | 6,708 | |
Prepaid registration and filing fees | | | 4,586 | |
Receivable for Fund shares sold | | | 1,499 | |
Securities lending income receivable | | | 219 | |
Dividends, interest and other receivables | | | 2 | |
Other assets | | | 55 | |
| | | | |
Total assets | | | 7,811,402 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 1,059,936 | |
Accrued professional fees | | | 36,787 | |
Payable for securities purchased | | | 12,682 | |
Transfer agent fees payable | | | 1,757 | |
Trustees’ fees payable | | | 15 | |
Accrued expenses | | | 2,494 | |
| | | | |
Total liabilities | | | 1,113,671 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 6,697,731 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 6,455,954 | |
Total distributable earnings (loss) | | | 241,777 | |
| | | | |
Net assets | | $ | 6,697,731 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $6,697,731 / 552,466 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.12 | |
| | | | |
| (x) | Includes value of securities on loan of $1,038,118. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 151,531 | |
Interest | | | 2,361 | |
Securities lending (net) | | | 7,286 | |
| | | | |
Total income | | | 161,178 | |
| | | | |
EXPENSES | |
Professional fees | | | 45,529 | |
Investment advisory fees | | | 32,492 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,352 | |
Printing and mailing expenses | | | 12,446 | |
Transfer agent fees | | | 11,100 | |
Custodian fees | | | 4,700 | |
Trustees’ fees | | | 186 | |
Miscellaneous | | | 5,166 | |
| | | | |
Gross expenses | | | 160,971 | |
Less: Waiver from investment adviser | | | (62,492 | ) |
Reimbursement from investment adviser | | | (63,518 | ) |
| | | | |
Net expenses | | | 34,961 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 126,217 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 56,371 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 15,857 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 72,228 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 198,445 | |
| | | | |
| | | | | | | | |
| STATEMENT OF CHANGES IN NET ASSETS | | Year Ended October 31, | |
| | | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 126,217 | | | $ | 115,645 | |
Net realized gain (loss) | | | 56,371 | | | | 25,132 | |
Net change in unrealized appreciation (depreciation) | | | 15,857 | | | | (1,103,028 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 198,445 | | | | (962,251 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (160,072 | ) | | | (123,256 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 73,448 and 107,689 shares, respectively ] | | | 924,612 | | | | 1,451,149 | |
Capital shares issued in reinvestment of dividends [ 6,479 and 3,304 shares, respectively ] | | | 80,140 | | | | 46,681 | |
Capital shares repurchased [ (28,021) and (9,613) shares , respectively] | | | (348,497 | ) | | | (124,690 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 656,255 | | | | 1,373,140 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 694,628 | | | | 287,633 | |
NET ASSETS: | |
Beginning of year | | | 6,003,103 | | | | 5,715,470 | |
| | | | | | | | |
End of year | | $ | 6,697,731 | | | $ | 6,003,103 | |
| | | | | | | | |
See Notes to Financial Statements.
114
1290 FUNDS
1290 RETIREMENT 2040 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 11.99 | | | $ | 14.32 | | | $ | 11.80 | | | $ | 12.05 | | | $ | 10.84 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.24 | | | | 0.25 | | | | 0.17 | | | | 0.23 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.21 | | | | (2.28 | ) | | | 2.82 | | | | (0.26 | ) | | | 1.24 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.45 | | | | (2.03 | ) | | | 2.99 | | | | (0.03 | ) | | | 1.46 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.26 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.21 | ) | | | (0.20 | ) |
Distributions from net realized gains | | | (0.06 | ) | | | (0.14 | ) | | | (0.25 | ) | | | (0.01 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.32 | ) | | | (0.30 | ) | | | (0.47 | ) | | | (0.22 | ) | | | (0.25 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.12 | | | $ | 11.99 | | | $ | 14.32 | | | $ | 11.80 | | | $ | 12.05 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.70 | % | | | (14.46 | )% | | | 25.92 | % | | | (0.24 | )% | | | 13.79 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 6,698 | | | $ | 6,003 | | | $ | 5,715 | | | $ | 4,185 | | | $ | 4,005 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.54 | %(j) | | | 0.54 | %(j) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (f) | | | 2.48 | % | | | 2.57 | % | | | 3.05 | % | | | 3.86 | % | | | 4.57 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.94 | % | | | 1.91 | % | | | 1.22 | % | | | 1.93 | % | | | 1.96 | % |
Before waivers and reimbursements (f)(x) | | | — | %‡‡ | | | (0.12 | )% | | | (1.29 | )% | | | (1.39 | )% | | | (2.08 | )% |
Portfolio turnover rate^ | | | 4 | % | | | 2 | % | | | 4 | % | | | 20 | % | | | 3 | % |
| ** | Includes tax expense of less than 0.005%. |
| ‡‡ | 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 0.65% . |
| (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.
115
1290 RETIREMENT 2045 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| | |
| Annualized Total Returns as of 10/31/23 | | | | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 3.86 | % | | | 5.05 | % | | | 5.39 | % |
S&P Target Date 2045 Index | | | 8.25 | | | | 6.68 | | | | 6.63 | |
| |
* 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 10/31/23. 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, 2023, 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, 2024. 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 3.86% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2045 Index, returned 8.25% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 82% allocation to equities contributed all the positive gains from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. Emerging markets equities also contributed a modest gain. |
| • | | The Fund’s 18% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Exposure to interest rate risk from intermediate-term maturity securities detracted in a rising rate environment. |
116
1290 RETIREMENT 2045 FUND (Unaudited)
| | | | |
| | |
Table by Asset Class (as a percentage of Total
Investments in Securities) As of October 31, 2023 | | | |
Equity | | | 82.1 | % |
Fixed Income | | | 17.9 | |
Investment Company | | | 0.0 | # |
# Less than 0.05% | | | | |
| | | | |
| | |
Top 10 Holdings (as a percentage of Total
Investments in Securities) As of October 31, 2023 | | | |
iShares Core S&P Total US Stock Market ETF | | | 28.4 | % |
iShares Core U.S. Aggregate Bond ETF | | | 15.2 | |
iShares Core MSCI EAFE ETF | | | 10.2 | |
Invesco S&P 500 Low Volatility ETF | | | 9.5 | |
iShares MSCI USA Min Vol Factor ETF | | | 9.5 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5.1 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.1 | |
Invesco S&P MidCap Low Volatility ETF | | | 5.1 | |
iShares TIPS Bond ETF | | | 2.7 | |
Invesco S&P SmallCap Low Volatility 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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | |
Actual | | | $1,000.00 | | | | $958.90 | | | | $2.63 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.52 | | | | 2.72 | |
| |
* Expenses are equal to the Fund’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). | |
117
1290 FUNDS
1290 RETIREMENT 2045 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (81.5%) | |
Invesco S&P 500 Low Volatility ETF | | | 13,420 | | | $ | 783,460 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 4,390 | | | | 96,580 | |
Invesco S&P International Developed Low Volatility ETF | | | 16,340 | | | | 421,735 | |
Invesco S&P MidCap Low Volatility ETF | | | 8,620 | | | | 415,590 | |
Invesco S&P SmallCap Low Volatility ETF | | | 4,880 | | | | 187,149 | |
iShares Core MSCI EAFE ETF | | | 13,420 | | | | 836,871 | |
iShares Core MSCI Emerging Markets ETF | | | 4,050 | | | | 186,057 | |
iShares Core S&P Total US Stock Market ETF | | | 25,540 | | | | 2,341,252 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 6,610 | | | | 423,437 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,870 | | | | 96,716 | |
iShares MSCI USA Min Vol Factor ETF | | | 10,900 | | | | 782,075 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,970 | | | | 186,897 | |
| | | | | | | | |
Total Equity | | | | | | | 6,757,819 | |
| | | | | | | | |
Fixed Income (17.8%) | |
iShares Core U.S. Aggregate Bond ETF | | | 13,570 | | | | 1,252,647 | |
iShares TIPS Bond ETF | | | 2,160 | | | | 222,048 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 1,474,695 | |
| | | | | | | | |
Total Exchange Traded Funds (99.3%)
(Cost $7,882,452) | | | | | | | 8,232,514 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENT: | | | | | |
Investment Company (0.0%)† | | | | | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 3,002 | | | | 3,004 | |
| | | | | | | | |
Total Short-Term Investment (0.0%)†
(Cost $3,004) | | | | | | | 3,004 | |
| | | | | | | | |
Total Investments in Securities (99.3%)
(Cost $7,885,456) | | | | | | | 8,235,518 | |
Other Assets Less Liabilities (0.7%) | | | | | | | 59,095 | |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 8,294,613 | |
| | | | | | | | |
| † | Percent shown is less than 0.05%. |
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, 2023:
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 | | $ | 8,232,514 | | | $ | — | | | $ | — | | | $ | 8,232,514 | |
Short-Term Investment | | | | | | | | | | | | | | | | |
Investment Company | | | 3,004 | | | | — | | | | — | | | | 3,004 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 8,235,518 | | | $ | — | | | $ | — | | | $ | 8,235,518 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 8,235,518 | | | $ | — | | | $ | — | | | $ | 8,235,518 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
See Notes to Financial Statements.
118
1290 FUNDS
1290 RETIREMENT 2045 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,331,146 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 758,922 | |
As of October 31, 2023, 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 | | $ | 717,734 | |
Aggregate gross unrealized depreciation | | | (379,508 | ) |
| | | | |
Net unrealized appreciation | | $ | 338,226 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 7,897,292 | |
| | | | |
See Notes to Financial Statements.
119
1290 FUNDS
1290 RETIREMENT 2045 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (Cost $7,885,456) | | $ | 8,235,518 | |
Cash | | | 75,000 | |
Receivable for Fund shares sold | | | 14,043 | |
Receivable from investment adviser | | | 6,264 | |
Prepaid registration and filing fees | | | 4,655 | |
Securities lending income receivable | | | 486 | |
Dividends, interest and other receivables | | | 37 | |
Other assets | | | 72 | |
| | | | |
Total assets | | | 8,336,075 | |
| | | | |
LIABILITIES | |
Transfer agent fees payable | | | 1,822 | |
Trustees’ fees payable | | | 15 | |
Accrued expenses | | | 39,625 | |
| | | | |
Total liabilities | | | 41,462 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 8,294,613 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 7,735,877 | |
Total distributable earnings (loss) | | | 558,736 | |
| | | | |
Net assets | | $ | 8,294,613 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $8,294,613 / 710,014 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 11.68 | |
| | | | |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 183,104 | |
Interest | | | 2,582 | |
Securities lending (net) | | | 5,766 | |
| | | | |
Total income | | | 191,452 | |
| | | | |
EXPENSES | | | | |
Professional fees | | | 46,471 | |
Investment advisory fees | | | 40,038 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,463 | |
Printing and mailing expenses | | | 12,696 | |
Transfer agent fees | | | 11,500 | |
Custodian fees | | | 4,800 | |
Trustees’ fees | | | 229 | |
Miscellaneous | | | 5,331 | |
| | | | |
Gross expenses | | | 170,528 | |
Less: Waiver from investment adviser | | | (70,038 | ) |
Reimbursement from investment adviser | | | (57,701 | ) |
| | | | |
Net expenses | | | 42,789 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 148,663 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 120,320 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | (1,133 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 119,187 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 267,850 | |
| | | | |
| | | | | | | | |
| STATEMENT OF CHANGES IN NET ASSETS | | Year Ended October 31, | |
| | | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 148,663 | | | $ | 147,672 | |
Net realized gain (loss) | | | 120,320 | | | | 120,337 | |
Net change in unrealized appreciation (depreciation) | | | (1,133 | ) | | | (1,468,800 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 267,850 | | | | (1,200,791 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (285,733 | ) | | | (477,748 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 134,386 and 89,244 shares, respectively ] | | | 1,624,916 | | | | 1,131,378 | |
Capital shares issued in reinvestment of dividends [ 14,587 and 19,296 shares, respectively ] | | | 173,581 | | | | 265,123 | |
Capital shares repurchased [ (89,066) and (21,318) shares , respectively] | | | (1,069,646 | ) | | | (272,190 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 728,851 | | | | 1,124,311 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 710,968 | | | | (554,228 | ) |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 7,583,645 | | | | 8,137,873 | |
| | | | | | | | |
End of year | | $ | 8,294,613 | | | $ | 7,583,645 | |
| | | | | | | | |
See Notes to Financial Statements.
120
1290 FUNDS
1290 RETIREMENT 2045 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 11.67 | | | $ | 14.46 | | | $ | 11.83 | | | $ | 12.18 | | | $ | 10.91 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.22 | | | | 0.24 | | | | 0.16 | | | | 0.23 | | | | 0.23 | |
Net realized and unrealized gain (loss) | | | 0.24 | | | | (2.18 | ) | | | 3.03 | | | | (0.36 | ) | | | 1.25 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.46 | | | | (1.94 | ) | | | 3.19 | | | | (0.13 | ) | | | 1.48 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.26 | ) | | | (0.18 | ) | | | (0.23 | ) | | | (0.22 | ) | | | (0.18 | ) |
Distributions from net realized gains | | | (0.19 | ) | | | (0.67 | ) | | | (0.33 | ) | | | — | # | | | (0.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.45 | ) | | | (0.85 | ) | | | (0.56 | ) | | | (0.22 | ) | | | (0.21 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 11.68 | | | $ | 11.67 | | | $ | 14.46 | | | $ | 11.83 | | | $ | 12.18 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 3.86 | % | | | (14.30 | )% | | | 27.63 | % | | | (1.08 | )% | | | 13.85 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 8,295 | | | $ | 7,584 | | | $ | 8,138 | | | $ | 6,625 | | | $ | 5,635 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.53 | %(j) |
Before waivers and reimbursements (f) | | | 2.13 | % | | | 2.16 | % | | | 2.18 | % | | | 2.78 | % | | | 3.51 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.86 | % | | | 1.90 | % | | | 1.21 | % | | | 1.92 | % | | | 1.97 | % |
Before waivers and reimbursements (f)(x) | | | 0.26 | % | | | 0.27 | % | | | (0.43 | )% | | | (0.33 | )% | | | (1.01 | )% |
Portfolio turnover rate^ | | | 10 | % | | | 5 | % | | | 18 | % | | | 18 | % | | | 1 | % |
| ** | Includes tax expense of less than 0.005%. |
| # | 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 0.65% . |
| (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.
121
1290 RETIREMENT 2050 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 4.32 | % | | | 5.28 | % | | | 5.65 | % |
S&P Target Date 2050 Index | | | 8.44 | | | | 6.82 | | | | 6.78 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 2.51%. 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, 2024. 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 4.32% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2050 Index, returned 8.44% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 87% allocation to equities contributed all the positive gains from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. Emerging markets equities also contributed a modest gain. |
| • | | The Fund’s 13% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Exposure to interest rate risk from intermediate-term maturity securities detracted in a rising rate environment. |
122
1290 RETIREMENT 2050 FUND (Unaudited)
| | | | |
| | |
Table by Asset Class (as a percentage of Total
Investments in Securities) | | | |
| | |
| As of October 31, 2023 | | | |
Equity | | | 79.2 | % |
Fixed Income | | | 11.6 | |
Investment Company | | | 9.2 | |
| | | | |
| | |
Top 10 Holdings (as a percentage of Total
Investments in Securities) | | | |
| | |
| As of October 31, 2023 | | | |
iShares Core S&P Total US Stock Market ETF | | | 27.7 | % |
iShares Core U.S. Aggregate Bond ETF | | | 9.9 | |
iShares Core MSCI EAFE ETF | | | 9.8 | |
Invesco S&P 500 Low Volatility ETF | | | 9.3 | |
iShares MSCI USA Min Vol Factor ETF | | | 9.1 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 9.1 | |
Invesco S&P International Developed Low Volatility ETF | | | 4.9 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4.8 | |
Invesco S&P MidCap Low Volatility ETF | | | 4.8 | |
iShares Core MSCI Emerging Markets 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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | |
Actual | | | $1,000.00 | | | | $960.50 | | | | $2.62 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.53 | | | | 2.70 | |
| |
* Expenses are equal to the Fund’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). | |
123
1290 FUNDS
1290 RETIREMENT 2050 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (86.7%) | |
Invesco S&P 500 Low Volatility ETF | | | 14,730 | | | $ | 859,937 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 4,600 | | | | 101,200 | |
Invesco S&P International Developed Low Volatility ETF | | | 17,770 | | | | 458,644 | |
Invesco S&P MidCap Low Volatility ETF | | | 9,260 | | | | 446,446 | |
Invesco S&P SmallCap Low Volatility ETF | | | 5,360 | | | | 205,557 | |
iShares Core MSCI EAFE ETF | | | 14,520 | | | | 905,467 | |
iShares Core MSCI Emerging Markets ETF | | | 4,490 | | | | 206,271 | |
iShares Core S&P Total US Stock Market ETF | | | 28,000 | | | | 2,566,760 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 6,980 | | | | 447,139 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,950 | | | | 100,854 | |
iShares MSCI USA Min Vol Factor ETF | | | 11,820 | | | | 848,085 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2,140 | | | | 203,025 | |
| | | | | | | | |
Total Equity | | | | | | | 7,349,385 | |
| | | | | | | | |
Fixed Income (12.8%) | |
iShares Core U.S. Aggregate Bond ETF (x) | | | 9,930 | | | | 916,638 | |
iShares TIPS Bond ETF | | | 1,610 | | | | 165,508 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 1,082,146 | |
| | | | | | | | |
Total Exchange Traded Funds (99.5%)
(Cost $7,993,591) | | | | | | | 8,431,531 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (10.0%) | | | | | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 842,312 | | | | 842,312 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 8,812 | | | | 8,816 | |
| | | | | | | | |
Total Investment Companies | | | | 851,128 | |
| | | | | |
Total Short-Term Investments (10.0%)
(Cost $851,128) | | | | 851,128 | |
| | | | | | | | |
Total Investments in Securities (109.5%)
(Cost $8,844,719) | | | | 9,282,659 | |
Other Assets Less Liabilities (-9.5%) | | | | | | | (808,907 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 8,473,752 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $824,974. This was collateralized by cash of $842,312 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 8,431,531 | | | $ | — | | | $ | — | | | $ | 8,431,531 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 851,128 | | | | — | | | | — | | | | 851,128 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 9,282,659 | | | $ | — | | | $ | — | | | $ | 9,282,659 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 9,282,659 | | | $ | — | | | $ | — | | | $ | 9,282,659 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
See Notes to Financial Statements.
124
1290 FUNDS
1290 RETIREMENT 2050 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,744,943 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 119,199 | |
As of October 31, 2023, 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 | | $ | 695,243 | |
Aggregate gross unrealized depreciation | | | (299,880 | ) |
| | | | |
Net unrealized appreciation | | $ | 395,363 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 8,887,296 | |
| | | | |
See Notes to Financial Statements.
125
1290 FUNDS
1290 RETIREMENT 2050 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x)
(Cost $8,844,719) | | $ | 9,282,659 | |
Cash | | | 75,000 | |
Receivable from investment adviser | | | 6,418 | |
Receivable for Fund shares sold | | | 4,862 | |
Prepaid registration and filing fees | | | 4,646 | |
Securities lending income receivable | | | 246 | |
Dividends, interest and other receivables | | | 64 | |
Other assets | | | 79 | |
| | | | |
Total assets | | | 9,373,974 | |
| | | | |
LIABILITIES | |
Payable for return of collateral on securities loaned | | | 842,312 | |
Payable for securities purchased | | | 16,305 | |
Transfer agent fees payable | | | 2,006 | |
Trustees’ fees payable | | | 17 | |
Accrued expenses | | | 39,582 | |
| | | | |
Total liabilities | | | 900,222 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 8,473,752 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 7,952,981 | |
Total distributable earnings (loss) | | | 520,771 | |
| | | | |
Net assets | | $ | 8,473,752 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $8,473,752 / 670,531 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.64 | |
| | | | |
| (x) | Includes value of securities on loan of $824,974. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | $ | 174,584 | |
Interest | | | 2,897 | |
Securities lending (net) | | | 6,695 | |
| | | | |
Total income | | | 184,176 | |
| | | | |
EXPENSES | |
Professional fees | | | 46,338 | |
Investment advisory fees | | | 38,983 | |
Administrative fees | | | 30,000 | |
Registration and filing fees | | | 19,404 | |
Printing and mailing expenses | | | 12,572 | |
Transfer agent fees | | | 11,400 | |
Custodian fees | | | 4,700 | |
Trustees’ fees | | | 218 | |
Miscellaneous | | | 5,520 | |
| | | | |
Gross expenses | | | 169,135 | |
Less: Waiver from investment adviser | | | (68,983 | ) |
Reimbursement from investment adviser | | | (58,750 | ) |
| | | | |
Net expenses | | | 41,402 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 142,774 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Net realized gain (loss) on investments in securities | | | 37,019 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 60,466 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 97,485 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 240,259 | |
| | | | |
| | | | | | | | |
| STATEMENT OF CHANGES IN NET ASSETS | | Year Ended October 31, | |
| | | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 142,774 | | | $ | 127,906 | |
Net realized gain (loss) | | | 37,019 | | | | 32,873 | |
Net change in unrealized appreciation (depreciation) | | | 60,466 | | | | (1,191,150 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 240,259 | | | | (1,030,371 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (181,109 | ) | | | (139,581 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 144,031 and 130,163 shares, respectively ] | | | 1,870,800 | | | | 1,777,782 | |
Capital shares issued in reinvestment of dividends [ 7,647 and 4,122 shares, respectively ] | | | 98,186 | | | | 60,381 | |
Capital shares repurchased [ (23,456) and (25,931) shares , respectively] | | | (297,786 | ) | | | (356,653 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 1,671,200 | | | | 1,481,510 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 1,730,350 | | | | 311,558 | |
NET ASSETS: | |
Beginning of year | | | 6,743,402 | | | | 6,431,844 | |
| | | | | | | | |
End of year | | $ | 8,473,752 | | | $ | 6,743,402 | |
| | | | | | | | |
See Notes to Financial Statements.
126
1290 FUNDS
1290 RETIREMENT 2050 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 12.43 | | | $ | 14.82 | | | $ | 11.76 | | | $ | 12.24 | | | $ | 10.97 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.24 | | | | 0.26 | | | | 0.16 | | | | 0.22 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.30 | | | | (2.34 | ) | | | 3.24 | | | | (0.46 | ) | | | 1.30 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.54 | | | | (2.08 | ) | | | 3.40 | | | | (0.24 | ) | | | 1.52 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.27 | ) | | | (0.16 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.20 | ) |
Distributions from net realized gains | | | (0.06 | ) | | | (0.15 | ) | | | (0.13 | ) | | | (0.02 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.33 | ) | | | (0.31 | ) | | | (0.34 | ) | | | (0.24 | ) | | | (0.25 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.64 | | | $ | 12.43 | | | $ | 14.82 | | | $ | 11.76 | | | $ | 12.24 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.32 | % | | | (14.31 | )% | | | 29.37 | % | | | (2.05 | )% | | | 14.18 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 8,474 | | | $ | 6,743 | | | $ | 6,432 | | | $ | 4,761 | | | $ | 3,747 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.53 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (f) | | | 2.17 | % | | | 2.39 | % | | | 2.75 | % | | | 3.80 | % | | | 4.52 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.83 | % | | | 1.93 | % | | | 1.17 | % | | | 1.90 | % | | | 1.96 | % |
Before waivers and reimbursements (f)(x) | | | 0.19 | % | | | 0.07 | % | | | (1.05 | )% | | | (1.37 | )% | | | (2.03 | )% |
Portfolio turnover rate^ | | | 2 | % | | �� | 2 | % | | | 5 | % | | | 21 | % | | | 2 | % |
| ** | Includes tax expense of 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 0.65% . |
| (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.
127
1290 RETIREMENT 2055 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 4.36 | % | | | 5.41 | % | | | 5.85 | % |
S&P Target Date 2055 Index | | | 8.48 | | | | 6.88 | | | | 6.84 | |
| |
* 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 10/31/22. 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, 2023, 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, 2024. 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 4.36% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2055 Index, returned 8.48% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 92% allocation to equities contributed all the positive gains from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. Emerging markets equities also contributed a modest gain. |
| • | | The Fund’s 8% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding no dedicated exposure to short duration securities in a rising rate environment hurt relative performance. |
128
1290 RETIREMENT 2055 FUND (Unaudited)
| | | | |
| |
Table by Asset Class (as a percentage of Total
Investments in Securities) | |
| | |
| As of October 31, 2023 | | | |
Equity | | | 86.9 | % |
Fixed Income | | | 7.3 | |
Investment Company | | | 5.8 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) | |
| | |
| As of October 31, 2023 | | | |
iShares Core S&P Total US Stock Market ETF | | | 30.0 | % |
iShares Core MSCI EAFE ETF | | | 10.5 | |
Invesco S&P 500 Low Volatility ETF | | | 10.4 | |
iShares MSCI USA Min Vol Factor ETF | | | 10.1 | |
iShares Core U.S. Aggregate Bond ETF | | | 6.3 | |
Invesco Government & Agency Portfolio, Institutional Shares | | | 5.6 | |
Invesco S&P International Developed Low Volatility ETF | | | 5.4 | |
Invesco S&P MidCap Low Volatility ETF | | | 5.4 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5.3 | |
Invesco S&P SmallCap Low Volatility 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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $961.50 | | | | $2.60 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.55 | | | | 2.68 | |
| |
* Expenses are equal to the Fund’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). | |
129
1290 FUNDS
1290 RETIREMENT 2055 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
EXCHANGE TRADED FUNDS (ETF): | | | | | | | | |
Equity (91.7%) | | | | | | | | |
Invesco S&P 500 Low Volatility ETF | | | 10,050 | | | $ | 586,719 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,180 | | | | 69,960 | |
Invesco S&P International Developed Low Volatility ETF | | | 11,900 | | | | 307,139 | |
Invesco S&P MidCap Low Volatility ETF | | | 6,320 | | | | 304,702 | |
Invesco S&P SmallCap Low Volatility ETF | | | 3,620 | | | | 138,828 | |
iShares Core MSCI EAFE ETF | | | 9,580 | | | | 597,409 | |
iShares Core MSCI Emerging Markets ETF | | | 2,930 | | | | 134,604 | |
iShares Core S&P Total US Stock Market ETF | | | 18,570 | | | | 1,702,312 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 4,720 | | | | 302,363 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,340 | | | | 69,305 | |
iShares MSCI USA Min Vol Factor ETF | | | 8,010 | | | | 574,717 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,430 | | | | 135,666 | |
| | | | | | | | |
Total Equity | | | | | | | 4,923,724 | |
| | | | | | | | |
Fixed Income (7.7%) | | | | | | | | |
iShares Core U.S. Aggregate Bond ETF(x) | | | 3,860 | | | | 356,317 | |
iShares TIPS Bond ETF | | | 590 | | | | 60,652 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 416,969 | |
| | | | | | | | |
Total Exchange Traded Funds (99.4%)
(Cost $4,802,298) | | | | | | | 5,340,693 | |
| | | | | | | | |
| | | Number of
Shares | | | Value
(Note 1) | |
SHORT-TERM INVESTMENTS: | | | | | | | | |
Investment Companies (6.1%) | | | | | | | | |
Dreyfus Treasury Obligations Cash Management Fund 5.24% (7 day yield) (xx) | | | 8,935 | | | | 8,935 | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 318,489 | | | | 318,489 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 327,424 | |
| | | | | | | | |
Total Short-Term Investments (6.1%)
(Cost $327,424) | | | | 327,424 | |
| | | | | | | | |
Total Investments in Securities (105.5%)
(Cost $5,129,722) | | | | 5,668,117 | |
Other Assets Less Liabilities (-5.5%) | | | | | | | (296,919 | ) |
| | | | | | | | |
Net Assets (100%) | | | | | | $ | 5,371,198 | |
| | | | | | | | |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $320,685. This was collateralized by cash of $327,424 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
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, 2023:
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 | | $ | 5,340,693 | | | $ | — | | | $ | — | | | $ | 5,340,693 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 327,424 | | | | — | | | | — | | | | 327,424 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 5,668,117 | | | $ | — | | | $ | — | | | $ | 5,668,117 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,668,117 | | | $ | — | | | $ | — | | | $ | 5,668,117 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements.
130
1290 FUNDS
1290 RETIREMENT 2055 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 753,374 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 648,376 | |
As of October 31, 2023, 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 | | $ | 691,069 | |
Aggregate gross unrealized depreciation | | | (155,110 | ) |
| | | | |
Net unrealized appreciation | | $ | 535,959 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 5,132,158 | |
| | | | |
See Notes to Financial Statements.
131
1290 FUNDS
1290 RETIREMENT 2055 FUND
| | | | |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 | |
| |
ASSETS | | | | |
Investments in Securities, at value (x)
(Cost $5,129,722) | | $ | 5,668,117 | |
Cash | | | 36,625 | |
Receivable for Fund shares sold | | | 23,375 | |
Receivable from investment adviser | | | 7,362 | |
Prepaid registration and filing fees | | | 4,534 | |
Securities lending income receivable | | | 168 | |
Other assets | | | 46 | |
| | | | |
Total assets | | | 5,740,227 | |
| | | | |
LIABILITIES | | | | |
Payable for return of collateral on securities loaned | | | 327,424 | |
Accrued professional fees | | | 36,733 | |
Transfer agent fees payable | | | 1,806 | |
Payable for Fund shares repurchased | | | 564 | |
Trustees’ fees payable | | | 24 | |
Accrued expenses | | | 2,478 | |
| | | | |
Total liabilities | | | 369,029 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
NET ASSETS | | $ | 5,371,198 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 4,611,071 | |
Total distributable earnings (loss) | | | 760,127 | |
| | | | |
Net assets | | $ | 5,371,198 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $5,371,198 / 422,175 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.72 | |
| | | | |
| (x) | Includes value of securities on loan of $320,685. |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
| |
INVESTMENT INCOME | | | | |
Dividends | | $ | 121,146 | |
Interest | | | 2,161 | |
Securities lending (net) | | | 5,218 | |
| | | | |
Total income | | | 128,525 | |
| | | | |
EXPENSES | | | | |
Professional fees | | | 45,014 | |
Administrative fees | | | 30,000 | |
Investment advisory fees | | | 27,458 | |
Registration and filing fees | | | 19,289 | |
Printing and mailing expenses | | | 12,370 | |
Transfer agent fees | | | 11,100 | |
Custodian fees | | | 5,200 | |
Trustees’ fees | | | 159 | |
Miscellaneous | | | 4,895 | |
| | | | |
Gross expenses | | | 155,485 | |
Less: Waiver from investment adviser | | | (57,458 | ) |
Reimbursement from investment adviser | | | (69,072 | ) |
| | | | |
Net expenses | | | 28,955 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 99,570 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 162,970 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | (36,485 | ) |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 126,485 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 226,055 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 99,570 | | | $ | 99,072 | |
Net realized gain (loss) | | | 162,970 | | | | 87,863 | |
Net change in unrealized appreciation (depreciation) | | | (36,485 | ) | | | (995,869 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 226,055 | | | | (808,934 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (197,242 | ) | | | (86,186 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 69,931 and 65,983 shares, respectively ] | | | 912,050 | | | | 901,418 | |
Capital shares issued in reinvestment of dividends [ 5,820 and 1,847 shares, respectively ] | | | 75,142 | | | | 27,561 | |
Capital shares repurchased [ (58,282) and (28,317) shares , respectively] | | | (764,470 | ) | | | (392,385 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 222,722 | | | | 536,594 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 251,535 | | | | (358,526 | ) |
NET ASSETS: | |
Beginning of year | | | 5,119,663 | | | | 5,478,189 | |
| | | | | | | | |
End of year | | $ | 5,371,198 | | | $ | 5,119,663 | |
| | | | | | | | |
See Notes to Financial Statements.
132
1290 FUNDS
1290 RETIREMENT 2055 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 12.65 | | | $ | 15.00 | | | $ | 11.73 | | | $ | 12.32 | | | $ | 11.04 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.24 | | | | 0.26 | | | | 0.16 | | | | 0.23 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.32 | | | | (2.37 | ) | | | 3.45 | | | | (0.58 | ) | | | 1.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.56 | | | | (2.11 | ) | | | 3.61 | | | | (0.35 | ) | | | 1.54 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (0.27 | ) | | | (0.17 | ) | | | (0.21 | ) | | | (0.23 | ) | | | (0.21 | ) |
Distributions from net realized gains | | | (0.22 | ) | | | (0.07 | ) | | | (0.13 | ) | | | (0.01 | ) | | | (0.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.49 | ) | | | (0.24 | ) | | | (0.34 | ) | | | (0.24 | ) | | | (0.26 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.72 | | | $ | 12.65 | | | $ | 15.00 | | | $ | 11.73 | | | $ | 12.32 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.36 | % | | | (14.34 | )% | | | 31.27 | % | | | (2.97 | )% | | | 14.29 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | |
Net assets, end of year (000’s) | | $ | 5,371 | | | $ | 5,120 | | | $ | 5,478 | | | $ | 3,883 | | | $ | 3,545 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.53 | %(j) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (f) | | | 2.83 | % | | | 2.86 | % | | | 3.11 | % | | | 4.34 | % | | | 4.74 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.81 | % | | | 1.88 | % | | | 1.16 | % | | | 1.97 | % | | | 1.95 | % |
Before waivers and reimbursements (f)(x) | | | (0.49 | )% | | | (0.46 | )% | | | (1.43 | )% | | | (1.84 | )% | | | (2.27 | )% |
Portfolio turnover rate^ | | | 12 | % | | | 5 | % | | | 2 | % | | | 6 | % | | | 2 | % |
| ** | Includes Tax expense of 0.01. |
| ^ | 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 0.66 in 2020 and 0.65 in 2023, 2022, 2021 and 2019. |
| (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.
133
1290 RETIREMENT 2060 FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
PERFORMANCE RESULTS
| | | | | | | | | | | | |
| |
| Annualized Total Returns as of 10/31/23 | |
| | | | |
| | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class I Shares* | | | 4.63 | % | | | 5.80 | % | | | 6.18 | % |
S&P Target Date 2060+ Index | | | 8.55 | | | | 6.90 | | | | 6.90 | |
| |
* Date of inception 2/27/17. Returnsfor 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 10/31/23. 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, 2023, the gross expense ratio including acquired fund fees for Class I shares was 2.88%. 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, 2024. 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 4.63% for the year ended October 31, 2023. The Fund’s benchmark, the S&P Target Date 2060+ Index, returned 8.55% over the same year.
Overview
Market notes
The Fund’s asset allocation covers the global equity and bond markets, and includes positions in low-volatility securities. The global markets reflected conflicting expectations for central bank interest-rate policies and global economic resilience in the face of higher inflation, rising borrowing costs and an uneven global recovery from the stresses of the COVID-19 and post-COVID era.
U.S. large-cap stocks delivered positive returns of 10.1% for the 12-month period ending 10/31/23 for the S&P 500 Index, with the bulk of gains attributable to a handful of mega-cap technology stocks. U.S. small-cap stocks fell sharply, with the Russell 2000 Index down 8.6% for the period. The rest of the developed world outpaced the U.S., with a 14.4% rise in the MSCI EAFE Index. Low-volatility stock returns in both the U.S. and the rest of the world were muted, with the MSCI All Country World Minimum Volatility Index up only 3.6%. Turning to the fixed-income markets, U.S. bonds contributed a 0.4% increase from the Bloomberg U.S. Aggregate Bond Index, with more substantial rewards further out the credit spectrum as the ICE BofA U.S. High Yield Index rose 5.9%.
What helped performance during the year?
| • | | In terms of equity, the Fund’s roughly 97% allocation to equities contributed all the positive gains from an absolute perspective. The top contributors within equities were U.S. large-cap stocks and developed-world (international) equities. Emerging markets equities also contributed a modest gain. |
| • | | The Fund’s 3% allocation to bonds saw flat, albeit slightly positive, returns from intermediate maturity securities. |
What hurt performance during the year?
| • | | Low-volatility exposure detracted across domestic, international, and emerging equity markets with market cap methodologies leading low volatility methodologies over the year. |
| • | | Holding no dedicated exposure to short duration securities in a rising rate environment hurt relative performance. |
134
1290 RETIREMENT 2060 FUND (Unaudited)
| | | | |
| | |
Table by Asset Class (as a percentage of Total
Investments in Securities) As of October 31, 2023 | | | |
Equity | | | 97.2 | % |
Fixed Income | | | 2.8 | |
| | | | |
| |
Top 10 Holdings (as a percentage of Total Investments in
Securities) As of October 31, 2023 | |
iShares Core S&P Total US Stock Market ETF | | | 33.8 | % |
iShares Core MSCI EAFE ETF | | | 11.8 | |
Invesco S&P 500 Low Volatility ETF | | | 11.6 | |
iShares MSCI USA Min Vol Factor ETF | | | 11.6 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 6.0 | |
Invesco S&P International Developed Low Volatility ETF | | | 6.0 | |
Invesco S&P MidCap Low Volatility ETF | | | 6.0 | |
Invesco S&P SmallCap Low Volatility ETF | | | 2.7 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 2.7 | |
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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses
Paid
During
Period*
5/1/23 -
10/31/23 | |
Class I | |
Actual | | | $1,000.00 | | | | $962.60 | | | | $2.58 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,022.57 | | | | 2.66 | |
| |
* Expenses are equal to the Fund’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). | |
135
1290 FUNDS
1290 RETIREMENT 2060 FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
| | | | | | | | |
EXCHANGE TRADED FUNDS (ETF): | |
Equity (97.1%) | |
Invesco S&P 500 Low Volatility ETF | | | 11,910 | | | $ | 695,306 | |
Invesco S&P Emerging Markets Low Volatility ETF | | | 3,570 | | | | 78,540 | |
Invesco S&P International Developed Low Volatility ETF | | | 13,890 | | | | 358,501 | |
Invesco S&P MidCap Low Volatility ETF | | | 7,400 | | | | 356,771 | |
Invesco S&P SmallCap Low Volatility ETF | | | 4,240 | | | | 162,605 | |
iShares Core MSCI EAFE ETF | | | 11,320 | | | | 705,915 | |
iShares Core MSCI Emerging Markets ETF | | | 3,380 | | | | 155,277 | |
iShares Core S&P Total US Stock Market ETF | | | 22,100 | | | | 2,025,907 | |
iShares MSCI EAFE Min Vol Factor ETF | | | 5,600 | | | | 358,736 | |
iShares MSCI Emerging Markets Min Vol Factor ETF | | | 1,580 | | | | 81,718 | |
iShares MSCI USA Min Vol Factor ETF | | | 9,680 | | | | 694,540 | |
SPDR SSGA US Small Cap Low Volatility Index ETF | | | 1,680 | | | | 159,384 | |
| | | | | | | | |
Total Equity | | | | | | | 5,833,200 | |
| | | | | | | | |
Fixed Income (2.7%) | |
iShares Core U.S. Aggregate Bond ETF | | | 1,510 | | | | 139,388 | |
iShares TIPS Bond ETF | | | 250 | | | | 25,700 | |
| | | | | | | | |
Total Fixed Income | | | | | | | 165,088 | |
| | | | | | | | |
Total Investments in Securities (99.8%)
(Cost $5,460,986) | | | | | | | 5,998,288 | |
Other Assets Less Liabilities (0.2%) | | | | | | | 10,861 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 6,009,149 | |
| | | | | | | | |
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, 2023:
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 | | $ | 5,998,288 | | | $ | — | | | $ | — | | | $ | 5,998,288 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 5,998,288 | | | $ | — | | | $ | — | | | $ | 5,998,288 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total | | $ | 5,998,288 | | | $ | — | | | $ | — | | | $ | 5,998,288 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 1,066,322 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 383,345 | |
See Notes to Financial Statements.
136
1290 FUNDS
1290 RETIREMENT 2060 FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
As of October 31, 2023, 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 | | $ | 656,646 | |
Aggregate gross unrealized depreciation | | | (131,955 | ) |
| | | | |
Net unrealized appreciation | | $ | 524,691 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 5,473,597 | |
| | | | |
See Notes to Financial Statements.
137
1290 FUNDS
1290 RETIREMENT 2060 FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (Cost $5,460,986) | | $ | 5,998,288 | |
Cash | | | 32,872 | |
Receivable from investment adviser | | | 8,351 | |
Receivable for Fund shares sold | | | 6,597 | |
Prepaid registration and filing fees | | | 4,561 | |
Securities lending income receivable | | | 173 | |
Other assets | | | 51 | |
| | | | |
Total assets | | | 6,050,893 | |
| | | | |
LIABILITIES | | | | |
Accrued professional fees | | | 36,767 | |
Transfer agent fees payable | | | 1,796 | |
Trustees’ fees payable | | | 17 | |
Accrued expenses | | | 3,164 | |
| | | | |
Total liabilities | | | 41,744 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 6,009,149 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 5,349,761 | |
Total distributable earnings (loss) | | | 659,388 | |
| | | | |
Net assets | | $ | 6,009,149 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $6,009,149 / 467,237 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 12.86 | |
| | | | |
| ^ | See Note 2 in Notes to the Financial Statements. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
|
INVESTMENT INCOME | |
Dividends | | $ | 127,030 | |
Interest | | | 1,989 | |
Securities lending (net) | | | 4,197 | |
| | | | |
Total income | | | 133,216 | |
| | | | |
EXPENSES | |
Professional fees | | | 46,219 | |
Administrative fees | | | 30,000 | |
Investment advisory fees | | | 29,041 | |
Registration and filing fees | | | 19,304 | |
Printing and mailing expenses | | | 12,458 | |
Transfer agent fees | | | 11,800 | |
Custodian fees | | | 5,500 | |
Trustees’ fees | | | 164 | |
Miscellaneous | | | 5,005 | |
| | | | |
Gross expenses | | | 159,491 | |
Less: Waiver from investment adviser | | | (59,041 | ) |
Reimbursement from investment adviser | | | (70,055 | ) |
| | | | |
Net expenses | | | 30,395 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 102,821 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | | | | |
Net realized gain (loss) on investments in securities | | | 71,819 | |
Net change in unrealized appreciation (depreciation) on investments in securities | | | 48,443 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 120,262 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 223,083 | |
| | | | |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 102,821 | | | $ | 102,750 | |
Net realized gain (loss) | | | 71,819 | | | | 94,052 | |
Net change in unrealized appreciation (depreciation) | | | 48,443 | | | | (1,048,819 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 223,083 | | | | (852,017 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class I | | | (211,104 | ) | | | (116,998 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 112,639 and 83,004 shares, respectively ] | | | 1,484,540 | | | | 1,152,423 | |
Capital shares issued in reinvestment of dividends [ 6,061 and 2,586 shares, respectively ] | | | 78,969 | | | | 38,948 | |
Capital shares repurchased [ (55,092) and (54,036) shares , respectively] | | | (729,068 | ) | | | (717,525 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 834,441 | | | | 473,846 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 846,420 | | | | (495,169 | ) |
NET ASSETS: | | | | | | | | |
Beginning of year | | | 5,162,729 | | | | 5,657,898 | |
| | | | | | | | |
End of year | | $ | 6,009,149 | | | $ | 5,162,729 | |
| | | | | | | | |
See Notes to Financial Statements.
138
1290 FUNDS
1290 RETIREMENT 2060 FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 12.79 | | | $ | 15.21 | | | $ | 11.77 | | | $ | 12.38 | | | $ | 11.07 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e)(x) | | | 0.24 | | | | 0.25 | | | | 0.16 | | | | 0.24 | | | | 0.22 | |
Net realized and unrealized gain (loss) | | | 0.36 | | | | (2.36 | ) | | | 3.66 | | | | (0.61 | ) | | | 1.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.60 | | | | (2.11 | ) | | | 3.82 | | | | (0.37 | ) | | | 1.56 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.28 | ) | | | (0.16 | ) | | | (0.22 | ) | | | (0.22 | ) | | | (0.21 | ) |
Distributions from net realized gains | | | (0.25 | ) | | | (0.15 | ) | | | (0.16 | ) | | | (0.02 | ) | | | (0.04 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.53 | ) | | | (0.31 | ) | | | (0.38 | ) | | | (0.24 | ) | | | (0.25 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 12.86 | | | $ | 12.79 | | | $ | 15.21 | | | $ | 11.77 | | | $ | 12.38 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 4.63 | % | | | (14.17 | )% | | | 33.13 | % | | | (3.11 | )% | | | 14.43 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 6,009 | | | $ | 5,163 | | | $ | 5,658 | | | $ | 3,818 | | | $ | 3,490 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.52 | %(j) | | | 0.53 | %**(j) | | | 0.52 | %(j) |
Before waivers and reimbursements (f) | | | 2.75 | % | | | 2.75 | % | | | 3.24 | % | | | 4.31 | % | | | 4.83 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f)(x) | | | 1.77 | % | | | 1.84 | % | | | 1.13 | % | | | 2.01 | % | | | 1.93 | % |
Before waivers and reimbursements (f)(x) | | | (0.45 | )% | | | (0.39 | )% | | | (1.58 | )% | | | (1.78 | )% | | | (2.39 | )% |
Portfolio turnover rate^ | | | 7 | % | | | 8 | % | | | 4 | % | | | 9 | % | | | 2 | % |
| ** | Includes Tax expense of 0.01%. |
| ^ | 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 0.66% in 2020 and 0.65% in 2023, 2022, 2021 and 2019. |
| (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.
139
1290 SMARTBETA EQUITY FUND (Unaudited)
INVESTMENT ADVISER
| Ø | | Equitable Investment Management, LLC |
INVESTMENT SUB-ADVISER
| Ø | | AXA Investment Managers US Inc. |
PERFORMANCE RESULTS
| | | | | | | | | | | | | | | | |
Annualized Total Returns as of 10/31/23 | |
| | | | | |
| | | | | | 1
Year | | | 5
Years | | | Since
Incept. | |
Fund – Class A Shares* | | | without Sales Charge | | | | 6.14 | % | | | 7.64 | % | | | 7.08 | % |
| | | | with Sales Charge (a) | | | | 0.33 | | | | 6.43 | | | | 6.41 | |
Fund – Class I Shares* | | | | | | | 6.46 | | | | 7.92 | | | | 7.35 | |
Fund – Class R Shares* | | | | | | | 5.90 | | | | 7.37 | | | | 6.81 | |
Fund – Class T Shares*† | | | without Sales Charge | | | | 6.46 | | | | 7.92 | | | | 7.35 | |
| | | | with Sales Charge (b) | | | | 3.83 | | | | 7.38 | | | | 7.05 | |
MSCI World (Net) Index | | | | | | | 10.48 | | | | 8.27 | | | | 7.38 | |
| |
* 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 10/31/23. 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, 2023, the gross expense ratios for Class A, I, R and T shares were 1.42%, 1.17%, 1.68% and 1.42%, respectively. The net expense ratios for Class A, I, R and T shares were 1.10%, 0.85%, 1.35% and 0.85%, respectively. The net expense ratios reflect the Adviser’s decision to contractually limit expenses through April 30, 2024. 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 6.46% for the year ended October 31, 2023. The Fund’s benchmark, the MSCI World (Net) Index, returned 10.48% over the same year.
Overview — AXA Investment Managers US Inc.
What helped performance during the year?
| • | | Although volatile, the quality and the low-volatility exposure of the Fund contributed positively to active returns. Companies demonstrating high earnings and balance sheet quality delivered above benchmark returns in aggregate while a lower beta and a lower volatility were also rewarded. |
| • | | Overweight insurers and underweight regional banks contributed positively during the period. |
What hurt performance during the year?
| • | | Underweight exposure in some segments of the technology sector, such as semiconductors, internet software and services, and IT software and services, detracted. |
| • | | Stock level underweightings in Nvidia Corp. and Amazon.com, Inc. detracted as these stocks rose strongly, supported by expected growth in Artificial Intelligence (AI) and green technologies. A zero-weighting in Meta Platforms, Inc. detracted. The stock was excluded from the selection universe due to controversies surrounding use of customer data and data privacy. |
| • | | Overweighting defensive companies in the food and drinks segment detracted in a more “risk-on” environment. |
140
1290 SMARTBETA EQUITY FUND (Unaudited)
| | | | |
| | |
Sector Weightings
as of October 31, 2023 | | % of
Net Assets | |
Information Technology | | | 18.3 | % |
Financials | | | 18.1 | |
Industrials | | | 17.3 | |
Health Care | | | 11.6 | |
Consumer Staples | | | 11.4 | |
Consumer Discretionary | | | 6.5 | |
Communication Services | | | 5.7 | |
Utilities | | | 3.8 | |
Materials | | | 2.0 | |
Real Estate | | | 1.9 | |
Energy | | | 1.9 | |
Investment Companies | | | 1.3 | |
Cash and Other | | | 0.2 | |
| | | | | |
| | | | 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, 2023 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
5/1/23 | | | Ending
Account
Value
10/31/23 | | | Expenses Paid During Period* 5/1/23 -
10/31/23 | |
Class A | |
Actual | | | $1,000.00 | | | | $967.50 | | | | $5.45 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,019.66 | | | | 5.60 | |
Class I | |
Actual | | | 1,000.00 | | | | 968.90 | | | | 4.22 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | |
Class R | |
Actual | | | 1,000.00 | | | | 966.20 | | | | 6.69 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,018.40 | | | | 6.87 | |
Class T | |
Actual | | | 1,000.00 | | | | 968.90 | | | | 4.22 | |
Hypothetical (5% average annual return before expenses) | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | |
| |
* Expenses are equal to the Fund’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). | |
141
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
COMMON STOCKS: | |
Communication Services (5.7%) | |
Diversified Telecommunication Services (1.9%) | |
AT&T, Inc. | | | 28,500 | | | $ | 438,900 | |
Nippon Telegraph & Telephone Corp. | | | 212,500 | | | | 247,864 | |
Quebecor, Inc., Class B | | | 8,300 | | | | 171,237 | |
Spark New Zealand Ltd. | | | 84,881 | | | | 245,775 | |
Swisscom AG (Registered) | | | 922 | | | | 551,386 | |
Telenor ASA | | | 17,872 | | | | 182,624 | |
Telstra Group Ltd. | | | 133,153 | | | | 321,814 | |
Verizon Communications, Inc. | | | 41,800 | | | | 1,468,434 | |
| | | | | | | | |
| | | | | | | 3,628,034 | |
| | | | | | | | |
Interactive Media & Services (2.5%) | |
Alphabet, Inc., Class A* | | | 35,300 | | | | 4,380,024 | |
Meta Platforms, Inc., Class A* | | | 736 | | | | 221,735 | |
| | | | | | | | |
| | | | | | | 4,601,759 | |
| | | | | | | | |
Media (0.8%) | |
Charter Communications, Inc., Class A* | | | 544 | | | | 219,123 | |
Comcast Corp., Class A | | | 29,100 | | | | 1,201,539 | |
| | | | | | | | |
| | | | | | | 1,420,662 | |
| | | | | | | | |
Wireless Telecommunication Services (0.5%) | |
KDDI Corp. | | | 12,700 | | | | 375,952 | |
T-Mobile US, Inc.* | | | 3,703 | | | | 532,714 | |
| | | | | | | | |
| | | | | | | 908,666 | |
| | | | | | | | |
Total Communication Services | | | | | | | 10,559,121 | |
| | | | | | | | |
Consumer Discretionary (6.5%) | |
Automobile Components (0.2%) | |
Bridgestone Corp. | | | 8,900 | | | | 332,748 | |
| | | | | | | | |
Automobiles (0.7%) | |
Bayerische Motoren Werke AG | | | 4,953 | | | | 459,249 | |
Mercedes-Benz Group AG | | | 8,206 | | | | 481,286 | |
Tesla, Inc.* | | | 2,172 | | | | 436,224 | |
| | | | | | | | |
| | | | | | | 1,376,759 | |
| | | | | | | | |
Broadline Retail (1.5%) | |
Amazon.com, Inc.* | | | 17,600 | | | | 2,342,384 | |
Dollarama, Inc. | | | 2,900 | | | | 198,039 | |
Wesfarmers Ltd. | | | 10,269 | | | | 329,094 | |
| | | | | | | | |
| | | | | | | 2,869,517 | |
| | | | | | | | |
Distributors (0.2%) | |
Genuine Parts Co. | | | 1,000 | | | | 128,860 | |
Pool Corp. | | | 555 | | | | 175,252 | |
| | | | | | | | |
| | | | | | | 304,112 | |
| | | | | | | | |
Hotels, Restaurants & Leisure (0.3%) | |
Aristocrat Leisure Ltd. | | | 8,814 | | | | 215,427 | |
Chipotle Mexican Grill, Inc., Class A* | | | 200 | | | | 388,440 | |
| | | | | | | | |
| | | | | | | 603,867 | |
| | | | | | | | |
Household Durables (0.4%) | |
DR Horton, Inc. | | | 1,900 | | | | 198,360 | |
Lennar Corp., Class A | | | 1,600 | | | | 170,688 | |
Sekisui House Ltd. | | | 17,200 | | | | 333,504 | |
| | | | | | | | |
| | | | | | | 702,552 | |
| | | | | | | | |
Specialty Retail (2.7%) | |
AutoZone, Inc.* | | | 200 | | | | 495,426 | |
Best Buy Co., Inc. | | | 2,600 | | | | 173,732 | |
Home Depot, Inc. (The) | | | 5,600 | | | | 1,594,264 | |
Industria de Diseno Textil SA(x) | | | 5,279 | | | | 181,815 | |
Lowe’s Cos., Inc. | | | 4,100 | | | | 781,337 | |
O’Reilly Automotive, Inc.* | | | 741 | | | | 689,456 | |
TJX Cos., Inc. (The) | | | 6,800 | | | | 598,876 | |
Tractor Supply Co. | | | 1,400 | | | | 269,584 | |
Ulta Beauty, Inc.* | | | 400 | | | | 152,524 | |
| | | | | | | | |
| | | | | | | 4,937,014 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods (0.5%) | |
Kering SA | | | 311 | | | | 126,099 | |
LVMH Moet Hennessy Louis Vuitton SE | | | 258 | | | | 184,132 | |
NIKE, Inc., Class B | | | 5,500 | | | | 565,235 | |
| | | | | | | | |
| | | | | | | 875,466 | |
| | | | | | | | |
Total Consumer Discretionary | | | | | | | 12,002,035 | |
| | | | | | | | |
Consumer Staples (11.4%) | |
Beverages (2.6%) | |
Brown-Forman Corp., Class B | | | 3,900 | | | | 219,024 | |
Carlsberg A/S, Class B | | | 1,112 | | | | 132,423 | |
Coca-Cola Co. (The) | | | 34,800 | | | | 1,965,852 | |
Diageo plc | | | 7,117 | | | | 268,767 | |
Keurig Dr Pepper, Inc. | | | 10,132 | | | | 307,304 | |
Monster Beverage Corp.* | | | 3,314 | | | | 169,345 | |
PepsiCo, Inc. | | | 11,000 | | | | 1,796,080 | |
| | | | | | | | |
| | | | | | | 4,858,795 | |
| | | | | | | | |
Consumer Staples Distribution & Retail (2.7%) | |
Coles Group Ltd. | | | 17,307 | | | | 167,645 | |
Costco Wholesale Corp. | | | 3,168 | | | | 1,750,130 | |
Dollar General Corp. | | | 1,700 | | | | 202,368 | |
George Weston Ltd. | | | 2,100 | | | | 227,786 | |
Koninklijke Ahold Delhaize NV | | | 14,652 | | | | 434,092 | |
Loblaw Cos. Ltd. | | | 2,300 | | | | 188,113 | |
Walmart, Inc. | | | 9,800 | | | | 1,601,418 | |
Woolworths Group Ltd. | | | 14,776 | | | | 330,122 | |
| | | | | | | | |
| | | | | | | 4,901,674 | |
| | | | | | | | |
Food Products (3.2%) | |
Ajinomoto Co., Inc. | | | 4,600 | | | | 166,307 | |
Archer-Daniels-Midland Co. | | | 8,100 | | | | 579,717 | |
Danone SA | | | 5,704 | | | | 338,888 | |
General Mills, Inc. | | | 11,700 | | | | 763,308 | |
Hershey Co. (The) | | | 3,500 | | | | 655,725 | |
J M Smucker Co. (The) | | | 2,200 | | | | 250,448 | |
Kellogg Co. | | | 7,700 | | | | 388,619 | |
McCormick & Co., Inc. (Non-Voting) | | | 2,100 | | | | 134,190 | |
Mondelez International, Inc., Class A | | | 18,800 | | | | 1,244,748 | |
Nestle SA (Registered) | | | 12,000 | | | | 1,293,596 | |
| | | | | | | | |
| | | | | | | 5,815,546 | |
| | | | | | | | |
Household Products (2.3%) | |
Church & Dwight Co., Inc. | | | 2,000 | | | | 181,880 | |
Colgate-Palmolive Co. | | | 12,800 | | | | 961,536 | |
Henkel AG & Co. KGaA (Preference)(q) | | | 3,969 | | | | 285,909 | |
Kimberly-Clark Corp. | | | 6,100 | | | | 729,804 | |
See Notes to Financial Statements.
142
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Procter & Gamble Co. (The) | | | 14,100 | | | $ | 2,115,423 | |
| | | | | | | | |
| | | | | | | 4,274,552 | |
| | | | | | | | |
Personal Care Products (0.6%) | |
Beiersdorf AG | | | 2,994 | | | | 392,984 | |
L’Oreal SA | | | 776 | | | | 325,273 | |
Unilever plc (Cboe Europe) | | | 4,078 | | | | 192,640 | |
Unilever plc (London Stock Exchange) | | | 5,289 | | | | 250,005 | |
| | | | | | | | |
| | | | | | | 1,160,902 | |
| | | | | | | | |
Total Consumer Staples | | | | | | | 21,011,469 | |
| | | | | | | | |
Energy (1.9%) | |
Oil, Gas & Consumable Fuels (1.9%) | |
Chevron Corp. | | | 4,500 | | | | 655,785 | |
Enbridge, Inc. | | | 35,500 | | | | 1,137,638 | |
Equinor ASA | | | 16,118 | | | | 540,275 | |
Exxon Mobil Corp. | | | 10,600 | | | | 1,122,010 | |
| | | | | | | | |
Total Energy | | | | | | | 3,455,708 | |
| | | | | | | | |
Financials (18.1%) | |
Banks (5.3%) | |
Bank Hapoalim BM | | | 42,421 | | | | 302,992 | |
Bank of America Corp. | | | 19,100 | | | | 503,094 | |
Bank of Montreal | | | 9,600 | | | | 725,426 | |
Bank of Nova Scotia (The) | | | 22,900 | | | | 927,229 | |
Canadian Imperial Bank of Commerce | | | 9,000 | | | | 317,426 | |
Commonwealth Bank of Australia | | | 2,502 | | | | 153,255 | |
DBS Group Holdings Ltd. | | | 11,000 | | | | 263,923 | |
Israel Discount Bank Ltd., Class A | | | 31,153 | | | | 136,805 | |
JPMorgan Chase & Co. | | | 7,400 | | | | 1,029,044 | |
Mitsubishi UFJ Financial Group, Inc. | | | 48,200 | | | | 399,719 | |
Mizuho Financial Group, Inc. | | | 17,700 | | | | 297,248 | |
National Bank of Canada(x) | | | 6,200 | | | | 385,480 | |
Nordea Bank Abp (Aquis Stock Exchange) | | | 23,265 | | | | 244,665 | |
Nordea Bank Abp (Turquoise Stock Exchange) | | | 13,972 | | | | 146,824 | |
Oversea-Chinese Banking Corp. Ltd. | | | 22,500 | | | | 208,377 | |
Royal Bank of Canada (x) | | | 18,600 | | | | 1,485,586 | |
Sumitomo Mitsui Financial Group, Inc. | | | 10,000 | | | | 476,332 | |
Toronto-Dominion Bank (The) | | | 21,900 | | | | 1,223,273 | |
United Overseas Bank Ltd. | | | 27,600 | | | | 544,682 | |
| | | | | | | | |
| | | | | | | 9,771,380 | |
| | | | | | | | |
Capital Markets (2.9%) | |
Ameriprise Financial, Inc. | | | 1,500 | | | | 471,855 | |
ASX Ltd. | | | 7,512 | | | | 267,473 | |
Bank of New York Mellon Corp. (The) | | | 7,700 | | | | 327,250 | |
BlackRock, Inc. | | | 683 | | | | 418,187 | |
Cboe Global Markets, Inc. | | | 1,900 | | | | 311,391 | |
CME Group, Inc. | | | 1,900 | | | | 405,574 | |
Daiwa Securities Group, Inc. | | | 33,000 | | | | 188,105 | |
Deutsche Boerse AG | | | 2,051 | | | | 336,809 | |
FactSet Research Systems, Inc. | | | 400 | | | | 172,756 | |
Hong Kong Exchanges & Clearing Ltd. | | | 4,900 | | | | 172,199 | |
Intercontinental Exchange, Inc. | | | 4,700 | | | | 504,968 | |
Moody’s Corp. | | | 1,700 | | | | 523,600 | |
Nasdaq, Inc. | | | 3,400 | | | | 168,640 | |
S&P Global, Inc. | | | 2,100 | | | | 733,551 | |
State Street Corp. | | | 2,800 | | | | 180,964 | |
TMX Group Ltd. | | | 9,500 | | | | 197,844 | |
| | | | | | | | |
| | | | | | | 5,381,166 | |
| | | | | | | | |
Consumer Finance (0.4%) | |
American Express Co. | | | 4,900 | | | | 715,547 | |
| | | | | | | | |
Financial Services (2.7%) | |
Berkshire Hathaway, Inc., Class B* | | | 4,500 | | | | 1,535,985 | |
Fiserv, Inc.* | | | 5,339 | | | | 607,311 | |
Mastercard, Inc., Class A | | | 3,300 | | | | 1,241,955 | |
Visa, Inc., Class A | | | 7,000 | | | | 1,645,700 | |
| | | | | | | | |
| | | | | | | 5,030,951 | |
| | | | | | | | |
Insurance (6.8%) | |
Admiral Group plc | | | 5,511 | | | | 163,640 | |
Aflac, Inc. | | | 8,800 | | | | 687,368 | |
Allianz SE (Registered) | | | 3,356 | | | | 784,412 | |
American International Group, Inc. | | | 5,400 | | | | 331,074 | |
Aon plc, Class A | | | 2,200 | | | | 680,680 | |
Assicurazioni Generali SpA | | | 20,746 | | | | 411,478 | |
Chubb Ltd. | | | 2,400 | | | | 515,088 | |
Hannover Rueck SE | | | 1,052 | | | | 231,863 | |
Hartford Financial Services Group, Inc. (The) | | | 2,600 | | | | 190,970 | |
Intact Financial Corp. | | | 3,000 | | | | 421,503 | |
Loews Corp. | | | 5,300 | | | | 339,253 | |
Manulife Financial Corp. | | | 23,400 | | | | 407,338 | |
Marsh & McLennan Cos., Inc. | | | 7,000 | | | | 1,327,550 | |
MS&AD Insurance Group Holdings, Inc. | | | 8,500 | | | | 308,036 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | | | 1,959 | | | | 784,562 | |
NN Group NV | | | 7,477 | | | | 239,399 | |
Progressive Corp. (The) | | | 2,800 | | | | 442,652 | |
Prudential Financial, Inc. | | | 3,700 | | | | 338,328 | |
Sampo OYJ, Class A | | | 10,515 | | | | 412,883 | |
Sompo Holdings, Inc. | | | 9,600 | | | | 412,121 | |
Sun Life Financial, Inc. | | | 10,300 | | | | 470,454 | |
Swiss Re AG | | | 3,896 | | | | 424,528 | |
Tokio Marine Holdings, Inc. | | | 17,500 | | | | 385,964 | |
Travelers Cos., Inc. (The) | | | 4,400 | | | | 736,736 | |
W R Berkley Corp. | | | 3,600 | | | | 242,712 | |
Zurich Insurance Group AG | | | 1,542 | | | | 729,935 | |
| | | | | | | | |
| | | | | | | 12,420,527 | |
| | | | | | | | |
Total Financials | | | | | | | 33,319,571 | |
| | | | | | | | |
Health Care (11.6%) | |
Biotechnology (0.6%) | |
Amgen, Inc. | | | 2,106 | | | | 538,504 | |
Gilead Sciences, Inc. | | | 2,100 | | | | 164,934 | |
Vertex Pharmaceuticals, Inc.* | | | 1,267 | | | | 458,794 | |
| | | | | | | | |
| | | | | | | 1,162,232 | |
| | | | | | | | |
Health Care Equipment & Supplies (2.7%) | |
Abbott Laboratories | | | 15,400 | | | | 1,456,070 | |
Becton Dickinson & Co. | | | 3,000 | | | | 758,340 | |
Boston Scientific Corp.* | | | 10,300 | | | | 527,257 | |
Edwards Lifesciences Corp.* | | | 7,400 | | | | 471,528 | |
IDEXX Laboratories, Inc.* | | | 562 | | | | 224,502 | |
Medtronic plc | | | 13,400 | | | | 945,504 | |
ResMed, Inc. | | | 1,200 | | | | 169,464 | |
See Notes to Financial Statements.
143
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Stryker Corp. | | | 1,300 | | | $ | 351,286 | |
| | | | | | | | |
| | | | | | | 4,903,951 | |
| | | | | | | | |
Health Care Providers & Services (3.0%) | |
Cencora, Inc. | | | 2,200 | | | | 407,330 | |
Cigna Group (The) | | | 1,800 | | | | 556,560 | |
CVS Health Corp. | | | 9,500 | | | | 655,595 | |
Elevance Health, Inc. | | | 1,700 | | | | 765,153 | |
HCA Healthcare, Inc. | | | 1,100 | | | | 248,754 | |
McKesson Corp. | | | 1,700 | | | | 774,112 | |
UnitedHealth Group, Inc. | | | 3,800 | | | | 2,035,128 | |
| | | | | | | | |
| | | | | | | 5,442,632 | |
| | | | | | | | |
Life Sciences Tools & Services (0.4%) | |
Agilent Technologies, Inc. | | | 3,500 | | | | 361,795 | |
Mettler-Toledo International, Inc.* | | | 200 | | | | 197,040 | |
Waters Corp.* | | | 900 | | | | 214,677 | |
| | | | | | | | |
| | | | | | | 773,512 | |
| | | | | | | | |
Pharmaceuticals (4.9%) | |
AstraZeneca plc | | | 1,309 | | | | 163,080 | |
Bristol-Myers Squibb Co. | | | 10,700 | | | | 551,371 | |
Eli Lilly and Co. | | | 2,400 | | | | 1,329,432 | |
GSK plc | | | 11,495 | | | | 203,622 | |
Johnson & Johnson | | | 13,979 | | | | 2,073,645 | |
Merck & Co., Inc. | | | 10,600 | | | | 1,088,620 | |
Merck KGaA | | | 2,813 | | | | 423,696 | |
Novartis AG (Registered) | | | 8,181 | | | | 760,316 | |
Novo Nordisk A/S, Class B | | | 8,130 | | | | 780,296 | |
Roche Holding AG | | | 2,282 | | | | 586,649 | |
Sanofi SA | | | 4,752 | | | | 430,907 | |
Zoetis, Inc., Class A | | | 4,600 | | | | 722,200 | |
| | | | | | | | |
| | | | | | | 9,113,834 | |
| | | | | | | | |
Total Health Care | | | | | | | 21,396,161 | |
| | | | | | | | |
Industrials (17.3%) | |
Aerospace & Defense (1.3%) | |
Airbus SE | | | 2,956 | | | | 394,972 | |
General Dynamics Corp. | | | 1,900 | | | | 458,489 | |
Lockheed Martin Corp. | | | 1,800 | | | | 818,352 | |
Northrop Grumman Corp. | | | 1,500 | | | | 707,145 | |
| | | | | | | | |
| | | | | | | 2,378,958 | |
| | | | | | | | |
Air Freight & Logistics (0.8%) | |
Deutsche Post AG | | | 8,646 | | | | 336,293 | |
Expeditors International of Washington, Inc. | | | 4,800 | | | | 524,400 | |
United Parcel Service, Inc., Class B | | | 4,700 | | | | 663,875 | |
| | | | | | | | |
| | | | | | | 1,524,568 | |
| | | | | | | | |
Building Products (1.6%) | |
Allegion plc | | | 5,500 | | | | 540,980 | |
Assa Abloy AB, Class B | | | 13,662 | | | | 290,682 | |
Carrier Global Corp. | | | 8,600 | | | | 409,876 | |
Geberit AG (Registered) | | | 619 | | | | 287,027 | |
Johnson Controls International plc | | | 9,200 | | | | 450,984 | |
Trane Technologies plc | | | 4,500 | | | | 856,395 | |
| | | | | | | | |
| | | | | | | 2,835,944 | |
| | | | | | | | |
Commercial Services & Supplies (1.2%) | |
Brambles Ltd. | | | 40,979 | | | | 340,795 | |
Cintas Corp. | | | 844 | | | | 428,009 | |
Copart, Inc.* | | | 10,314 | | | | 448,865 | |
Republic Services, Inc., Class A | | | 1,100 | | | | 163,339 | |
Secom Co. Ltd. | | | 2,500 | | | | 172,357 | |
Waste Management, Inc. | | | 4,300 | | | | 706,619 | |
| | | | | | | | |
| | | | | | | 2,259,984 | |
| | | | | | | | |
Construction & Engineering (0.1%) | |
WSP Global, Inc. | | | 1,400 | | | | 183,224 | |
| | | | | | | | |
Electrical Equipment (1.0%) | |
ABB Ltd. (Registered) | | | 10,619 | | | | 355,348 | |
Eaton Corp. plc | | | 4,900 | | | | 1,018,759 | |
Schneider Electric SE | | | 2,328 | | | | 357,123 | |
| | | | | | | | |
| | | | | | | 1,731,230 | |
| | | | | | | | |
Ground Transportation (1.8%) | |
Canadian National Railway Co. | | | 7,400 | | | | 782,983 | |
CSX Corp. | | | 26,701 | | | | 797,025 | |
Hankyu Hanshin Holdings, Inc. | | | 8,100 | | | | 252,606 | |
Old Dominion Freight Line, Inc. | | | 700 | | | | 263,662 | |
Union Pacific Corp. | | | 6,100 | | | | 1,266,421 | |
| | | | | | | | |
| | | | | | | 3,362,697 | |
| | | | | | | | |
Industrial Conglomerates (1.4%) | |
General Electric Co. | | | 6,600 | | | | 716,958 | |
Hitachi Ltd. | | | 4,100 | | | | 256,347 | |
Honeywell International, Inc. | | | 7,100 | | | | 1,301,146 | |
Siemens AG (Registered) | | | 2,495 | | | | 329,889 | |
| | | | | | | | |
| | | | | | | 2,604,340 | |
| | | | | | | | |
Machinery (3.8%) | |
Atlas Copco AB, Class A | | | 35,680 | | | | 460,925 | |
Caterpillar, Inc. | | | 3,600 | | | | 813,780 | |
Cummins, Inc. | | | 1,800 | | | | 389,340 | |
Deere & Co. | | | 2,000 | | | | 730,720 | |
Dover Corp. | | | 2,600 | | | | 337,870 | |
Epiroc AB, Class A | | | 10,331 | | | | 169,832 | |
Fortive Corp. | | | 2,400 | | | | 156,672 | |
GEA Group AG | | | 3,889 | | | | 132,625 | |
Illinois Tool Works, Inc. | | | 4,800 | | | | 1,075,776 | |
Knorr-Bremse AG | | | 3,781 | | | | 210,195 | |
Kone OYJ, Class B | | | 3,952 | | | | 170,986 | |
Otis Worldwide Corp. | | | 3,900 | | | | 301,119 | |
PACCAR, Inc. | | | 10,771 | | | | 888,931 | |
Pentair plc | | | 5,900 | | | | 342,908 | |
Snap-on, Inc. | | | 1,600 | | | | 412,704 | |
Volvo AB, Class B | | | 22,816 | | | | 451,519 | |
| | | | | | | | |
| | | | | | | 7,045,902 | |
| | | | | | | | |
Professional Services (2.4%) | |
Automatic Data Processing, Inc. | | | 5,705 | | | | 1,244,945 | |
Broadridge Financial Solutions, Inc. | | | 2,400 | | | | 409,536 | |
Jacobs Solutions, Inc. | | | 1,600 | | | | 213,280 | |
Leidos Holdings, Inc. | | | 2,034 | | | | 201,610 | |
Paychex, Inc. | | | 4,091 | | | | 454,305 | |
SGS SA (Registered) | | | 2,158 | | | | 175,506 | |
Thomson Reuters Corp. | | | 4,545 | | | | 544,417 | |
Verisk Analytics, Inc., Class A | | | 1,600 | | | | 363,776 | |
Wolters Kluwer NV | | | 6,349 | | | | 813,535 | |
| | | | | | | | |
| | | | | | | 4,420,910 | |
| | | | | | | | |
Trading Companies & Distributors (1.9%) | |
Brenntag SE | | | 4,227 | | | | 313,618 | |
See Notes to Financial Statements.
144
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Fastenal Co. | | | 12,442 | | | $ | 725,866 | |
ITOCHU Corp. | | | 16,000 | | | | 567,165 | |
Mitsubishi Corp. | | | 8,400 | | | | 385,433 | |
Mitsui & Co. Ltd. | | | 15,500 | | | | 553,940 | |
Sumitomo Corp. | | | 16,800 | | | | 325,692 | |
WW Grainger, Inc. | | | 800 | | | | 583,864 | |
| | | | | | | | |
| | | | | | | 3,455,578 | |
| | | | | | | | |
Total Industrials | | | | | | | 31,803,335 | |
| | | | | | | | |
Information Technology (18.3%) | |
Communications Equipment (1.0%) | |
Cisco Systems, Inc. | | | 21,700 | | | | 1,131,221 | |
Motorola Solutions, Inc. | | | 2,700 | | | | 751,842 | |
| | | | | | | | |
| | | | | | | 1,883,063 | |
| | | | | | | | |
Electronic Equipment, Instruments & Components (1.1%) | |
Amphenol Corp., Class A | | | 8,700 | | | | 700,785 | |
CDW Corp. | | | 3,200 | | | | 641,280 | |
Hexagon AB, Class B | | | 20,718 | | | | 168,343 | |
Keysight Technologies, Inc.* | | | 1,900 | | | | 231,895 | |
TE Connectivity Ltd. | | | 2,800 | | | | 329,980 | |
| | | | | | | | |
| | | | | | | 2,072,283 | |
| | | | | | | | |
IT Services (1.6%) | |
Accenture plc, Class A | | | 4,200 | | | | 1,247,778 | |
Bechtle AG | | | 5,404 | | | | 240,612 | |
CGI, Inc.* | | | 1,600 | | | | 154,468 | |
Fujitsu Ltd. | | | 1,400 | | | | 179,324 | |
Gartner, Inc.* | | | 900 | | | | 298,836 | |
International Business Machines Corp. | | | 3,800 | | | | 549,632 | |
VeriSign, Inc.* | | | 1,395 | | | | 278,526 | |
| | | | | | | | |
| | | | | | | 2,949,176 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment (3.6%) | |
ASML Holding NV | | | 1,376 | | | | 823,046 | |
Broadcom, Inc. | | | 1,087 | | | | 914,569 | |
KLA Corp. | | | 500 | | | | 234,850 | |
Microchip Technology, Inc. | | | 2,451 | | | | 174,732 | |
NVIDIA Corp. | | | 4,622 | | | | 1,884,852 | |
NXP Semiconductors NV | | | 2,814 | | | | 485,218 | |
QUALCOMM, Inc. | | | 6,600 | | | | 719,334 | |
Texas Instruments, Inc. | | | 9,600 | | | | 1,363,296 | |
| | | | | | | | |
| | | | | | | 6,599,897 | |
| | | | | | | | |
Software (5.9%) | |
Autodesk, Inc.* | | | 1,948 | | | | 384,983 | |
Cadence Design Systems, Inc.* | | | 3,160 | | | | 757,926 | |
Fair Isaac Corp.* | | | 200 | | | | 169,174 | |
Microsoft Corp. | | | 23,310 | | | | 7,881,344 | |
Roper Technologies, Inc. | | | 1,600 | | | | 781,712 | |
SAP SE | | | 1,875 | | | | 251,444 | |
Synopsys, Inc.* | | | 1,445 | | | | 678,341 | |
| | | | | | | | |
| | | | | | | 10,904,924 | |
| | | | | | | | |
Technology Hardware, Storage & Peripherals (5.1%) | |
Apple, Inc. | | | 49,300 | | | | 8,418,961 | |
Canon, Inc.(x) | | | 10,500 | | | | 245,987 | |
FUJIFILM Holdings Corp. | | | 3,700 | | | | 200,238 | |
HP, Inc. | | | 7,000 | | | | 184,310 | |
NetApp, Inc. | | | 2,900 | | | | 211,062 | |
| | | | | | | | |
| | | | | | | 9,260,558 | |
| | | | | | | | |
Total Information Technology | | | | | | | 33,669,901 | |
| | | | | | | | |
Materials (2.0%) | |
Chemicals (1.6%) | |
Air Liquide SA | | | 1,364 | | | | 233,344 | |
Air Products and Chemicals, Inc. | | | 1,000 | | | | 282,440 | |
Corteva, Inc. | | | 4,900 | | | | 235,886 | |
Ecolab, Inc. | | | 3,400 | | | | 570,316 | |
Givaudan SA (Registered) | | | 154 | | | | 511,274 | |
Mitsubishi Chemical Group Corp. | | | 37,400 | | | | 209,262 | |
PPG Industries, Inc. | | | 1,300 | | | | 159,601 | |
Sherwin-Williams Co. (The) | | | 2,900 | | | | 690,809 | |
| | | | | | | | |
| | | | | | | 2,892,932 | |
| | | | | | | | |
Metals & Mining (0.4%) | |
BHP Group Ltd. | | | 7,744 | | | | 218,602 | |
Franco-Nevada Corp. | | | 3,100 | | | | 377,119 | |
Rio Tinto Ltd. | | | 2,153 | | | | 160,586 | |
| | | | | | | | |
| | | | | | | 756,307 | |
| | | | | | | | |
Total Materials | | | | | | | 3,649,239 | |
| | | | | | | | |
Real Estate (1.9%) | |
Diversified REITs (0.2%) | |
Nomura Real Estate Master Fund, Inc. (REIT) | | | 305 | | | | 335,837 | |
| | | | | | | | |
Industrial REITs (0.1%) | |
Goodman Group (REIT) | | | 18,902 | | | | 248,683 | |
| | | | | | | | |
Office REITs (0.1%) | |
Nippon Building Fund, Inc. (REIT)(x) | | | 41 | | | | 164,189 | |
| | | | | | | | |
Real Estate Management & Development (0.1%) | |
Mitsubishi Estate Co. Ltd. | | | 15,400 | | | | 194,462 | |
| | | | | | | | |
Residential REITs (0.4%) | |
AvalonBay Communities, Inc. (REIT) | | | 2,200 | | | | 364,628 | |
Equity Residential (REIT) | | | 3,400 | | | | 188,122 | |
Essex Property Trust, Inc. (REIT) | | | 864 | | | | 184,827 | |
| | | | | | | | |
| | | | | | | 737,577 | |
| | | | | | | | |
Specialized REITs (1.0%) | |
American Tower Corp. (REIT) | | | 3,200 | | | | 570,208 | |
Crown Castle, Inc. (REIT) | | | 5,300 | | | | 492,794 | |
Iron Mountain, Inc. (REIT) | | | 3,300 | | | | 194,931 | |
Public Storage (REIT) | | | 2,300 | | | | 549,033 | |
| | | | | | | | |
| | | | | | | 1,806,966 | |
| | | | | | | | |
Total Real Estate | | | | | | | 3,487,714 | |
| | | | | | | | |
Utilities (3.8%) | |
Electric Utilities (1.5%) | |
Chubu Electric Power Co., Inc. | | | 18,300 | | | | 220,035 | |
Enel SpA | | | 114,379 | | | | 724,694 | |
Eversource Energy | | | 10,900 | | | | 586,311 | |
Hydro One Ltd. (m) | | | 6,600 | | | | 171,146 | |
Iberdrola SA | | | 47,505 | | | | 527,783 | |
Terna - Rete Elettrica Nazionale | | | 58,178 | | | | 444,819 | |
| | | | | | | | |
| | | | | | | 2,674,788 | |
| | | | | | | | |
Gas Utilities (0.5%) | |
Atmos Energy Corp. | | | 5,688 | | | | 612,370 | |
Hong Kong & China Gas Co. Ltd. | | | 308,000 | | | | 214,511 | |
| | | | | | | | |
| | | | | | | 826,881 | |
| | | | | | | | �� |
See Notes to Financial Statements.
145
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | |
| | | |
| | | Number of
Shares | | | Value
(Note 1) | |
Multi-Utilities (1.7%) | |
Consolidated Edison, Inc. | | | 7,600 | | | $ | 667,204 | |
E.ON SE | | | 37,794 | | | | 448,686 | |
National Grid plc | | | 26,197 | | | | 311,597 | |
Public Service Enterprise Group, Inc. | | | 12,100 | | | | 745,965 | |
Sempra | | | 14,500 | | | | 1,015,435 | |
| | | | | | | | |
| | | | | | | 3,188,887 | |
| | | | | | | | |
Water Utilities (0.1%) | |
American Water Works Co., Inc. | | | 2,100 | | | | 247,065 | |
| | | | | | | | |
Total Utilities | | | | | | | 6,937,621 | |
| | | | | | | | |
Total Common Stocks (98.5%)
(Cost $177,442,298) | | | | | | | 181,291,875 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS: | | | | | |
Investment Companies (1.3%) | | | | | |
Invesco Government & Agency Portfolio, Institutional Shares 5.27% (7 day yield) (xx) | | | 187,107 | | | | 187,107 | |
JPMorgan Prime Money Market Fund, IM Shares 5.64% (7 day yield) | | | 2,271,516 | | | | 2,272,425 | |
| | | | | | | | |
Total Investment Companies | | | | | | | 2,459,532 | |
| | | | | |
Total Short-Term Investments (1.3%)
(Cost $2,459,309) | | | | 2,459,532 | |
| | | | | | | | |
Total Investments in Securities (99.8%)
(Cost $179,901,607) | | | | 183,751,407 | |
Other Assets Less Liabilities (0.2%) | | | | 358,119 | |
| | | | | |
Net Assets (100%) | | | | | | $ | 184,109,526 | |
| | | | | | | | |
| (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, 2023, the market value or fair value, as applicable, of these securities amounted to $171,146 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. |
| (x) | All or a portion of security is on loan at October 31, 2023. |
| (xx) | At October 31, 2023, the Fund had loaned securities with a total value of $1,890,475. This was collateralized by $1,955,021 of various U.S. Government Treasury Securities, ranging from 0.000% - 5.435%, maturing 11/16/23 - 8/15/53 and by cash of $187,107 which was subsequently invested in investment companies as detailed in the Notes to the Financial Statements. |
Glossary:
| | REIT | — Real Estate Investment Trust |
| | | | |
| | |
Country Diversification As a Percentage of Total Net Assets | | | |
Australia | | | 1.5 | % |
Canada | | | 5.8 | |
China | | | 0.3 | |
Denmark | | | 0.5 | |
Finland | | | 0.5 | |
France | | | 0.9 | |
Germany | | | 3.5 | |
Hong Kong | | | 0.2 | |
Israel | | | 0.2 | |
Italy | | | 0.9 | |
Japan | | | 4.4 | |
Netherlands | | | 1.3 | |
New Zealand | | | 0.1 | |
Norway | | | 0.4 | |
Singapore | | | 0.6 | |
Spain | | | 0.4 | |
Sweden | | | 0.8 | |
Switzerland | | | 1.8 | |
United Kingdom | | | 0.7 | |
United States | | | 75.0 | |
Cash and Other | | | 0.2 | |
| | | | | |
| | | | 100.0 | % |
| | | | | |
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, 2023:
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 | | $ | 8,633,706 | | | $ | 1,925,415 | | | $ | — | | | $ | 10,559,121 | |
See Notes to Financial Statements.
146
1290 FUNDS
1290 SMARTBETA EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
October 31, 2023
| | | | | | | | | | | | | | | | |
| | | | | |
| 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 | |
Consumer Discretionary | | $ | 9,358,681 | | | $ | 2,643,354 | | | $ | — | | | $ | 12,002,035 | |
Consumer Staples | | | 16,432,818 | | | | 4,578,651 | | | | — | | | | 21,011,469 | |
Energy | | | 2,915,433 | | | | 540,275 | | | | — | | | | 3,455,708 | |
Financials | | | 23,891,342 | | | | 9,428,229 | | | | — | | | | 33,319,571 | |
Health Care | | | 18,047,595 | | | | 3,348,566 | | | | — | | | | 21,396,161 | |
Industrials | | | 23,698,925 | | | | 8,104,410 | | | | — | | | | 31,803,335 | |
Information Technology | | | 31,560,907 | | | | 2,108,994 | | | | — | | | | 33,669,901 | |
Materials | | | 2,316,171 | | | | 1,333,068 | | | | — | | | | 3,649,239 | |
Real Estate | | | 2,544,543 | | | | 943,171 | | | | — | | | | 3,487,714 | |
Utilities | | | 4,045,496 | | | | 2,892,125 | | | | — | | | | 6,937,621 | |
Short-Term Investments | | | | | | | | | | | | | | | | |
Investment Companies | | | 2,459,532 | | | | – | | | | — | | | | 2,459,532 | |
| | | | | | | | | | | | | | | | |
Total Assets | | $ | 145,905,149 | | | $ | 37,846,258 | | | $ | — | | | $ | 183,751,407 | |
| | | | | | | | | | | | | | | | |
Total Liabilities | | $ | – | | | $ | – | | | $ | — | | | $ | – | |
| | | | | | | | | | | | | | | | |
Total | | $ | 145,905,149 | | | $ | 37,846,258 | | | $ | — | | | $ | 183,751,407 | |
| | | | | | | | | | | | | | | | |
The Fund held no derivatives contracts during the year ended October 31, 2023.
Investment security transactions for the year ended October 31, 2023 were as follows:
| | | | |
Cost of Purchases: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 78,323,146 | |
Net Proceeds of Sales and Redemptions: | | | | |
Long-term investments other than U.S. government debt securities | | $ | 59,927,635 | |
As of October 31, 2023, 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 | | $ | 14,406,121 | |
Aggregate gross unrealized depreciation | | | (11,058,124 | ) |
| | | | |
Net unrealized appreciation | | $ | 3,347,997 | |
| | | | |
Federal income tax cost of investments in securities and derivative instruments, if applicable | | $ | 180,403,410 | |
| | | | |
See Notes to Financial Statements.
147
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2023
| | | | |
ASSETS | |
Investments in Securities, at value (x)
(Cost $179,901,607) | | $ | 183,751,407 | |
Cash | | | 383,000 | |
Foreign cash (Cost $57,311) | | | 57,134 | |
Dividends, interest and other receivables | | | 416,592 | |
Receivable for Fund shares sold | | | 147,181 | |
Prepaid registration and filing fees | | | 26,271 | |
Securities lending income receivable | | | 2,371 | |
Other assets | | | 1,686 | |
| | | | |
Total assets | | | 184,785,642 | |
| | | | |
LIABILITIES | |
Payable for Fund shares repurchased | | | 295,244 | |
Payable for return of collateral on securities loaned | | | 187,107 | |
Investment advisory fees payable | | | 39,669 | |
Transfer agent fees payable | | | 32,132 | |
Administrative fees payable | | | 23,817 | |
Distribution fees payable – Class A | | | 1,060 | |
Distribution fees payable – Class R | | | 905 | |
Trustees’ fees payable | | | 223 | |
Distribution fees payable – Class T** | | | 33 | |
Accrued expenses | | | 95,926 | |
| | | | |
Total liabilities | | | 676,116 | |
| | | | |
Commitments and contingent liabilities^ | | | | |
| |
NET ASSETS | | $ | 184,109,526 | |
| | | | |
Net assets were comprised of: | | | | |
Paid in capital | | $ | 181,341,855 | |
Total distributable earnings (loss) | | | 2,767,671 | |
| | | | |
Net assets | | $ | 184,109,526 | |
| | | | |
Class A | | | | |
Net asset value and redemption price per share, $4,928,958 / 330,749 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.90 | |
Maximum sales charge (5.50% of offering price) | | | 0.87 | |
| | | | |
Maximum offering price per share | | $ | 15.77 | |
| | | | |
Class I | | | | |
Net asset value, offering and redemption price per share, $176,892,393 / 11,831,018 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.95 | |
| | | | |
Class R | | | | |
Net asset value, offering and redemption price per share, $2,133,752 / 143,642 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.85 | |
| | | | |
Class T** | | | | |
Net asset value and redemption price per share, $154,423 / 10,332 shares outstanding (unlimited amount authorized: $0.001 par value) | | $ | 14.95 | |
Maximum sales charge (2.50% of offering price) | | | 0.38 | |
| | | | |
Maximum offering price per share | | $ | 15.33 | |
| | | | |
| (x) | Includes value of securities on loan of $1,890,475. |
| ^ | See Note 2 in Notes to the Financial Statements. |
| ** | Class T shares currently are not offered for sale. |
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2023
| | | | |
INVESTMENT INCOME | |
Dividends (net of $240,049 foreign withholding tax) | | $ | 3,988,827 | |
Interest | | | 15,911 | |
Securities lending (net) | | | 20,291 | |
| | | | |
Total income | | | 4,025,029 | |
| | | | |
EXPENSES | |
Investment advisory fees | | | 1,253,197 | |
Administrative fees | | | 268,543 | |
Transfer agent fees | | | 201,100 | |
Professional fees | | | 176,347 | |
Printing and mailing expenses | | | 53,681 | |
Registration and filing fees | | | 48,708 | |
Custodian fees | | | 34,999 | |
Distribution fees – Class A | | | 12,976 | |
Distribution fees – Class R | | | 9,357 | |
Trustees’ fees | | | 5,063 | |
Distribution fees – Class T** | | | 392 | |
Miscellaneous | | | 37,162 | |
| | | | |
Gross expenses | | | 2,101,525 | |
Waiver from investment adviser | | | (556,893 | ) |
Waiver from distributor | | | (392 | ) |
| | | | |
Net expenses | | | 1,544,240 | |
| | | | |
NET INVESTMENT INCOME (LOSS) | | | 2,480,789 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) | |
Realized gain (loss) on: | | | | |
Investments in securities | | | 422,727 | |
Foreign currency transactions | | | 22,994 | |
| | | | |
Net realized gain (loss) | | | 445,721 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | |
Investments in securities | | | 6,897,295 | |
Foreign currency translations | | | 9,839 | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | 6,907,134 | |
| | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | 7,352,855 | |
| | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | $ | 9,833,644 | |
| | | | |
| ** | Class T shares currently are not offered for sale. |
See Notes to Financial Statements.
148
1290 FUNDS
1290 SMARTBETA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Year Ended October 31, | |
| | 2023 | | | 2022 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: | |
Net investment income (loss) | | $ | 2,480,789 | | | $ | 1,777,719 | |
Net realized gain (loss) | | | 445,721 | | | | (3,639,334 | ) |
Net change in unrealized appreciation (depreciation) | | | 6,907,134 | | | | (20,499,597 | ) |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | 9,833,644 | | | | (22,361,212 | ) |
| | | | | | | | |
Distributions to shareholders: | | | | | | | | |
Class A | | | (41,330 | ) | | | (351,608 | ) |
Class I | | | (1,652,986 | ) | | | (9,465,365 | ) |
Class R | | | (9,040 | ) | | | (71,605 | ) |
Class T** | | | (1,614 | ) | | | (13,147 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (1,704,970 | ) | | | (9,901,725 | ) |
| | | | | | | | |
CAPITAL SHARES TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Capital shares sold [ 37,543 and 76,397 shares, respectively ] | | | 565,321 | | | | 1,157,736 | |
Capital shares issued in reinvestment of dividends [ 2,774 and 20,966 shares, respectively ] | | | 41,330 | | | | 351,607 | |
Capital shares repurchased [ (55,092) and (34,561) shares , respectively] | | | (836,037 | ) | | | (524,512 | ) |
| | | | | | | | |
Total Class A transactions | | | (229,386 | ) | | | 984,831 | |
| | | | | | | | |
Class I | | | | | | | | |
Capital shares sold [ 3,973,319 and 6,210,077 shares, respectively ] | | | 60,284,429 | | | | 95,868,042 | |
Capital shares issued in reinvestment of dividends [ 110,705 and 563,723 shares, respectively ] | | | 1,651,723 | | | | 9,464,904 | |
Capital shares repurchased [ (2,877,536) and (3,189,544) shares , respectively] | | | (43,620,496 | ) | | | (47,975,390 | ) |
| | | | | | | | |
Total Class I transactions | | | 18,315,656 | | | | 57,357,556 | |
| | | | | | | | |
Class R | | | | | | | | |
Capital shares sold [ 61,544 and 49,639 shares, respectively ] | | | 933,269 | | | | 777,333 | |
Capital shares issued in reinvestment of dividends [ 607 and 4,275 shares, respectively ] | | | 9,040 | | | | 71,605 | |
Capital shares repurchased [ (16,467) and (9,270) shares , respectively] | | | (252,479 | ) | | | (140,469 | ) |
| | | | | | | | |
Total Class R transactions | | | 689,830 | | | | 708,469 | |
| | | | | | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS | | | 18,776,100 | | | | 59,050,856 | |
| | | | | | | | |
TOTAL INCREASE (DECREASE) IN NET ASSETS | | | 26,904,774 | | | | 26,787,919 | |
NET ASSETS: | |
Beginning of year | | | 157,204,752 | | | | 130,416,833 | |
| | | | | | | | |
End of year | | $ | 184,109,526 | | | $ | 157,204,752 | |
| | | | | | | | |
** Class T shares currently are not offered for sale. | | | | | | | | |
See Notes to Financial Statements.
149
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class A | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.15 | | | $ | 17.61 | | | $ | 13.34 | | | $ | 13.34 | | | $ | 12.09 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.17 | | | | 0.15 | | | | 0.14 | | | | 0.14 | | | | 0.15 | |
Net realized and unrealized gain (loss) | | | 0.70 | | | | (2.37 | ) | | | 4.29 | | | | 0.14 | | | | 1.67 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.87 | | | | (2.22 | ) | | | 4.43 | | | | 0.28 | | | | 1.82 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.12 | ) | | | (0.13 | ) | | | (0.08 | ) | | | (0.13 | ) | | | (0.14 | ) |
Distributions from net realized gains | | | — | # | | | (1.11 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.12 | ) | | | (1.24 | ) | | | (0.16 | ) | | | (0.28 | ) | | | (0.57 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.90 | | | $ | 14.15 | | | $ | 17.61 | | | $ | 13.34 | | | $ | 13.34 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.14 | % | | | (13.73 | )% | | | 33.49 | % | | | 2.07 | % | | | 15.81 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 4,929 | | | $ | 4,888 | | | $ | 4,978 | | | $ | 3,278 | | | $ | 2,014 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.10 | % | | | 1.10 | % | | | 1.10 | % | | | 1.14 | % | | | 1.15 | % |
Before waivers and reimbursements (f) | | | 1.41 | % | | | 1.42 | % | | | 1.48 | % | | | 1.83 | % | | | 2.26 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.15 | % | | | 0.96 | % | | | 0.89 | % | | | 1.04 | % | | | 1.19 | % |
Before waivers and reimbursements (f) | | | 0.84 | % | | | 0.64 | % | | | 0.51 | % | | | 0.35 | % | | | 0.08 | % |
Portfolio turnover rate^ | | | 34 | % | | | 38 | % | | | 59 | % | | | 42 | % | | | 31 | % |
| |
| | | Year Ended October 31, | |
| Class I | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.19 | | | $ | 17.66 | | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.21 | | | | 0.19 | | | | 0.19 | | | | 0.17 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | 0.71 | | | | (2.38 | ) | | | 4.29 | | | | 0.14 | | | | 1.67 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.92 | | | | (2.19 | ) | | | 4.48 | | | | 0.31 | | | | 1.86 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.16 | ) | | | (0.17 | ) | | | (0.11 | ) | | | (0.16 | ) | | | (0.17 | ) |
Distributions from net realized gains | | | — | # | | | (1.11 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.16 | ) | | | (1.28 | ) | | | (0.19 | ) | | | (0.31 | ) | | | (0.60 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.95 | | | $ | 14.19 | | | $ | 17.66 | | | $ | 13.37 | | | $ | 13.37 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.46 | % | | | (13.56 | )% | | | 33.87 | % | | | 2.30 | % | | | 16.16 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 176,892 | | | $ | 150,789 | | | $ | 124,320 | | | $ | 46,777 | | | $ | 23,959 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.85 | % | | | 0.85 | % | | | 0.85 | % | | | 0.89 | % | | | 0.90 | % |
Before waivers and reimbursements (f) | | | 1.16 | % | | | 1.17 | % | | | 1.23 | % | | | 1.58 | % | | | 2.02 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.40 | % | | | 1.23 | % | | | 1.16 | % | | | 1.27 | % | | | 1.49 | % |
Before waivers and reimbursements (f) | | | 1.09 | % | | | 0.90 | % | | | 0.78 | % | | | 0.58 | % | | | 0.37 | % |
Portfolio turnover rate^ | | | 34 | % | | | 38 | % | | | 59 | % | | | 42 | % | | | 31 | % |
See Notes to Financial Statements.
150
1290 FUNDS
1290 SMARTBETA EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31, | |
| Class R | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.10 | | | $ | 17.56 | | | $ | 13.30 | | | $ | 13.31 | | | $ | 12.06 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.14 | | | | 0.11 | | | | 0.10 | | | | 0.10 | | | | 0.12 | |
Net realized and unrealized gain (loss) | | | 0.69 | | | | (2.37 | ) | | | 4.29 | | | | 0.14 | | | | 1.67 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.83 | | | | (2.26 | ) | | | 4.39 | | | | 0.24 | | | | 1.79 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.08 | ) | | | (0.09 | ) | | | (0.05 | ) | | | (0.10 | ) | | | (0.11 | ) |
Distributions from net realized gains | | | — | # | | | (1.11 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.08 | ) | | | (1.20 | ) | | | (0.13 | ) | | | (0.25 | ) | | | (0.54 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.85 | | | $ | 14.10 | | | $ | 17.56 | | | $ | 13.30 | | | $ | 13.31 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 5.90 | % | | | (13.97 | )% | | | 33.21 | % | | | 1.75 | % | | | 15.55 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 2,134 | | | $ | 1,381 | | | $ | 936 | | | $ | 236 | | | $ | 151 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.35 | % | | | 1.35 | % | | | 1.35 | % | | | 1.39 | % | | | 1.40 | % |
Before waivers and reimbursements (f) | | | 1.66 | % | | | 1.68 | % | | | 1.73 | % | | | 2.09 | % | | | 2.52 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.89 | % | | | 0.72 | % | | | 0.64 | % | | | 0.77 | % | | | 1.00 | % |
Before waivers and reimbursements (f) | | | 0.58 | % | | | 0.40 | % | | | 0.26 | % | | | 0.07 | % | | | (0.12 | )% |
Portfolio turnover rate^ | | | 34 | % | | | 38 | % | | | 59 | % | | | 42 | % | | | 31 | % |
| |
| | | Year Ended October 31, | |
| Class T** | | 2023 | | | 2022 | | | 2021 | | | 2020 | | | 2019 | |
Net asset value, beginning of year | | $ | 14.19 | | | $ | 17.65 | | | $ | 13.37 | | | $ | 13.37 | | | $ | 12.11 | |
| | | | | | | | | | | | | | | | | | | | |
Income (loss) from investment operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (e) | | | 0.21 | | | | 0.18 | | | | 0.18 | | | | 0.17 | | | | 0.19 | |
Net realized and unrealized gain (loss) | | | 0.71 | | | | (2.36 | ) | | | 4.29 | | | | 0.14 | | | | 1.67 | |
| | | | | | | | | | | | | | | | | | | | |
Total from investment operations | | | 0.92 | | | | (2.18 | ) | | | 4.47 | | | | 0.31 | | | | 1.86 | |
| | | | | | | | | | | | | | | | | | | | |
Less distributions: | |
Dividends from net investment income | | | (0.16 | ) | | | (0.17 | ) | | | (0.11 | ) | | | (0.16 | ) | | | (0.17 | ) |
Distributions from net realized gains | | | — | # | | | (1.11 | ) | | | (0.08 | ) | | | (0.15 | ) | | | (0.43 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (0.16 | ) | | | (1.28 | ) | | | (0.19 | ) | | | (0.31 | ) | | | (0.60 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of year | | $ | 14.95 | | | $ | 14.19 | | | $ | 17.65 | | | $ | 13.37 | | | $ | 13.37 | |
| | | | | | | | | | | | | | | | | | | | |
Total return | | | 6.46 | % | | | (13.51 | )% | | | 33.79 | % | | | 2.30 | % | | | 16.16 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data: | |
Net assets, end of year (000’s) | | $ | 154 | | | $ | 147 | | | $ | 182 | | | $ | 138 | | | $ | 138 | |
Ratio of expenses to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 0.85 | % | | | 0.85 | % | | | 0.85 | % | | | 0.90 | % | | | 0.90 | % |
Before waivers and reimbursements (f) | | | 1.41 | % | | | 1.42 | % | | | 1.48 | % | | | 1.84 | % | | | 2.27 | % |
Ratio of net investment income (loss) to average net assets: | | | | | | | | | | | | | | | | | | | | |
After waivers and reimbursements (f) | | | 1.40 | % | | | 1.20 | % | | | 1.14 | % | | | 1.28 | % | | | 1.50 | % |
Before waivers and reimbursements (f) | | | 0.84 | % | | | 0.63 | % | | | 0.50 | % | | | 0.33 | % | | | 0.13 | % |
Portfolio turnover rate^ | | | 34 | % | | | 38 | % | | | 59 | % | | | 42 | % | | | 31 | % |
| ** | 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.
151
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2023
| 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 sixteen diversified funds in operation (each, a “Fund” and collectively, the “Funds”). Equitable Investment Management, LLC (“EIM” or the “Adviser”) is the investment adviser to each Fund. The Adviser is registered with the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940, as amended, and is an indirect, wholly-owned subsidiary of Equitable Holdings, Inc., which is a publicly- owned company. The Adviser began serving as the investment adviser to each Fund on January 1, 2023. Prior to January 1, 2023, Equitable Investment Management Group, LLC (“EIMG”), an affiliate of the Adviser, served as the investment adviser to each Fund.
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 sixteen 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, 1290 Loomis Sayles Multi-Asset Income Fund and 1290 High Yield Bond Fund, and up to 5.50% for 1290 GAMCO Small/ Mid Cap Value Fund, 1290 Essex Small Cap Growth 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%.
On March 2, 2022, EIMG redeemed capital out of the 1290 High Yield Bond Fund, 1290 Retirement 2020 Fund, 1290 Retirement 2030 Fund, and 1290 Retirement 2035 Fund in the amount of $5,000,000, $1,500,000, $1,600,000, and $1,700,000, respectively, for Class I shares.
On June 1, 2022, EIMG redeemed capital out of the 1290 High Yield Bond Fund in the amount of $5,000,000 for Class I shares.
On July 11, 2022, EIMG contributed seed capital to the 1290 Essex Small Cap Growth Fund in the amount of $100,000, $9,800,000 and $100,000 for Class A, Class I and Class R, respectively.
152
1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
On August 19, 2022, EIMG redeemed capital out of the 1290 High Yield Bond Fund in the amount of $5,000,000 for Class I shares.
On December 1, 2022, EIMG redeemed capital out of the 1290 High Yield Bond Fund in the amount of $5,000,000 for Class I share.
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 Essex Small Cap Growth Fund (sub-advised by Essex Investment Management Company, LLC) — Seeks long-term growth of capital.
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 US Inc.) — Seeks to maximize current income.
1290 Loomis Sayles Multi-Asset Income Fund (sub-advised by Loomis, Sayles & Company, L.P.) — Seeks to provide income and total return through principally investing in income generating securities and investments.
1290 Multi-Alternative Strategies Fund — Seeks long-term growth of capital.
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 Investment Managers US Inc.) — 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
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October 31, 2023
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”). 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 fair valued at a bid price estimated by a broker.
Convertible preferred stocks listed on national securities exchanges are generally valued as of their last sale price or, if there is no sale, at the latest available bid price. Convertible bonds and unlisted convertible preferred stocks are generally valued using prices obtained from a pricing service for such investments or, if a pricing service price is not available, fair valued at bid prices obtained from one or more of the major dealers in such bonds or stocks. Convertible bonds may be matrix-priced based upon the conversion value to the underlying common stocks and market premiums.
Mortgage-backed and asset-backed securities are generally valued at evaluated prices obtained from a pricing service where available, or fair valued 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, 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 net asset value (“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.
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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 fair value of the swap will be determined in good faith by the Trust’s Valuation Committee (as discussed below).
Securities for which market quotations are readily available are valued at their market value. All other securities are valued at their fair value, as determined in good faith by the Board of Trustees (the “Board”) of the Trust. In accordance with Rule 2a-5 under the Investment Company Act of 1940, as amended, the Board has designated the Adviser as its valuation designee (the “Valuation Designee”). As Valuation Designee, EIM, subject to the oversight of the Board, is responsible for making fair valuation determinations in accordance with procedures (the “Pricing Procedures”) approved by the Board. EIM’s day-to-day responsibilities as Valuation Designee are performed by a valuation committee established by EIM (the “Committee”).
The Adviser also serves as the administrator of the Funds. The Administrator oversees the calculation of the NAV of the Funds and their respective share classes. The Administrator has entered into a sub-administration agreement with JPMorgan Chase Bank, N.A. (the “Sub-Administrator”) to assist in performing certain duties, including the calculation of the Funds’ NAVs.
Due to the inherent uncertainty of the fair value of such securities 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 each Fund’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, 2023, 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 fair 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 fair value Level 3 securities. As part of a review, the Committee would consider obtaining
155
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October 31, 2023
updates from its pricing vendors and Sub-Advisers for fair valued securities. For example, with respect to model driven prices, the Committee could 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 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.
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 recorded at the market value or fair value, as applicable, 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.
Foreign Taxes:
The Funds may be subject to foreign taxes on dividend and interest income, gains on investments or currency purchase/repatriation, all or a portion of which may be recoverable. Each Fund applies for refunds where available. The Funds will accrue such taxes and recoveries as applicable, based on their current interpretation of the tax rules and regulations that exist in the markets in which they invest.
As a result of several court rulings in certain European countries, the Funds may also file withholding tax reclaims in certain jurisdictions to recover all or a portion of amounts withheld in prior period that may now be reclaimable. Any payments received on such withholding tax reclaims are included in Other Income in the Statements of Operations and are recorded when the amount is known and there are no significant uncertainties on collectability.
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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.
Offering costs incurred in connection with the offering of shares of a Fund will be amortized and recorded as an expense on a straight line basis over 12 months from the date of the Fund’s commencement of public offering of shares. Amortized offering costs are disclosed in the Statement of Operations.
Offering costs incurred during the year ended October 31, 2022 by the following Fund are shown below:
| | | | |
Portfolio: | | Amount | |
1290 Essex Small Cap Growth | | $ | 206,856 | |
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 or fair value, as applicable, 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.
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
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
any, related to uncertain tax positions as income tax expense in the Statements of Operations. During the year ended October 31, 2023, the Funds did not incur any interest or penalties. Each of the tax years in the four year period ended October 31, 2023 remains subject to examination by the Internal Revenue Service, state and local taxing authorities.
Each Fund (other than the 1290 Diversified Bond Fund, 1290 High Yield Bond Fund and 1290 Loomis Sayles Multi-Asset Income Fund) generally distributes most or all of its net investment income and net realized gains, if any, annually. Each of the 1290 Diversified Bond Fund, 1290 High Yield Bond Fund and 1290 Loomis Sayles Multi-Asset Income Fund normally distributes dividends from its net investment income monthly and distributes its net realized gains, if any, annually. 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, 2023 and October 31, 2022 and the tax composition of undistributed ordinary income and undistributed long term gains at October 31, 2023 are presented in the following table. For the Funds, the cumulative significant differences related to the tax composition of undistributed ordinary income and long term gains are primarily due to 1256 mark to market contracts (1290 Diversified Bond), capital loss carryforwards (1290 Diversified Bond, 1290 Essex Small Cap Growth, 1290 High Yield Bond, 1290 Multi-Alternative Strategies and 1290 SmartBeta Equity), deferral of losses on offsetting positions (1290 Loomis Sayles Multi-Asset Income), partnership basis adjustments (1290 Multi-Alternative Strategies) and wash sale loss deferrals (1290 Diversified Bond, 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond, 1290 Loomis Sayles Multi-Asset Income, 1290 Multi-Alternative Strategies, 1290 Retirement 2020, 1290 Retirement 2025, 1290 Retirement 2030, 1290 Retirement 2035 and 1290 Retirement 2050).
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended October 31,
2023 | | | As of October 31, 2023 | | | Year/Period Ended
October 31, 2022 | |
Portfolios: | | 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 | | $ | 15,606,684 | | | $ | — | | | $ | — | | | $ | — | | | $ | 15,789,422 | | | $ | — | |
1290 Essex Small Cap Growth | | | 73,637 | | | | — | | | | — | | | | — | | | | — | | | | — | |
1290 GAMCO Small/Mid Cap Value | | | 248,039 | | | | 2,550,136 | | | | 1,082,312 | | | | 3,909,012 | | | | 3,318,337 | | | | 6,937,069 | |
1290 High Yield Bond | | | 3,658,332 | | | | — | | | | — | | | | — | | | | 3,240,660 | | | | — | |
1290 Loomis Sayles Multi-Asset Income | | | 2,420,631 | | | | 1,048,196 | | | | 946,755 | | | | — | | | | 6,031,882 | | | | 1,904,182 | |
1290 Multi-Alternative Strategies | | | 349,910 | | | | — | | | | 231,519 | | | | — | | | | 360,960 | | | | 1,243,789 | |
1290 Retirement 2020 | | | 204,241 | | | | 570,728 | | | | 117,498 | | | | 90,190 | | | | 166,329 | | | | 463,440 | |
1290 Retirement 2025 | | | 389,577 | | | | 735,181 | | | | 241,333 | | | | 312,846 | | | | 288,656 | | | | 860,778 | |
1290 Retirement 2030 | | | 195,023 | | | | 519,067 | | | | 121,296 | | | | 80,516 | | | | 122,307 | | | | 128,767 | |
1290 Retirement 2035 | | | 242,334 | | | | 550,396 | | | | 125,091 | | | | 143,495 | | | | 166,168 | | | | — | |
1290 Retirement 2040 | | | 132,662 | | | | 27,410 | | | | 80,116 | | | | 56,874 | | | | 65,632 | | | | 57,624 | |
1290 Retirement 2045 | | | 162,933 | | | | 122,800 | | | | 91,341 | | | | 129,169 | | | | 101,057 | | | | 376,691 | |
1290 Retirement 2050 | | | 147,935 | | | | 33,174 | | | | 88,692 | | | | 36,716 | | | | 71,905 | | | | 67,676 | |
1290 Retirement 2055 | | | 109,392 | | | | 87,850 | | | | 59,550 | | | | 164,616 | | | | 61,562 | | | | 24,624 | |
1290 Retirement 2060 | | | 112,234 | | | | 98,870 | | | | 62,050 | | | | 72,647 | | | | 60,223 | | | | 56,775 | |
1290 SmartBeta Equity | | | 1,704,970 | | | | — | | | | 2,539,876 | | | | — | | | | 3,843,892 | | | | 6,057,833 | |
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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, 2023, the following Fund elected to defer late year losses, in the amount listed below:
| | | | |
Fund: | | Deferred Late Year Losses | |
1290 Essex Small Cap Growth | | $ | 91,911 | |
The following Funds had a Return of Capital during the year ended October 31, 2023:
| | | | |
Portfolios: | | Return of Capital | |
1290 Diversified Bond | | $ | 8,391,802 | |
1290 High Yield Bond | | | 31,809 | |
The following Funds had a Return of Capital during the year ended October 31, 2022:
| | | | |
Funds: | | Return of Capital | |
1290 High Yield Bond | | $ | 121,909 | |
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, 2023 as follows:
| | | | | | | | | | | | |
Portfolios: | | Undistributed
Net Investment
Income
(Loss) (a) | | | Accumulated
Net Realized
Gain (Loss) (a) | | | Paid In
Capital | |
1290 Diversified Bond | | $ | (12,647,652 | ) | | $ | 12,647,652 | | | $ | — | |
1290 Essex Small Cap Growth | | | 4,089 | | | | 513 | | | | (4,602 | ) |
1290 GAMCO Small/Mid Cap Value | | | 39,725 | | | | (39,725 | ) | |
| —
|
|
1290 High Yield Bond | | | 131,773 | | | | (82,191 | ) | | | (49,582 | ) |
1290 Loomis Sayles Multi-Asset Income | | | (63,883 | ) | | | 63,883 | | | | — | |
1290 Multi-Alternative Strategies | | | (362,693 | ) | | | 363,578 | | | | (885 | ) |
1290 Retirement 2020 | | | (109 | ) | | | 109 | | | | — | |
1290 Retirement 2025 | | | (124 | ) | | | 124 | | | | — | |
1290 Retirement 2030 | | | (6 | ) | | | 6 | | | | — | |
1290 Retirement 2035 | | | — | | | | — | | | | — | |
1290 Retirement 2040 | | | (686 | ) | | | 686 | | | | — | |
1290 Retirement 2045 | | | — | | | | — | | | | — | |
1290 Retirement 2050 | | | — | | | | — | | | | — | |
1290 Retirement 2055 | | | — | | | | — | | | | — | |
1290 Retirement 2060 | | | (500 | ) | | | 500 | | | | — | |
1290 SmartBeta Equity | | | 60,628 | | | | (60,628 | ) | | | — | |
(a) These components of net assets are included in Total Distributable Earnings (Loss) in the Statement of Assets and Liabilities.
To the extent book and tax differences in shareholder distributions are permanent in nature, such amounts are reclassified within the capital accounts based on their Federal tax basis treatment. Permanent book and tax differences resulted in reclassifications to undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in-capital at October 31, 2023 as follows: partnership basis adjustments (1290 Multi-Alternative Strategies) and reclassification of gain and losses from foreign currency transactions (1290 Diversified Bond).
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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 | |
Portfolios: | | Short
Term | | | Long
Term | | | Short Term | | | Long Term | |
1290 Diversified Bond | | $ | — | | | $ | — | | | $ | 77,112,534 | | | $ | 78,279,056 | |
1290 Essex Small Cap Growth | | | — | | | | — | | | | 2,148,541 | | | | — | |
1290 High Yield Bond | | | — | | | | — | | | | 1,137,525 | | | | 5,334,685 | |
1290 Multi-Alternative Strategies | | | — | | | | — | | | | 30,333 | | | | 799,841 | |
1290 SmartBeta Equity | | | 441,231 | | | | — | | | | 3,116,153 | | | | — | |
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 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 or fair value, as applicable. 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
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NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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.
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 forward 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 or fair value, as applicable, 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
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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 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.
A Fund may use inflation-linked swaps to provide inflation protection within its portfolio. These are agreements between counterparties to exchange interest payments based on interest rates over the life of the swap. One cash flow stream will typically be a floating rate payment based upon the Consumer Price Index while the other is a pre-determined fixed interest rate. The use of swaps exposes the Fund to interest rate risk. Swaptions are marked-to-market daily based upon values from third party vendors.
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
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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 or fair value, as applicable, 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 “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.
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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 as collateral 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.
Securities Lending:
During the year ended October 31, 2023, certain Funds entered into securities lending transactions. To generate additional income, a Fund may lend its portfolio securities, up to 30% of the market value of the Fund’s total assets, to brokers, dealers, and other financial institutions.
JPMorgan serves as securities lending agent for the securities lending program of the Trust. Securities lending transactions are considered to be overnight and continuous and can be terminated by a Fund or the borrower at any time.
The Funds’ securities lending policies and procedures require that the borrower (i) deliver collateral consisting of cash or U.S. Government securities, equal to at least 102% of the value of the portfolio securities loaned with respect to each new loan of U.S. securities, and equal to at least 105% of the value of the portfolio securities loaned with respect to each new loan of non-U.S. securities; and (ii) at all times thereafter mark-to-market the collateral on a daily basis so that the market value of such collateral is at least 100% of the value of securities loaned. Cash collateral received is permitted to be invested in short-term, highly liquid investments, such as government money market funds and repurchase agreements, and shown in the Portfolio of Investments and included in calculating the Fund’s total assets. U.S. Government securities received as collateral, if any, are held in safekeeping by JPMorgan and cannot be sold or repledged by the Fund and accordingly are not reflected in the Fund’s total assets. For additional information on the non-cash collateral received, please refer to note (xx) in the Portfolio of Investments. Certain of the securities on loan may have been sold prior to the close of the reporting period and are included in Receivables for Securities Sold on the Statements of Assets and Liabilities.
The Funds receive payments from the lending agent equivalent to any dividends and/or interest that would have been earned on the securities loaned while simultaneously seeking to earn income on the investment of cash collateral. Securities lending income includes any fees charged to borrowers less expenses associated with the loan. Income from the securities lending program is recorded when earned from the lending agent and reflected in the Statements of Operations under “Securities lending (net).” The Funds may invest cash collateral in government money market funds or repurchase agreements as indicated on the Portfolio of Investments, and record a liability in the Statements of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Such liabilities, if any, are reflected in the Statements of Assets and Liabilities under “Payable for return of collateral on securities loaned”. There may be risks of delay or restrictions in recovery of the securities or disposal of collateral should the borrower of the securities fail financially.
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October 31, 2023
Loans are made, however, only to borrowers deemed by the lending agent to be of good standing and creditworthy and approved by EIM. Loans are subject to termination by a Fund or the borrower at any time, and, therefore, are not considered to be illiquid investments. The lending agent receives a fee based on a percentage of earnings derived from the investment of cash collateral. The Funds receive 90% of the net earnings from the securities lending program up to $45 million of aggregate earnings across all Funds within a calendar year and 92% thereafter.
The Securities Lending Agreement between the Trust and JPMorgan provides that in the event of a default by a borrower with respect to any loan, a Fund may terminate the loan and JPMorgan will exercise any and all remedies provided under the applicable borrower agreement to make the Fund whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting borrower against the purchase cost of the replacement securities. If, despite such efforts by JPMorgan to exercise these remedies, the Fund sustains losses as a result of a borrower’s default, JPMorgan indemnifies the Fund by purchasing replacement securities at JPMorgan’s expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agreement between the Fund and JPMorgan.
At October 31, 2023, the Securities Lending Agreement does not permit the Fund to enforce a netting arrangement.
Market, Credit and Other Risk:
A Fund’s investments in financial instruments expose the Fund to various risks such as, but not limited to, market, interest rate, foreign currency, foreign securities, forward settling transactions, equity, and credit risks.
The market values of a Fund’s investments may decline due to factors that are specifically related to a particular company or issuer, as well as general market conditions, such as real or perceived adverse economic or political conditions, changes in the general outlook for corporate earnings, inflation rates and/or investor expectations concerning such rates, changes in interest rates or currency rates, recessions or adverse investor sentiment generally. The market values of a Fund’s investments may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. During a general downturn in the securities markets, multiple asset classes may decline in value simultaneously. 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. World markets, or those in a particular region, may all react in similar fashion to important economic, political or other developments. Events such as environmental and natural disasters or other catastrophes, public health crises (such as the COVID-19 pandemic, which has caused significant global market disruptions), social unrest, and cybersecurity incidents, and governments’ reactions (or failure to react) to such events, could cause uncertainty in the markets and may adversely affect the performance of the global economy. Geopolitical and other events, including terrorism, tensions, war or other open conflicts between nations, or political or economic dysfunction within some nations that are global economic powers or major producers of oil, may lead to overall instability in world economies and markets generally and have led, and may in the future lead, to increased market volatility and may have adverse long- term effects. Impacts from climate change may include significant risks to global financial assets and economic growth. The U.S. Federal Reserve (“Fed”) has invested or otherwise made available substantial amounts of money to keep credit flowing through short-term money markets and has signaled that it will continue to adjust its operations as appropriate to support short-term money markets. Amid these efforts, concerns about the markets’ dependence on the Fed’s provision of liquidity have grown. Policy changes by the U.S. government and/or the Fed and political events within the United States may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. A downgrade of the ratings of U.S. government debt obligations, or concerns about the U.S.
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October 31, 2023
government’s credit quality in general, could have a substantial negative effect on the U.S. and global economies. High public debt in the United States and other countries creates ongoing systemic and market risks and policymaking uncertainty.
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.
Interest rates were unusually low in recent years in the United States and abroad, but the interest rate environment changed dramatically in 2022 as interest rates moved significantly higher. Aggressive stimulus measures in 2020 and 2021, rising demand for goods and services, tight labor markets, and supply chain disruptions contributed to a surge of inflation in many sectors of the U.S. and global economies. Due to concerns regarding high inflation, the U.S. Federal Reserve and many foreign governments and monetary authorities have raised interest rates and implemented other policy initiatives in an effort to control inflation, and they may continue to do so. It is difficult to predict accurately the pace at which central banks or monetary authorities may increase interest rates or the timing, frequency, or magnitude of any such further increases, and the evaluation of macro-economic and other conditions could cause a change in approach in the future. Rising interest rates may present a greater risk than has historically been the case due to the effect of government fiscal and monetary policy initiatives and potential market reaction to those initiatives. As such, fixed-income and related markets may continue to experience heightened levels of interest rate volatility. Inflation risk is the uncertainty over the future real value (after inflation) of an investment. A Fund’s investments may not keep pace with inflation, and the value of an investment in a Fund may be eroded over time by inflation. Changes in government or central bank policies could negatively affect the value and liquidity of a Fund’s investments and cause it to lose money, and there can be no assurance that the initiatives undertaken by governments and central banks will be successful.
Prior to June 30, 2023, many debt securities, derivatives and other financial instruments utilized the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations; however, LIBOR settings for all maturities and currencies ceased to be published on a representative basis after 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. There may be risks associated with using a new reference or benchmark rate with respect to existing or new investments and transactions. The SOFR or other alternative reference or benchmark rate may be an ineffective substitute with respect to an existing or new investment or transaction, resulting in prolonged adverse market conditions for a Fund, which could negatively affect a Fund’s performance and/or net asset value.
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
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October 31, 2023
the International Monetary Fund, or by the imposition of currency controls or other political 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.
Russia’s military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict have had, and could continue to have, severe adverse effects on regional and global economies and could further increase volatility and uncertainty in the financial markets. The United States and other countries have imposed broad- ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine and may impose sanctions on other countries that provide military or economic support to Russia. These events have resulted in, and could continue to result in, significant market disruptions, including in certain industries or sectors such as the oil and natural gas markets, and may further strain global supply chains and negatively affect inflation and global growth. These and any related events could significantly impact a Fund’s performance and the value of an investment in a Fund beyond any direct exposure a Fund may have to Russian issuers or issuers in other countries affected by the invasion.
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, a 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.
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. In addition, common stock prices may be particularly sensitive to rising interest rates, which increase borrowing costs and the costs of capital.
A Fund will be exposed to credit risk to parties with whom it trades and will also bear the risk of settlement default. A 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.
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October 31, 2023
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 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
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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 |
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 Essex Small Cap Growth | | | 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 Loomis Sayles Multi-Asset Income | | | 0.650 | | | | 0.600 | | | | 0.575 | | | | 0.550 | | | | 0.525 | |
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 | |
Prior to January 1, 2023 EIMG was the investment adviser to the Funds.
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.
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October 31, 2023
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, 2023 are included in Waiver from distributor on the Statement of Operations for each Fund and are not eligible for recoupment. |
The Trust, on behalf of the Funds, has entered into a transfer agency and service agreement (the “Transfer Agency Agreement”) with SS&C GIDS, Inc. (“Transfer Agent”). Pursuant to the Transfer Agency Agreement, the Transfer Agent 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, the Transfer Agent 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. As of October 31, 2023, 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 invests (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, 2025 (unless the Board consents to an earlier revision or termination of this arrangement) (“Expense Limitation Agreement”),
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
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 Essex Small Cap Growth | | | 0.88 | |
1290 GAMCO Small/Mid Cap Value* | | | 0.95 | |
1290 High Yield Bond | | | 0.75 | |
1290 Loomis Sayles Multi-Asset Income | | | 0.80 | |
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. |
Prior to January 1, 2023 EIMG was the investment adviser to the Funds.
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 amount of any such payments or waivers provided that the payments or waivers are reimbursed within three years of the payments or waivers being recorded and the Fund’s expense ratio, after the reimbursement is taken into account, does not exceed the Fund’s expense cap at the time of the waiver or the Fund’s expense cap at the time of the reimbursement, whichever is lower. 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, 2023, the Funds did not incur recoupment fees and as of October 31, 2023, no commitment or contingent liability is expected. At October 31, 2023, 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: | | 2024 | | | 2025 | | | 2026 | |
1290 Diversified Bond | | $ | 2,190,751 | | | $ | 3,005,779 | | | $ | 3,030,013 | | | $ | 8,226,543 | |
1290 Essex Small Cap Growth | | | — | | | | 202,116 | | | | 412,087 | | | | 614,203 | |
1290 GAMCO Small/Mid Cap Value | | | 251,731 | | | | 393,763 | | | | 411,133 | | | | 1,056,627 | |
1290 High Yield Bond | | | 248,164 | | | | 280,965 | | | | 299,929 | | | | 829,058 | |
1290 Loomis Sayles Multi-Asset Income | | | 200,745 | | | | 302,294 | | | | 282,902 | | | | 785,941 | |
1290 Multi-Alternative Strategies | | | 101,405 | | | | 110,420 | | | | 122,841 | | | | 334,666 | |
1290 Retirement 2020 | | | 137,253 | | | | 126,767 | | | | 126,214 | | | | 390,234 | |
1290 Retirement 2025 | | | 150,364 | | | | 137,099 | | | | 133,596 | | | | 421,059 | |
1290 Retirement 2030 | | | 131,389 | | | | 125,762 | | | | 127,176 | | | | 384,327 | |
1290 Retirement 2035 | | | 135,296 | | | | 130,199 | | | | 129,923 | | | | 395,418 | |
1290 Retirement 2040 | | | 128,227 | | | | 123,023 | | | | 126,010 | | | | 377,260 | |
1290 Retirement 2045 | | | 133,137 | | | | 126,549 | | | | 127,739 | | | | 387,425 | |
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
| | | | | | | | | | | | | | | | |
| | | Amount Eligible Through | | | Total Eligible
For
Reimbursement | |
Funds: | | 2024 | | | 2025 | | | 2026 | |
1290 Retirement 2050 | | $ | 129,144 | | | $ | 123,486 | | | $ | 127,733 | | | $ | 380,363 | |
1290 Retirement 2055 | | | 128,662 | | | | 123,400 | | | | 126,530 | | | | 378,592 | |
1290 Retirement 2060 | | | 129,838 | | | | 124,402 | | | | 129,096 | | | | 383,336 | |
1290 SmartBeta Equity | | | 350,864 | | | | 475,250 | | | | 556,893 | | | | 1,383,007 | |
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 redemptions of the Funds’ Class A shares. The Distributor has advised the Funds that for the year ended October 31, 2023, the proceeds retained from sales and redemptions are as follows:
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.
| | | | | | | | | | | | |
| | | Class A | | | Class T | |
Funds: | | Front
End
Sales
Charge | | | Contingent
Deferred
Sales
Charge | | | Front
End
Sales
Charge | |
1290 Diversified Bond | | $ | 6,647 | | | $ | — | | | $ | — | |
1290 Essex Small Cap Growth | | | 1,337 | | | | — | | | | — | |
1290 GAMCO Small/Mid Cap Value | | | 16,945 | | | | — | | | | — | |
1290 High Yield Bond | | | 1,838 | | | | — | | | | — | |
1290 Loomis Sayles Multi-Asset Income | | | 36,798 | | | | — | | | | — | |
1290 Multi-Alternative Strategies | | | 3,360 | | | | — | | | | — | |
1290 SmartBeta Equity | | | 23,697 | | | | — | | | | — | |
| Note 4 | Compensation of Officers |
Each officer of the Trust is an employee of Equitable Financial, EIM 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, 2023, the three trusts in the fund complex reimbursed EIM and EIMG for $290,000 of the Chief Compliance Officer’s compensation, including $2,300 reimbursed by the Trust.
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
October 31, 2023
| Note 5 | Percentage of Ownership by Affiliates |
At October 31, 2023, EIMG and Equitable Financial held investments in each of the Funds as follows:
| | | | |
Funds: | | Percentage of
Ownership | |
1290 Essex Small Cap Growth | | | 20 | % |
1290 GAMCO Small/ Mid Cap Value | | | 18 | |
1290 High Yield Bond | | | 9 | |
1290 Loomis Sayles Multi-Asset Income | | | 80 | |
1290 Multi-Alternative Strategies | | | 63 | |
1290 Retirement 2020 | | | 100 | |
1290 Retirement 2025 | | | 98 | |
1290 Retirement 2030 | | | 99 | |
1290 Retirement 2035 | | | 98 | |
1290 Retirement 2040 | | | 99 | |
1290 Retirement 2045 | | | 98 | |
1290 Retirement 2050 | | | 99 | |
1290 Retirement 2055 | | | 100 | |
1290 Retirement 2060 | | | 99 | |
Shares of 1290 Diversified Bond, 1290 Essex Small Cap Growth, 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond and 1290 SmartBeta Equity Funds may be held as an underlying investment by certain series of the EQ Advisors Trust and EQ Premier VIP Trust (“VIP Trust”). The following table shows the percentage of ownership of the net assets of each Fund by a series of EQ Advisors Trust or VIP Trust as of October 31, 2023.
| | | | | | | | | | | | | | | | | | | | |
Portfolios: | | 1290
Diversified Bond | | | 1290 Essex
Small Cap
Growth | | | 1290 GAMCO
Small/Mid Cap
Value | | | 1290 High
Yield Bond | | | 1290
SmartBeta
Equity | |
EQ/All Asset Growth Allocation | | | 1.15 | % | | | — | % | | | — | % | | | — | % | | | — | % |
Equitable Conservative Growth MF/ETF | | | 3.82 | | | | 4.44 | | | | 2.43 | | | | 10.17 | | | | 4.17 | |
Equitable Moderate Growth MF/ETF | | | 0.49 | | | | 1.76 | | | | 0.95 | | | | 1.47 | | | | 1.77 | |
Equitable Growth MF/ETF | | | 0.09 | | | | 2.63 | | | | 1.42 | | | | 1.58 | | | | 3.16 | |
EQ/Conservative Allocation | | | 4.85 | | | | — | | | | — | | | | — | | | | — | |
EQ/Conservative-Plus Allocation | | | 4.16 | | | | — | | | | — | | | | — | | | | — | |
EQ/Moderate Allocation | | | 21.81 | | | | — | | | | — | | | | — | | | | — | |
EQ/Moderate-Plus Allocation | | | 16.22 | | | | — | | | | — | | | | — | | | | — | |
EQ/Aggressive Allocation | | | 2.10 | | | | — | | | | — | | | | — | | | | — | |
Target 2015 Allocation | | | 0.62 | | | | — | | | | — | | | | — | | | | — | |
Target 2025 Allocation | | | 1.64 | | | | — | | | | — | | | | — | | | | — | |
Target 2035 Allocation | | | 1.20 | | | | — | | | | — | | | | — | | | | — | |
Target 2045 Allocation | | | 0.72 | | | | — | | | | — | | | | — | | | | — | |
Target 2055 Allocation | | | 0.10 | | | | — | | | | — | | | | — | | | | — | |
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1290 FUNDS
NOTES TO FINANCIAL STATEMENTS (Concluded)
October 31, 2023
The Adviser evaluated subsequent events from October 31, 2023, the date of these financial statements, through the date these financial statements were issued. The subsequent events include the following:
Effective November 29, 2023, the name of the 1290 Retirement 2060 Fund changed to 1290 Avantis® U.S. Large Cap Growth Fund; American Century Investment Management, Inc. became the Fund’s sub-adviser; and the Fund’s investment objective changed. Effective November 29, 2023, the Fund seeks to provide long-term growth of capital and pursues its investment objective by investing directly in U.S. equity securities.
174
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of 1290 Funds and Shareholders of each of the sixteen 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, 2023, the related statements of operations and the statements of changes in net assets for each of the periods indicated in the table below, 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, 2023, the results of each of their operations and the changes in each of their net assets for each of the periods indicated in the table below 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 (1) | | 1290 Retirement 2030 Fund (1) |
| 1290 Essex Small Cap Growth Fund (2) | | 1290 Retirement 2035 Fund (1) |
| 1290 GAMCO Small/Mid Cap Value Fund (1) | | 1290 Retirement 2040 Fund (1) |
| 1290 High Yield Bond Fund (1) | | 1290 Retirement 2045 Fund (1) |
| 1290 Loomis Sayles Multi-Asset Income Fund (1) | | 1290 Retirement 2050 Fund (1) |
| 1290 Multi-Alternative Strategies Fund (1) | | 1290 Retirement 2055 Fund (1) |
| 1290 Retirement 2020 Fund (1) | | 1290 Retirement 2060 Fund (1) |
| 1290 Retirement 2025 Fund (1) | | 1290 SmartBeta Equity Fund (1) |
| (1) | Statement of operations for the year ended October 31, 2023 and statement of changes in net assets for each of the two years in the period ended October 31, 2023 |
| (2) | Statement of operations for the year ended October 31, 2023 and statement of changes in net assets for the year ended October 31, 2023 and for the period July 11, 2022 (commencement of operations) through October 31, 2022 |
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, 2023 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, 2023
We have served as the auditor of one or more investment companies in the Equitable Investment Management, 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, 2023 (UNAUDITED)
At an in-person meeting held on July 18-19, 2023 (the “July 2023 Meeting”), 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) 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, 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. As noted below, the Board considered, and made a decision with respect to, each Agreement for each Fund separately.
| | |
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 Essex Small Cap Growth Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with Essex Investment Management Company, LLC |
| |
1290 GAMCO Small/Mid Cap Value Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with GAMCO Asset Management, Inc. |
| |
1290 High Yield Bond Fund 1290 SmartBeta Equity Fund | | Advisory Agreement with EIM Sub-Advisory Agreement with AXA Investment Managers US Inc. |
| |
1290 Loomis Sayles Multi-Asset Income Fund (formerly known as 1290 DoubleLine Dynamic Allocation Fund) | | Advisory Agreement with EIM Sub-Advisory Agreement with Loomis, Sayles & Company, L.P. |
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 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 provided by, and the profits (if any) 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,
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including any potential economies of scale and 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). The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets and the mutual fund industry). 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 take into account conclusions reached during their consideration of these same arrangements in prior years. The Board is assisted by counsel for the Trust and the Independent Trustees are also separately assisted by independent legal counsel throughout the process.
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, as well as third-party providers; 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 and expense information for each Fund and comparative investment performance information for each Fund with at least one year of operating history as of March 31, 2023. The Independent Trustees, in consultation with their independent legal counsel, annually review and assess and, as they deem appropriate, request revisions to, the materials provided by Broadridge to ensure that the Independent Trustees continue to receive comparative fee, expense, and investment performance information in a format that facilitates and 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, and the Independent Trustees receive information on an ongoing basis) 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 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
177
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 requested and 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 managed by Equitable Investment Management Group, LLC (“EIMG”), an affiliate of 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 noted that EIMG served as the investment adviser to the Trust prior to January 1, 2023. The Board also noted that all but one of the Sub-Advisers currently serve as investment sub-advisers for one or more series, or allocated portion(s) of series, of EQ Advisors Trust and EQ Premier VIP Trust. The Trustees took into account information relating to the Adviser, EIMG and the 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, EIMG, the 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 and each relevant Agreement separately and, in doing so, noted the respective roles of the Adviser and, as applicable, the relevant Sub-Adviser in providing services to the Fund. In approving the renewal of the relevant Agreement(s) with respect to each Fund, each Trustee, including the Independent Trustees, after considering all factors they deemed relevant, reached a determination, with the assistance of Independent Trustees’ counsel and fund counsel and through the exercise of their own business judgment, 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, other series (or allocated portion(s) of other series) in the same fund complex with the 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 Adviser’s personnel who perform those functions with respect to the Funds. In addition, the Board considered the quality of the Adviser’s communications with the Board and the Adviser’s responsiveness to Board inquiries and requests made from time to time with respect to the Funds. The Board further considered
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that the Adviser also provides the Trust with personnel, including Trust officers, in connection with 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 assumes significant entrepreneurial risk in sponsoring new Funds or recommending and implementing changes (e.g., investment objective, strategy or policy changes) to existing Funds and that the Adviser also bears and assumes significant ongoing risks, including investment, operational, cybersecurity, enterprise, litigation, regulatory and compliance risks, with respect to all Funds. The Board considered that the Adviser’s responsibilities with respect to all Funds include daily monitoring of investment, operational, cybersecurity, enterprise, litigation, regulatory and compliance risks as they relate to the Funds. The Board also considered periodic reports provided to the Board regarding the Adviser’s ongoing risk monitoring and management activities. The Board also noted increased regulatory risk.
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, as well as information on staffing levels and succession planning. 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 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 and reports from the Trust’s Chief Compliance Officer regarding the monitoring of execution quality.
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 received 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 the 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 (as well as periodic enhancements thereto) 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 market conditions over the past year and considered the overall performance of the Adviser and the Sub-Advisers in this context. The Board also considered information about the Adviser’s and each Sub-Adviser’s plans with respect to its continued operation in an in-person, remote or hybrid work environment 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 market and business disruptions resulting from a variety of economic and other factors. The Board also noted that, at the Independent Trustees’ request, the
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Adviser had continued to provide the Board with periodically updated EIM 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 U.S. Securities and Exchange Commission 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 pricing and valuation of portfolio securities; liquidity and derivatives risk management; cybersecurity; trustee independence; mutual fund board governance “best practices”; new reporting requirements for mutual funds; 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 noted the increasing complexity of the financial markets.
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. The Board also noted that, throughout the past year, the Adviser and its affiliates had continued or undertaken strategic and other actions and 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. 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 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.
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 information about performance attribution and reviewed performance in relation to certain measures of the degree of investment risk undertaken by the portfolio managers. The Board also considered the Adviser’s effectiveness in monitoring the performance of the Sub-Advisers, and the Adviser’s responses to performance issues when identified. 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, 2023. The Board noted that this information supplemented other performance information provided to the Board throughout the year and in connection with the annual renewal process. For each Fund with at least one year of operating history as of March 31, 2023, 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 also noted that, at the Independent Trustees’ request, the Adviser had provided the Board with updated performance information for all of the Funds for periods ended May 31, 2023, as well as market commentary, in connection with the annual renewal process.
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
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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. The Board noted that while the Adviser requested that the Board be provided certain supplemental peer group performance information, the Adviser did not participate in Broadridge’s selection of peer funds, or identification of a peer group, for any Fund.
In evaluating the Funds’ performance, the Board generally considered longer-term performance over a full market cycle (typically five years or longer, if applicable) to be more important than short-term performance. The Board also took into account factors including general market conditions (including the amount of volatility in the market over the past year); interest rate and inflation levels and credit conditions; 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 selecting different time periods for performance calculations (for example, whether a one-year period is from December to December or March to March) can produce significantly different results in terms of a Fund’s returns and peer ranking on a relative basis. The Board further acknowledged that longer-term performance could be impacted by even one period of significant outperformance or underperformance. 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 Loomis Sayles Multi-Asset Income Fund, the Board considered that the Fund allocates its assets between equity and fixed income investments and is advised by a single Sub-Adviser. In evaluating the performance of the Fund, the Board also noted that, in August 2022, the Fund had replaced its former sub-adviser with a new Sub-Adviser, and had changed its investment objective, policies and strategy, performance benchmark, fee and expense structure, and name. Therefore, the Board focused on the Fund’s performance since that time.
With respect to the performance of each of the 1290 Retirement Funds, the Board considered that each Fund operates as a fund-of-funds managed by the Adviser 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 took into account that, at the July 2023 Meeting, the Adviser had proposed, and the Board had approved, changing the 1290 Retirement 2060 Fund from a fund-of-funds managed by the Adviser to a sub-advised fund. In connection with the change, the Board also approved a new investment sub-advisory agreement between the Adviser and the proposed new sub-adviser1 with respect to the Fund, as well as changes to the Fund’s investment objective, policies and strategy, performance benchmark, and name. The Board also noted that the implementation of the proposed changes was subject to shareholder approval of the new investment sub-advisory agreement with respect to the Fund.2
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.
| 1 | A discussion of the process followed by the Board in its approval of the new investment sub-advisory agreement, including the information reviewed, certain material factors considered, and certain related conclusions reached, is provided elsewhere in this shareholder report. |
| 2 | As of the date of this shareholder report, the Fund’s shareholders have since approved the new investment sub-advisory agreement at a special shareholder meeting held on October 23, 2023. |
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Active Funds
With respect to the performance of the 1290 Diversified Bond, 1290 Essex Small Cap Growth, 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 June 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 the 1290 Essex Small Cap Growth Fund had only a short operating history on which to evaluate performance.
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.
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 administrator 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.
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The Broadridge expense data was based upon information taken from each Fund’s audited annual report for the period ended October 31, 2022, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. 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 operational 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. For the 1290 Retirement Funds, the only operational share class is Class I. 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 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, the Fund-specific contractual advisory fee and total expense ratio comparisons provided below are relative to 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. The Board also considered that the full effects of certain fee and expense changes that the Adviser had agreed to implement during 2022 were not reflected in the Broadridge expense data, but that all current fees and expenses of each Fund are disclosed as required in Fund offering documents.
The Board noted that the Broadridge expense groups and universes for the Funds excluded ETFs because ETFs have a different structure from open-end funds like the Funds and shares of ETFs are accessed differently by investors. The Board also noted that the Broadridge expense groups and universes for the actively managed Funds excluded passive, or index, funds because passive funds pursue their investment strategies differently from the actively managed Funds. The Board noted that, in each case, the excluded funds could have lower advisory fees and total expenses, and that the inclusion of these funds in peer groups and universes would have the effect of lowering the averages and medians of the expense measurements in the peer groups and universes. The Board also noted that, as with performance peer groups, the Adviser did not participate in Broadridge’s selection of peer funds, or identification of a peer group, for any Fund for purposes of fee and expense comparisons.
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 and its affiliates in connection with the operation of the Fund. The Board also considered the sub-advisory fee paid to a Sub-Adviser in light of fees charged by the Sub-Adviser to similar funds, if any, advised or sub-advised by the Sub-Adviser, including explanations of differences among funds where relevant.
Allocation Funds
The Board considered that the contractual advisory fee for the 1290 Loomis Sayles Multi-Asset Income Fund and each of the 1290 Retirement Funds was above the median for the Fund’s respective Broadridge category. The
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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 of the 1290 Retirement Funds, 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 above the median for the Fund’s Broadridge category.
The Board considered that the contractual advisory fee for each of the 1290 Diversified Bond, 1290 Essex Small Cap Growth, 1290 GAMCO Small/Mid Cap Value, 1290 High Yield Bond and 1290 SmartBeta Equity Funds was above (but, in the case of the 1290 Essex Small Cap Growth 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 each of the 1290 Diversified Bond and 1290 Essex Small Cap Growth Funds was below the median for the Fund’s respective 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 the median for the Fund’s respective Broadridge category.
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.
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 and its affiliates’ advisory, administrative and other fees so that each Fund’s total expense ratios do not exceed certain levels as set forth in the Fund’s prospectus. In this regard, the Board also noted that the current expense limitation arrangements for the 1290 GAMCO Small/Mid Cap Value Fund 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.
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, 2022, which was the most recent fiscal year for the Adviser and its affiliates. The Board also considered a year-over-year comparison of profitability information for the one-year periods ended December 31, 2022, 2021, and 2020. 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 there is no uniform methodology within the asset management industry regarding the allocation of firm-wide or complex-wide expenses for determining profitability for this purpose; 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
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Adviser’s cost allocation methodology was consistent with the 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 has engaged an outside consultant to conduct periodic assessments of the cost allocation methodology, including adjustments to the methodology, as part of the Board’s review of the Adviser’s profitability analysis in connection with the annual renewal process. In addition to the annual profitability report presentation and extensive discussions with management, the Board took into account the series of assessments and noted that, following each such assessment, the consultant found that the Adviser’s overall cost allocation methodology was reasonable in all material respects and generally consistent with observed industry practices. 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 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 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 Board acknowledged that, because each Sub-Adviser’s fee is paid by the Adviser, the Adviser is incentivized to negotiate a favorable fee. 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 a Fund grows 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, and also considered whether such breakpoints are set at appropriate asset 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 and its affiliates’ advisory, administrative and other fees so that each Fund’s total expense ratios do not exceed certain contractual levels as set forth in the Fund’s 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 bears the risk that the Fund will never become profitable), while shareholders of the Fund
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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 the ongoing development of the Adviser’s infrastructure and information technology to support the Funds through, among other things, cybersecurity, business continuity planning, and risk management. In this regard, the Board also considered information about the operation of the Trust’s securities lending program. The Board also noted that the Adviser can share economies of scale with Funds by maintaining existing expense structures in the face of a rising cost environment.
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 or EIMG 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.
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 serves as the administrator for the Funds and receives compensation for acting in this capacity. 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. The Board also noted that certain Sub-Advisers currently serve as investment sub-advisers for other funds advised by the Adviser or EIMG and receive 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.
186
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, 2023, 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 shareholder report. See Notes on Performance (Unaudited) elsewhere in this shareholder report for descriptions of the benchmarks.
1290 Funds Investment Performance
For periods ended March 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 | | | | (3.80 | ) | | | (9.12 | ) | | | 24.94 | | | | 22.59 | | | | 6.18 | | | | 4.97 | | | | 7.48 | | | | 6.76 | |
1290 GAMCO Small/Mid Cap Value Fund Class T | | | 11/12/2014 | | | | (3.58 | ) | | | (5.97 | ) | | | 25.25 | | | | 24.19 | | | | 6.45 | | | | 5.92 | | | | 7.75 | | | | 7.42 | |
1290 GAMCO Small/Mid Cap Value Fund Class I | | | 11/12/2014 | | | | (3.58 | ) | | | n/a | | | | 25.25 | | | | n/a | | | | 6.45 | | | | n/a | | | | 7.75 | | | | n/a | |
1290 GAMCO Small/Mid Cap Value Fund Class R | | | 11/12/2014 | | | | (4.08 | ) | | | n/a | | | | 24.63 | | | | n/a | | | | 5.92 | | | | n/a | | | | 7.22 | | | | n/a | |
Lipper Small-Cap Core Funds | | | | | | | (7.67 | ) | | | n/a | | | | 21.63 | | | | n/a | | | | 5.53 | | | | n/a | | | | 6.72 | | | | n/a | |
Russell 2500 Value Index | | | | | | | (10.53 | ) | | | n/a | | | | 21.80 | | | | n/a | | | | 5.61 | | | | n/a | | | | 6.40 | | | | n/a | |
1290 Multi-Alternative Strategies Fund Class A | | | 7/6/2015 | | | | (10.05 | ) | | | (14.96 | ) | | | 3.05 | | | | 1.14 | | | | (0.07 | ) | | | (1.19 | ) | | | 0.38 | | | | (0.35 | ) |
1290 Multi-Alternative Strategies Fund Class I | | | 7/6/2015 | | | | (9.71 | ) | | | n/a | | | | 3.34 | | | | n/a | | | | 0.18 | | | | n/a | | | | 0.63 | | | | n/a | |
1290 Multi-Alternative Strategies Fund Class R | | | 7/6/2015 | | | | (10.22 | ) | | | n/a | | | | 2.80 | | | | n/a | | | | (0.31 | ) | | | n/a | | | | 0.13 | | | | n/a | |
Lipper Alternative Multi-Strategy Funds | | | | | | | (1.01 | ) | | | n/a | | | | 4.53 | | | | n/a | | | | 1.52 | | | | n/a | | | | 1.24 | | | | n/a | |
ICE BofA U.S. 3-Month Treasury Bill Index | | | | | | | 2.53 | | | | n/a | | | | 0.90 | | | | n/a | | | | 1.41 | | | | n/a | | | | 1.12 | | | | n/a | |
1290 SmartBeta Equity Fund Class A | | | 11/12/2014 | | | | (5.66 | ) | | | (10.88 | ) | | | 13.96 | | | | 11.82 | | | | 7.87 | | | | 6.66 | | | | 7.72 | | | | 6.99 | |
1290 SmartBeta Equity Fund Class T | | | 11/12/2014 | | | | (5.42 | ) | | | (7.77 | ) | | | 14.26 | | | | 13.29 | | | | 8.15 | | | | 7.60 | | | | 7.99 | | | | 7.66 | |
1290 SmartBeta Equity Fund Class I | | | 11/12/2014 | | | | (5.42 | ) | | | n/a | | | | 14.26 | | | | n/a | | | | 8.15 | | | | n/a | | | | 7.99 | | | | n/a | |
1290 SmartBeta Equity Fund Class R | | | 11/12/2014 | | | | (5.90 | ) | | | n/a | | | | 13.69 | | | | n/a | | | | 7.61 | | | | n/a | | | | 7.45 | | | | n/a | |
Lipper Global Large-Cap Core Funds | | | | | | | (5.32 | ) | | | n/a | | | | 14.16 | | | | n/a | | | | 6.83 | | | | n/a | | | | 6.83 | | | | n/a | |
MSCI World (Net) Index | | | | | | | (7.02 | ) | | | n/a | | | | 16.40 | | | | n/a | | | | 8.01 | | | | n/a | | | | 7.89 | | | | n/a | |
1290 High Yield Bond Fund Class A | | | 11/12/2014 | | | | (3.23 | ) | | | (7.63 | ) | | | 4.81 | | | | 3.22 | | | | 2.68 | | | | 1.74 | | | | 3.05 | | | | 2.49 | |
1290 High Yield Bond Fund Class T | | | 11/12/2014 | | | | (2.98 | ) | | | (5.44 | ) | | | 5.07 | | | | 4.18 | | | | 2.96 | | | | 2.45 | | | | 3.32 | | | | 3.00 | |
1290 High Yield Bond Fund Class I | | | 11/12/2014 | | | | (2.98 | ) | | | n/a | | | | 5.07 | | | | n/a | | | | 2.94 | | | | n/a | | | | 3.32 | | | | n/a | |
1290 High Yield Bond Fund Class R | | | 11/12/2014 | | | | (3.47 | ) | | | n/a | | | | 4.55 | | | | n/a | | | | 2.43 | | | | n/a | | | | 2.80 | | | | n/a | |
Lipper High Yield Funds | | | | | | | (3.85 | ) | | | n/a | | | | 5.44 | | | | n/a | | | | 2.58 | | | | n/a | | | | 3.06 | | | | n/a | |
ICE BofA U.S. High Yield Index | | | | | | | (3.50 | ) | | | n/a | | | | 5.86 | | | | n/a | | | | 3.07 | | | | n/a | | | | 3.73 | | | | n/a | |
1290 Diversified Bond Fund Class A | | | 7/6/2015 | | | | (8.66 | ) | | | (12.80 | ) | | | 2.35 | | | | 0.78 | | | | 2.74 | | | | 1.81 | | | | 2.55 | | | | 1.95 | |
1290 Diversified Bond Fund Class I | | | 7/6/2015 | | | | (8.31 | ) | | | n/a | | | | 2.53 | | | | n/a | | | | 2.98 | | | | n/a | | | | 2.80 | | | | n/a | |
1290 Diversified Bond Fund Class R | | | 7/6/2015 | | | | (8.84 | ) | | | n/a | | | | 2.04 | | | | n/a | | | | 2.47 | | | | n/a | | | | 2.29 | | | | n/a | |
Lipper Global Income Funds | | | | | | | (5.78 | ) | | | n/a | | | | (1.04 | ) | | | n/a | | | | (0.44 | ) | | | n/a | | | | 0.92 | | | | n/a | |
Bloomberg U.S. Aggregate Bond Index | | | | | | | (4.78 | ) | | | n/a | | | | (2.77 | ) | | | n/a | | | | 0.91 | | | | n/a | | | | 1.23 | | | | n/a | |
187
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 Loomis Sayles Multi-Asset Income Fund Class A | | | 3/7/2016 | | | | (1.78 | ) | | | (7.20 | ) | | | 9.34 | | | | 7.30 | | | | 5.95 | | | | 4.75 | | | | 6.41 | | | | 5.57 | |
1290 Loomis Sayles Multi-Asset Income Fund Class I | | | 3/7/2016 | | | | (1.58 | ) | | | n/a | | | | 9.61 | | | | n/a | | | | 6.21 | | | | n/a | | | | 6.68 | | | | n/a | |
1290 Loomis Sayles Multi-Asset Income Fund Class R | | | 3/7/2016 | | | | (2.08 | ) | | | n/a | | | | 9.08 | | | | n/a | | | | 5.69 | | | | n/a | | | | 6.14 | | | | n/a | |
Lipper Mixed-Asset Target Allocation Moderate Funds | | | | | | | (6.10 | ) | | | n/a | | | | 8.25 | | | | n/a | | | | 4.17 | | | | n/a | | | | 5.44 | | | | n/a | |
20% MSCI World High Dividend Yield Index / 20% Cboe S&P 500 BuyWrite IndexSM / 30% Bloomberg U.S. Corporate High Yield Index / 30% Bloomberg U.S. Aggregate Bond Index | | | | | | | (4.34 | ) | | | n/a | | | | 5.93 | | | | n/a | | | | 3.42 | | | | n/a | | | | 4.63 | | | | n/a | |
60% S&P 500 Index / 40% Bloomberg U.S. Aggregate Bond Index | | | | | | | (6.25 | ) | | | n/a | | | | 9.90 | | | | n/a | | | | 7.34 | | | | n/a | | | | 8.24 | | | | n/a | |
1290 Essex Small Cap Growth Fund Class A | | | 7/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7.17 | | | | 1.30 | |
1290 Essex Small Cap Growth Fund Class I | | | 7/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7.37 | | | | n/a | |
1290 Essex Small Cap Growth Fund Class R | | | 7/11/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6.97 | | | | n/a | |
Lipper Small Cap Growth Funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (0.89 | ) | | | n/a | |
Russell 2000 Growth Index | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8.38 | | | | n/a | |
1290 Retirement 2020 Fund Class I | | | 2/27/2017 | | | | (5.48 | ) | | | n/a | | | | 5.70 | | | | n/a | | | | 3.61 | | | | n/a | | | | 4.21 | | | | n/a | |
Lipper Mixed-Asset Target 2020 Funds | | | | | | | (5.76 | ) | | | n/a | | | | 6.66 | | | | n/a | | | | 3.92 | | | | n/a | | | | 4.63 | | | | n/a | |
S&P Target Date 2020 Index | | | | | | | (4.36 | ) | | | n/a | | | | 6.90 | | | | n/a | | | | 4.26 | | | | n/a | | | | 4.81 | | | | n/a | |
1290 Retirement 2025 Fund Class I | | | 2/27/2017 | | | | (5.75 | ) | | | n/a | | | | 7.09 | | | | n/a | | | | 4.14 | | | | n/a | | | | 4.84 | | | | n/a | |
Lipper Mixed-Asset Target 2025 Funds | | | | | | | (5.79 | ) | | | n/a | | | | 7.47 | | | | n/a | | | | 4.20 | | | | n/a | | | | 4.98 | | | | n/a | |
S&P Target Date 2025 Index | | | | | | | (4.41 | ) | | | n/a | | | | 8.75 | | | | n/a | | | | 4.91 | | | | n/a | | | | 5.56 | | | | n/a | |
1290 Retirement 2030 Fund Class I | | | 2/27/2017 | | | | (5.79 | ) | | | n/a | | | | 8.31 | | | | n/a | | | | 4.51 | | | | n/a | | | | 5.27 | | | | n/a | |
Lipper Mixed-Asset Target 2030 Funds | | | | | | | (6.21 | ) | | | n/a | | | | 9.19 | | | | n/a | | | | 4.79 | | | | n/a | | | | 5.76 | | | | n/a | |
S&P Target Date 2030 Index | | | | | | | (4.82 | ) | | | n/a | | | | 10.46 | | | | n/a | | | | 5.43 | | | | n/a | | | | 6.18 | | | | n/a | |
1290 Retirement 2035 Fund Class I | | | 2/27/2017 | | | | (5.95 | ) | | | n/a | | | | 9.20 | | | | n/a | | | | 4.82 | | | | n/a | | | | 5.62 | | | | n/a | |
Lipper Mixed-Asset Target 2035 Funds | | | | | | | (6.65 | ) | | | n/a | | | | 11.23 | | | | n/a | | | | 5.44 | | | | n/a | | | | 6.54 | | | | n/a | |
S&P Target Date 2035 Index | | | | | | | (5.40 | ) | | | n/a | | | | 12.27 | | | | n/a | | | | 5.99 | | | | n/a | | | | 6.83 | | | | n/a | |
1290 Retirement 2040 Fund Class I | | | 2/27/2017 | | | | (5.98 | ) | | | n/a | | | | 10.11 | | | | n/a | | | | 5.41 | | | | n/a | | �� | | 6.21 | | | | n/a | |
Lipper Mixed-Asset Target 2040 Funds | | | | | | | (6.88 | ) | | | n/a | | | | 12.62 | | | | n/a | | | | 5.85 | | | | n/a | | | | 7.04 | | | | n/a | |
S&P Target Date 2040 Index | | | | | | | (5.68 | ) | | | n/a | | | | 13.59 | | | | n/a | | | | 6.42 | | | | n/a | | | | 7.31 | | | | n/a | |
1290 Retirement 2045 Fund Class I | | | 2/27/2017 | | | | (6.07 | ) | | | n/a | | | | 10.82 | | | | n/a | | | | 5.58 | | | | n/a | | | | 6.44 | | | | n/a | |
Lipper Mixed-Asset Target 2045 Funds | | | | | | | (7.01 | ) | | | n/a | | | | 13.58 | | | | n/a | | | | 6.18 | | | | n/a | | | | 7.37 | | | | n/a | |
S&P Target Date 2045 Index | | | | | | | (5.78 | ) | | | n/a | | | | 14.39 | | | | n/a | | | | 6.66 | | | | n/a | | | | 7.58 | | | | n/a | |
1290 Retirement 2050 Fund Class I | | | 2/27/2017 | | | | (6.09 | ) | | | n/a | | | | 11.62 | | | | n/a | | | | 5.76 | | | | n/a | | | | 6.69 | | | | n/a | |
Lipper Mixed-Asset Target 2050 Funds | | | | | | | (7.14 | ) | | | n/a | | | | 13.86 | | | | n/a | | | | 6.25 | | | | n/a | | | | 7.46 | | | | n/a | |
S&P Target Date 2050 Index | | | | | | | (5.87 | ) | | | n/a | | | | 14.78 | | | | n/a | | | | 6.78 | | | | n/a | | | | 7.74 | | | | n/a | |
1290 Retirement 2055 Fund Class I | | | 2/27/2017 | | | | (6.34 | ) | | | n/a | | | | 12.34 | | | | n/a | | | | 5.86 | | | | n/a | | | | 6.88 | | | | n/a | |
Lipper Mixed-Asset Target 2055 Funds | | | | | | | (7.14 | ) | | | n/a | | | | 14.00 | | | | n/a | | | | 6.29 | | | | n/a | | | | 7.53 | | | | n/a | |
S&P Target Date 2055 Index | | | | | | | (5.85 | ) | | | n/a | | | | 14.98 | | | | n/a | | | | 6.83 | | | | n/a | | | | 7.81 | | | | n/a | |
1290 Retirement 2060 Fund Class I | | | 2/27/2017 | | | | (6.19 | ) | | | n/a | | | | 13.17 | | | | n/a | | | | 6.26 | | | | n/a | | | | 7.23 | | | | n/a | |
Lipper Mixed-Asset Target 2060 Funds | | | | | | | (7.16 | ) | | | n/a | | | | 14.12 | | | | n/a | | | | 6.33 | | | | n/a | | | | 7.57 | | | | n/a | |
S&P Target Date 2060+ Index | | | | | | | (5.85 | ) | | | n/a | | | | 14.98 | | | | n/a | | | | 6.87 | | | | n/a | | | | 7.87 | | | | n/a | |
188
1290 FUNDS
DISCLOSURE REGARDING ADVISORY CONTRACT APPROVAL
APPROVAL OF NEW INVESTMENT SUB-ADVISORY AGREEMENT DURING THE SIX-MONTH PERIOD ENDED OCTOBER 31, 2023 (UNAUDITED)
At an in-person meeting held on July 18-19, 2023, the Board of Trustees (the “Board”) of 1290 Funds (the “Trust”), including those Trustees who are not parties to the New Sub-Advisory 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 a new Investment Sub-Advisory Agreement (the “New Sub-Advisory Agreement”) between Equitable Investment Management, LLC (the “Adviser”), which serves as the Trust’s investment adviser, and American Century Investment Management, Inc. (“American Century” or the “Sub-Adviser”) with respect to the 1290 Retirement 2060 Fund (the “Fund”). The Board also determined to recommend that shareholders of the Fund approve the New Sub-Advisory Agreement. In connection with its approval of the New Sub-Advisory Agreement, the Board also approved the Adviser’s proposed restructuring of the Fund, involving changes to the Fund’s investment objective, strategy and policies, performance benchmark, and name. These changes, which are described in more detail below, together with the appointment of American Century as the sub-adviser to the Fund, collectively are referred to as the “Fund Restructuring.” As of the date of this shareholder report, the Fund’s shareholders have since approved the New Sub-Advisory Agreement at a special shareholder meeting held on October 23, 2023, and the appointment of American Century as the sub-adviser to the Fund occurred on or about November 29, 2023.1
The Board noted that the Fund currently operates as a “target date fund-of-funds,” is managed to target 2060 as the specific year of planned retirement, and currently invests substantially all of its assets in exchange-traded securities of other investment companies or investment vehicles (“Underlying ETFs”) that, in turn, invest primarily in securities, rather than investing directly in securities and other financial instruments. The Board also noted that, because the Fund’s target date is many years in the future, the Fund’s asset mix is currently comprised largely of Underlying ETFs that emphasize investments in equity securities. The Board noted that, subject to shareholder approval of the New Sub-Advisory Agreement, American Century would be appointed as the sub-adviser for the Fund; the Fund’s current strategy would be changed to a U.S. large capitalization growth strategy implemented by American Century (acting through its division Avantis Investors®) pursuant to which the Fund would invest directly in domestic equity securities; the Fund’s name would be changed to “1290 Avantis® U.S. Large Cap Growth Fund” (the “Restructured Fund”); the Fund’s investment objective would be changed so that the Fund would seek to provide long-term growth of capital; and the Fund’s current performance benchmark (i.e., the S&P Target Date 2060+) would be replaced with the S&P 500® Index as a primary benchmark and the Russell 1000® Growth Index as a secondary benchmark. The Board also noted that the approval of the New Sub-Advisory Agreement and the appointment of American Century as sub-adviser to the Fund would not result in any change to the investment advisory fee paid by the Fund to the Adviser. The Board also considered the estimated portfolio transaction costs of the Fund Restructuring and noted that the Adviser intends to implement the Fund Restructuring in a manner that would minimize such costs and that the Adviser believes that such costs would be reasonable in relation to the anticipated benefits of the Fund Restructuring. The Board also considered that the repositioning of the Fund’s portfolio holdings in connection with the Fund Restructuring may result in higher taxes when shareholders hold Fund shares in a taxable account and considered the Adviser’s estimate of the capital gains that would be realized upon the sale of the Fund’s portfolio holdings. The Board further noted that if shareholders do not approve the New Sub-Advisory Agreement, then the retention of American Century as the sub-adviser for the Fund and the Adviser’s proposed changes to the Fund’s investment objective, strategy and policies, performance benchmark, and name would not go into effect. Instead, the Fund would continue to operate as a target date fund-of-funds in accordance with its current investment objective and strategy.
| 1 | At the July 18-19, 2023 meeting, the Board, including the Independent Trustees, also considered and unanimously approved a change in the Fund’s classification from “diversified” to “non-diversified” under the 1940 Act and determined to recommend that shareholders of the Fund approve the change in the Fund’s classification. The Board considered the Adviser’s belief that changing the Fund’s classification would give the Adviser and American Century more flexibility in implementing the Fund’s investment strategies, as restructured. The Fund’s shareholders have since approved the change in the Fund’s classification at the special shareholder meeting held on October 23, 2023. |
189
The Board also considered that, in connection with the Fund Restructuring, the Restructured Fund would continue to provide existing shareholders with substantially similar domestic equity exposure as the Fund currently provides. The Board noted that the proposed Fund Restructuring was based on the Adviser’s belief that the Fund, as currently structured, has failed to attract sufficient interest from investors, has not achieved sufficient scale to operate with a sustainable asset base, and has limited prospects for future growth and would have better prospects for future growth as a restructured fund pursuing a U.S. large capitalization growth strategy.
The Board also noted that American Century currently serves as a sub-adviser with respect to two series of EQ Advisors Trust, an affiliated investment company of the Trust for which Equitable Investment Management Group, LLC (“EIMG”), an affiliate of the Adviser, serves as investment adviser and the Adviser serves as administrator and for which all of the Board members currently serve on the Board of Trustees. The Board also considered its conclusions, in its capacity as the Board of Trustees of EQ Advisors Trust, in connection with its prior approval of the investment sub-advisory agreement between EIMG and American Century with respect to the series of EQ Advisors Trust, including its satisfaction with the nature and quality of services being provided to the series of EQ Advisors Trust by American Century. In reaching its decision to approve the New Sub-Advisory Agreement with respect to the Fund at its July 18-19, 2023 meeting, the Board also noted that, in its capacity as the Board of Trustees of EQ Advisors Trust, it was conducting its annual review of, and considering the renewal of, the investment sub-advisory agreement between EIMG and American Century with respect to the series of EQ Advisors Trust at that same meeting.
In reaching its decision to approve the New Sub-Advisory Agreement, the Board considered the overall fairness of the New Sub-Advisory Agreement and whether the New Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. The Board further considered all factors it deemed relevant with respect to the Fund and the New Sub-Advisory Agreement, including: (1) the nature, quality and extent of the overall services to be provided to the Fund by the proposed Sub-Adviser; (2) comparative performance information; (3) the level of the proposed sub-advisory fee relative to fees of comparable funds; (4) the estimated impact of the appointment of the proposed Sub-Adviser on the profitability realized by the Adviser and its affiliates; (5) economies of scale that may be realized by the Fund; and (6) “fall out” benefits that may accrue to the proposed Sub-Adviser and its affiliates (i.e., indirect benefits that the Sub-Adviser or its affiliates would not receive but for the relationship with the Fund). The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets and the industry). The Board also considered possible alternatives to the Fund Restructuring, including liquidating the Fund and the potential benefits and detriments of maintaining the current structure. In considering the New Sub-Advisory 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 information requested by the Independent Trustees and prepared by the Adviser and the proposed Sub-Adviser, including memoranda and other materials addressing the factors set out above, which were provided to the Trustees prior to and during the meeting. The Board also took into account information, including information relating to the proposed Sub-Adviser, provided to the Trustees, including in their capacities as Trustees of EQ Advisors Trust, at prior Board meetings, including a preliminary presentation of the proposal at a Board meeting held on April 19-20, 2023. The information provided to the Trustees described, among other things, the Restructured Fund’s investment strategies and risks, and the services to be provided by the proposed Sub-Adviser, as well as the proposed Sub-Adviser’s investment personnel, proposed sub-advisory fee, performance information, and other matters. The Board considered that the Adviser had conducted extensive due diligence on the proposed Sub-Adviser from an investment management, operational and compliance perspective, and the Board had received materials including the Adviser’s due diligence questionnaire indicating the proposed Sub-Adviser’s responses to the Adviser’s due diligence questions. The Board also noted the Adviser’s familiarity with the proposed Sub-Adviser’s operational and compliance structure as the proposed Sub-Adviser currently serves as a sub-adviser with respect to two series of EQ Advisors Trust, as noted above. During the meeting, the Trustees met with senior representatives of the Adviser to discuss the New Sub-Advisory Agreement and the information provided. The Independent Trustees also met in advance of, and in executive session during, the meeting to discuss the New Sub-Advisory Agreement and review the information provided. At the meeting, the Independent Trustees and management engaged in extensive discussions regarding the New Sub-Advisory Agreement. The Independent Trustees were assisted by independent legal counsel prior to and during the meeting and during their deliberations regarding the New Sub-Advisory Agreement and also received from legal counsel materials addressing, among other things, the legal standards applicable to their consideration of the New Sub-Advisory Agreement.
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In approving the New Sub-Advisory Agreement, each Trustee, including the Independent Trustees, after considering all factors they deemed relevant, reached a determination, with the assistance of Independent Trustees’ counsel and fund counsel and through the exercise of their own business judgment, that the proposed sub-advisory fee was fair and reasonable and that the approval of the New Sub-Advisory Agreement was in the best interests of the 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 approve the New Sub-Advisory Agreement.
Nature, Quality and Extent of Services
The Board evaluated the nature, quality and extent of the overall services to be provided to the Fund and its shareholders by the proposed Sub-Adviser. In addition to the investment performance and expense information discussed below, the Board considered the proposed Sub-Adviser’s responsibilities with respect to the Fund pursuant to the New Sub-Advisory Agreement. The Board considered that, subject to the oversight of the Adviser, the proposed Sub-Adviser would be responsible for making investment decisions for the Fund; placing with brokers or dealers orders for the purchase and sale of investments for the Fund; and performing certain related administrative functions. The Board also considered information regarding the proposed Sub-Adviser’s process for selecting investments for the Fund, as well as information regarding the qualifications and experience of the proposed Sub-Adviser’s portfolio managers who would provide services to the Fund. The Board also considered the Adviser’s familiarity with, and confidence in, the proposed Sub-Adviser, and the results of the Adviser’s due diligence. The Board also considered information regarding the proposed Sub-Adviser’s procedures for executing portfolio transactions for the Fund and the proposed Sub-Adviser’s policies and procedures for selecting brokers and dealers. In addition, the Board considered information regarding the proposed Sub-Adviser’s trading experience and how the proposed Sub-Adviser would seek to achieve “best execution” on behalf of the Fund. The Board’s conclusion regarding the nature, quality and extent of the overall services to be provided by the proposed Sub-Adviser also was based, in part, on the Board members’ experience and familiarity, in their capacities as Trustees of EQ Advisors Trust, with the Sub-Adviser serving as a sub-adviser for two series of EQ Advisors Trust, as noted above, and on periodic reports provided to the Board regarding the services provided by the Sub-Adviser to those series.
The Board also considered that the Trust’s compliance team had performed due diligence on American Century from an operational and compliance perspective, noting the Adviser’s familiarity with American Century’s operational and compliance structure as American Century currently serves as a sub-adviser with respect to two series of EQ Advisors Trust, as noted above. The Board also considered the Trust’s Chief Compliance Officer’s evaluation of American Century’s compliance program, policies and procedures, and certification that they were consistent with applicable legal standards, including in connection with the Board’s renewal of the investment sub-advisory agreement between EIMG and American Century with respect to the aforementioned series of EQ Advisors Trust at the July 18-19, 2023 meeting. The Board also considered whether there were any pending lawsuits, enforcement proceedings or regulatory investigations involving the proposed Sub-Adviser and reviewed information regarding the proposed Sub-Adviser’s financial condition and history of operations and potential conflicts of interest in managing the Fund.
The Board also received and reviewed information regarding the performance of the Fund operating as a fund-of-funds relative to the hypothetical performance of the proposed Sub-Adviser’s U.S. large capitalization growth strategy and as compared to the Restructured Fund’s performance benchmarks for various periods, as well as information regarding the proposed Sub-Adviser’s methodology for calculating the hypothetical performance. The Board noted that, although the proposed Sub-Adviser did not currently manage accounts with the Restructured Fund’s specific strategy, the proposed Sub-Adviser has significant experience managing large capitalization investment strategies, and the Board also considered information regarding the proposed Sub-Adviser’s performance managing proprietary mutual funds using active U.S. equity strategies, including active U.S. large capitalization strategies. The Board generally considered long-term performance to be more important than short-term performance. The Board also considered the proposed Sub-Adviser’s expertise, resources, proposed investment strategy, and personnel for advising the Fund.
Based on its review, the Board determined that the nature, quality and extent of the overall services to be provided by the proposed Sub-Adviser were appropriate for the Fund in light of its proposed investment objective and, thus, supported a decision to approve the New Sub-Advisory Agreement.
191
Expenses
The Board considered the proposed sub-advisory fee for the proposed Sub-Adviser in light of the nature, quality and extent of the overall services to be provided by the proposed Sub-Adviser. In addition, the Board considered the relative level of the sub-advisory fee to be paid to the proposed Sub-Adviser and the advisory fee to be 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 proposed Sub-Adviser. In this regard, the Board noted that the approval of the New Sub-Advisory Agreement and the appointment of American Century as sub-adviser to the Fund would not result in any change to the investment advisory fee paid by the Fund to the Adviser. The Board also noted that the approval of the New Sub-Advisory Agreement and the appointment of American Century is expected to have no material impact on the Adviser’s overall profitability (as discussed below) at the Fund’s current asset levels.
The Board also considered the proposed sub-advisory fee rate in light of the fee rates that American Century charges under advisory agreements with other mutual funds that utilize a large capitalization equity investment strategy. The Board further noted that the Adviser, and not the Restructured Fund, would pay the proposed Sub-Adviser and that the proposed sub-advisory fee was negotiated between the proposed Sub-Adviser and the Adviser. Moreover, the Board noted that the Adviser generally is aware of the fees charged by sub-advisers to other clients and that the Adviser believes that the fee agreed upon with the proposed Sub-Adviser is reasonable in light of the nature, quality and extent of the investment sub-advisory services to be provided. Based on its review, the Board determined that the proposed sub-advisory fee for the proposed Sub-Adviser is fair and reasonable.
The Board also considered information provided by the Adviser comparing the advisory fee rate and expense ratio for the Fund to the advisory fee rates and expense ratios for mutual funds comparable to the Restructured Fund, including information compiled with data from Broadridge Financial Solutions Inc., an independent provider of mutual fund industry data. In addition, the Board considered that the Adviser had contractually agreed to make payments or waive all or a portion of its and its affiliates’ advisory, administrative and other fees so that the Fund’s net expense ratios will not exceed certain levels as currently set forth in the Fund’s prospectus (i.e., the Fund’s existing expense caps) and that, although the Adviser was not proposing to change the Fund’s existing expense caps in connection with the Fund Restructuring, the Adviser was proposing to continue the existing expense caps for an additional one-year period, through April 30, 2025. The Board also noted that the Fund would incur portfolio transaction costs in connection with the Fund Restructuring and that such costs were expected to be reasonable when taking into account the anticipated benefits of the restructuring. The Board further noted that the Adviser had agreed to bear the expenses associated with obtaining shareholder approval of the New Sub-Advisory Agreement that exceed the Fund’s existing expense caps and that the Fund is currently operating at its expense caps.
Profitability and Costs
The Board also considered the estimated impact of the Fund Restructuring on the profitability of the Adviser. In this regard, the Board noted that the proposed sub-advisory fee is expected to have no material impact on the Adviser’s overall profitability at the Fund’s current asset levels and a positive impact on the Adviser’s overall profitability at the Restructured Fund’s assets at scale, assuming future growth. The Board acknowledged that, because the proposed Sub-Adviser’s fee would be paid by the Adviser, the Adviser is incentivized to negotiate a favorable fee. The Adviser also advised the Board that it does not regard Sub-Adviser profitability as meaningful to its evaluation of the New Sub-Advisory Agreement. The Board acknowledged the Adviser’s view of Sub-Adviser profitability, noting the Board’s findings as to the reasonableness of the sub-advisory fee and that the fee to be paid to the proposed Sub-Adviser is the product of negotiations with the Adviser and reflects levels of profitability acceptable to the Adviser and the proposed Sub-Adviser based on the particular circumstances for each of them. The Board noted again that the proposed Sub-Adviser’s fee would be paid by the Adviser and not the Fund and that many responsibilities related to the advisory function are retained by the Adviser. In light of all the factors considered, the Board determined that the anticipated profitability to the Adviser remained within the reasonable range of profitability levels previously reported.
Economies of Scale
The Board also considered whether economies of scale would be realized as the Restructured Fund grows larger and the extent to which this is reflected in the proposed sub-advisory fee rate. While recognizing that any
192
precise determination is inherently subject to assumptions and subjective assessments, the Board noted American Century’s explanation that the proposed sub-advisory fee rate reflects economies of scale through competitive pricing.
The Board considered these factors, and the relationship they bear to the fee structure charged to the Fund by the Adviser, and concluded that there would be a reasonable sharing of benefits from any economies of scale with the Restructured Fund.
Fall-Out and Other Benefits
The Board also considered possible fall-out benefits and other types of benefits that may accrue to the proposed Sub-Adviser, including the following. The Board noted that the proposed Sub-Adviser currently serves as a sub-adviser with respect to two series of EQ Advisors Trust, as noted above, and receives sub-advisory fees with respect to those series. The Board also noted that the proposed Sub-Adviser may benefit from greater exposure in the marketplace with respect to its investment process and from expanding its level of assets under management, and that the proposed 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 proposed Sub-Adviser are fair and reasonable.
193
Federal Income Tax Information (Unaudited)
| | | | | | | | | | | | | | | | |
Portfolios: | | 70% Dividend
Received
Reduction | | | Foreign
Taxes | | | Foreign
Source
Income | | | Long Term
Capital Gain | |
1290 Diversified Bond | | | 0.00 | % | | $ | — | | | $ | — | | | $ | — | |
1290 Essex Small Cap Growth | | | 13.02 | | | | — | | | | — | | | | — | |
1290 GAMCO Small/Mid Cap Value | | | 100.00 | | | | — | | | | — | | | | 2,550,136 | |
1290 High Yield Bond | | | 0.00 | | | | — | | | | — | | | | — | |
1290 Loomis Sayles Multi-Asset Income | | | 10.98 | | | | — | | | | — | | | | 1,048,196 | |
1290 Multi-Alternative Strategies | | | 0.96 | | | | 83 | | | | 22,346 | | | | — | |
1290 Retirement 2020 | | | 10.55 | | | | 1,741 | | | | 28,915 | | | | 570,728 | |
1290 Retirement 2025 | | | 13.44 | | | | 4,167 | | | | 69,699 | | | | 735,181 | |
1290 Retirement 2030 | | | 17.91 | | | | 2,963 | | | | 46,706 | | | | 519,067 | |
1290 Retirement 2035 | | | 19.67 | | | | 3,462 | | | | 51,645 | | | | 550,396 | |
1290 Retirement 2040 | | | 20.65 | | | | 2,355 | | | | 36,152 | | | | 27,410 | |
1290 Retirement 2045 | | | 24.12 | | | | 3,021 | | | | 46,883 | | | | 122,800 | |
1290 Retirement 2050 | | | 23.82 | | | | 3,151 | | | | 48,951 | | | | 33,174 | |
1290 Retirement 2055 | | | 26.95 | | | | 2,327 | | | | 36,188 | | | | 87,850 | |
1290 Retirement 2060 | | | 30.41 | | | | 2,548 | | | | 37,997 | | | | 98,870 | |
1290 SmartBeta Equity | | | 93.90 | | | | — | | | | — | | | | — | |
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MANAGEMENT OF THE TRUST (UNAUDITED)
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 |
| Interested Trustee |
Steven M. Joenk* 1345 Avenue of the Americas, New York, New York 10105 (1958) | | Trustee, Chief Executive Officer, and President | | Trustee and Chief Executive Officer from June 2014 to present; President from September 2023 through present; and Chairman of the Board from June 2014 through September 2017 | | Chairman of the Board and Chief Executive Officer (January 2023 to present) and President (August 2023 to present) of EIM II; Chairman of the Board and Chief Executive Officer (May 2011 to present) and President (August 2023 to present) of EIM; Senior Vice President and Chief Investment Officer of AXA Financial, Inc. (April 2017 to 2019); and Chief Investment Officer (April 2017 to present) and employee (September 1999 to present) of Equitable Financial. | | 126 | | None. |
| Independent Trustees |
Mark A. Barnard c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (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). | | 126 | | None. |
Michael B. Clement c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (1957) | | Trustee | | From January 1, 2019 to present | | Professor of Accounting, University of Texas, from 1997 to 2002 and from 2004 to present (Department of Accounting Chair from 2018 to 2022); Visiting Professor, Harvard Business School, 2023 to present. | | 126 | | New York Mortgage Trust |
Donald E. Foley c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (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. | | 126 | | BioSig Technologies, Inc.; Wilmington Funds (12) |
Patricia M. Haverland c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (1956) | | Trustee | | From April 1, 2022 to present | | Retired. Previously, Vice President and Chief Investment Officer North America Pensions, Siemens, 2009 to 2018. | | 126 | | None. |
195
| | | | | | | | | | |
| | | | | | |
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 |
| Independent Trustees (Continued) |
H. Thomas McMeekin c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (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. | | 126 | | None. |
Jeffery S. Perry c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (1965) | | Trustee | | From April 1, 2022 to present | | Founder and Chief Executive Officer, Lead Mandates LLC (business and leadership advisory firm). Retired, Global Client Service Partner, Ernst & Young LLP, 2004 to 2020. | | 126 | | Fortune Brands Innovations, Inc.; MasterBrand, Inc. |
Gary S. Schpero c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (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. | | 126 | | Blackstone Funds (4) |
Kathleen Stephansen c/o 1290 Funds 1345 Avenue of the Americas, New York, New York 10105 (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. | | 126 | | 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. The Board has adopted a policy that currently provides that 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 Trust and EQ Advisors Trust. Mr. Joenk serves as Trustee, President and Chief Executive Officer for each of the registered investment companies in the fund complex. Mr. Schpero serves as Chairman of the Board for each such registered investment company. |
196
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, EIM II, and/or Equitable Distributors, LLC (“Equitable Distributors”). The address of each officer is 1345 Avenue of the Americas, New York, NY 10105. The Trust’s principal officers are:
| | | | | | |
| | | | |
| Name and Year of Birth | | Position(s) Held
With Trust* | | Term of Office and Length of Time Served** | | Principal Occupation(s) During Past 5 Years |
| Steven M. Joenk (1958) | | Trustee, Chief Executive Officer, and President | | Trustee and Chief Executive Officer from June 2014 to present; President from September 2023 through present; and Chairman of the Board from June 2014 through September 2017 | | Chairman of the Board and Chief Executive Officer (January 2023 to present) and President (August 2023 to present) of EIM II; Chairman of the Board and Chief Executive Officer (May 2011 to present) and President (August 2023 to present) of EIM; Senior Vice President and Chief Investment Officer of AXA Financial, Inc. (April 2017 to 2019); and Chief Investment Officer (April 2017 to present) and employee (September 1999 to present) of Equitable Financial. |
| Brian Walsh (1968) | | Chief Financial Officer and Treasurer | | June 2014 to present | | Senior Vice President of EIM II (June 2022 to present); Director (February 2011 to present) and Senior Vice President (May 2011 to present) of EIM; and Signatory Officer (November 2021 to present) and employee (February 2003 to present) of Equitable Financial. |
| Joseph J. Paolo (1970) | | Chief Compliance Officer and Vice President | | June 2014 to present | | Chief Compliance Officer and Vice President of EIM II (June 2022 to present); Chief Compliance Officer (June 2007 to present) and Senior Vice President (May 2011 to present) of EIM; and Signatory Officer (November 2021 to present) and employee (June 2007 to present) of Equitable Financial. |
| Kenneth Kozlowski (1961) | | Senior Vice President and Chief Investment Officer | | June 2014 to present | | Executive Vice President and Chief Investment Officer of EIM II (June 2022 to present); Executive Vice President and Chief Investment Officer (June 2012 to present) and Director (May 2017 to present) of EIM; previously, Senior Vice President of EIM (May 2011 to June 2012); and Signatory Officer (November 2021 to present) and employee (February 2001 to present) of Equitable Financial. |
| Alwi Chan (1974) | | Vice President and Deputy Chief Investment Officer | | June 2014 to present | | Senior Vice President and Deputy Chief Investment Officer of EIM II (December 2022 to present); Senior Vice President and Deputy Chief Investment Officer of EIM (June 2012 to present), previously, Vice President of EIM (May 2011 to June 2012); and employee of Equitable Financial (1999 to present). |
| James Chen (1968) | | Vice President and Director of Risk | | July 2022 to Present | | Vice President of EIM II (June 2022 to present); Vice President of EIM (July 2022 to present); employee of Equitable Financial (2015 to present); |
| Aysha Pride (1988) | | Vice President | | July 2022 to Present | | Vice President of EIM II (June 2022 to present); Vice President of EIM (July 2022 to present); employee of Equitable Financial (2014 to present). |
| Andrew Houston (1990) | | Vice President | | September 2022 to Present | | Vice President of EIM II (June 2022 to present) Vice President of EIM (July 2022 to present); and employee of Equitable Financial (2017 to present). |
| James Kelly (1968) | | Controller | | June 2014 to present | | Vice President of EIM II (June 2022 to present); Vice President of EIM (May 2011 to present); and employee of Equitable Financial (September 2008 to present). |
| Miao Hu (1978) | | Vice President | | June 2016 to present | | Vice President of EIM II (December 2022 to present); Assistant Portfolio Manager (May 2016 to present) and Vice President (June 2016 to present) of EIM; and employee of Equitable Financial (November 2013 to present). |
197
| | | | | | |
| | | | |
| Name and Year of Birth | | Position(s) Held
With Trust* | | Term of Office and Length of Time Served** | | Principal Occupation(s) During Past 5 Years |
| Kevin McCarthy (1983) | | Vice President | | September 2019 to present | | Vice President of EIM II (June 2022 to present); Assistant Portfolio Manager (December 2018 to present) and Vice President (July 2022 to present) of EIM; and employee of Equitable Financial (August 2015 to present). |
| Xavier Poutas (1977) | | Vice President | | June 2016 to present | | Vice President of EIM II (December 2022 to present); Assistant Portfolio Manager (May 2011 to present) and Vice President (June 2016 to present) of EIM; and employee of Equitable Financial (August 2002 to present). |
| Shane Daly (1970) | | Chief Legal Officer, Senior Vice President and Secretary | | March 2023 to present | | Executive Vice President, Secretary and General Counsel of EIM II and EIM (March 2023 to present); employee of Equitable Financial (2011 to present). |
| Maureen E. Kane (1962) | | Vice President and Assistant Secretary | | March 2023 to present | | Senior Vice President, Assistant Secretary and Associate General Counsel of EIM II and EIM (March 2023 to present); employee of Equitable Financial (February 2019 to present); and Managing Director and Managing Counsel of The Bank of New York Mellon (July 2014 to February 2019). |
| Cheryl Cherian (1979) | | Vice President and Assistant Secretary | | March 2023 to present | | Employee of Equitable Financial (April 2019 to present); and Compliance Associate at Manifold Fund Advisors (November 2016 to March 2018). |
| Artemis Brannigan (1974) | | Vice President | | September 2019 to present | | Vice President of EIM II (June 2022 to present); Vice President of EIM (August 2019 to present); employee of Equitable Financial (August 2019 to present); and Director of Prudential Financial (January 2016 to July 2019). |
| Helen Lai (1973) | | Assistant Vice President | | June 2016 to present | | Employee of Equitable Financial (March 2013 to present). |
| Roselle Ibanga (1978) | | Assistant Controller, Vice President and Anti-Money Laundering Compliance Officer | | Assistant Controller from June 2014 to present; Vice President and Anti-Money Laundering Compliance Officer from January 2023 to present | | Employee of Equitable Financial (February 2009 to present). |
| Lisa Perrelli (1974) | | Assistant Controller | | June 2014 to present | | Employee of Equitable Financial (November 2002 to present). |
| Michelle Gallo (1973) | | Assistant Controller | | March 2023 to present | | Employee of Equitable Financial (July 2013 to present). |
| Jennifer Mastronardi (1985) | | Assistant Vice President | | From June 2014 to present | | Vice President of EIM II (June 2022 to present); Vice President of EIM (April 2015 to present); and employee of Equitable Financial (February 2009 to present). |
| Helen Espaillat (1963) | | Assistant Secretary | | June 2014 to present | | Assistant Vice President and Assistant Secretary of EIM II (June 2022 to present); Assistant Vice President and Assistant Secretary of EIM (March 2015 to present); and employee of Equitable Financial (July 2004 to present). |
| Lorelei Fajardo (1978) | | Assistant Secretary | | June 2016 to present | | Employee of Equitable Financial (July 2013 to present). |
| Monica Giron (1976) | | Assistant Secretary | | July 2019 to present | | Employee of Equitable Financial (June 2019 to present); and Senior Paralegal at Gemini Fund Services (August 2015 to May 2019). |
| * | The officers in the table above (except Roselle Ibanga in respect of her role as a Vice President and Anti-Money Laundering Compliance Officer of 1290 Funds) hold similar positions with EQ Advisors Trust, the other registered investment company in the fund complex. |
| ** | Each officer is elected on an annual basis. |
198
SHAREHOLDER MEETING VOTING RESULTS (UNAUDITED)
At a Special Meeting of Shareholders held on October 23, 2023, shareholders of the 1290 Funds (the “Trust”) elected Mark A. Barnard, Michael B. Clement, Donald E. Foley, Patricia M. Haverland, Marcia Haydel, Steven M. Joenk, Kimberly Thompson Laughton, H. Thomas McMeekin, Jeffery S. Perry, Gary S. Schpero, and Kathleen Stephansen as Trustees of the Trust. The result of the shareholder vote is as follows:
| | | | | | | | | | | | |
1290 Fund Trust | | Votes For | | | Votes Against | | | Abstain | |
Mark A. Barnard | | | 116,970,081.422 | | | | 115,555,399.876 | | | | 1,414,681.546 | |
Michael B. Clement | | | 116,970,081.422 | | | | 115,574,817.508 | | | | 1,395,363.914 | |
Donald E. Foley | | | 116,970,081.422 | | | | 115,565,747.625 | | | | 1,404,433.797 | |
Patricia M. Haverland | | | 116,970,081.422 | | | | 86,734,827.240 | | | | 30,235,354.182 | |
Marcia Haydel | | | 116,970,081.422 | | | | 87,695,725.579 | | | | 29,274,455.843 | |
Steven M. Joenk | | | 116,970,081.422 | | | | 116,526,686.296 | | | | 443,495.126 | |
Kimberly Thompson Laughton | | | 116,970,081.422 | | | | 87,695,725.579 | | | | 29,274,455.843 | |
H. Thomas McMeekin | | | 116,970,081.422 | | | | 115,564,742.900 | | | | 1,405,438.522 | |
Jeffery S. Perry | | | 116,970,081.422 | | | | 86,541,578.699 | | | | 30,428,602.723 | |
Gary S. Schpero | | | 116,970,081.422 | | | | 115,565,747.625 | | | | 1,404,433.797 | |
Kathleen Stephansen | | | 116,970,081.422 | | | | 115,768,451.072 | | | | 1,201,730.350 | |
At a Joint Special Meeting of Shareholders held on October 23, 2023, shareholders of the 1290 Retirement 2060 Fund approved changing the 1290 Retirement 2060 Fund, a series of the Trust, from a diversified fund to a non-diversified fund. The result of the shareholder vote is as follows:
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Fund | | Votes For | | | Votes Against | | | Abstentions | |
1290 Retirement 2060 Fund | | | 456,219.078 | | | | 421,135.460 | | | | 34,806.618 | |
At a Joint Special Meeting of Shareholders held on October 23, 2023, shareholders of the 1290 Retirement 2060 Fund approved a new Investment Sub-Advisory Agreement between Equitable Investment Management, LLC and American Century Investment Management, Inc. with respect to the 1290 Retirement 2060 Fund. The result of the shareholder vote is as follows:
| | | | | | | | | | | | |
Fund | | Votes For | | | Votes Against | | | Abstentions | |
1290 Retirement 2060 Fund | | | 456,219.078 | | | | 402,832.492 | | | | 53,034.922 | |
At a Joint Special Meeting of Shareholders held on October 23, 2023, shareholders of each of the Funds listed below approved a “manager-of-managers” policy with respect to each respective Fund. The result of the shareholder vote is as follows:
| | | | | | | | | | | | |
Fund | | Votes For | | | Votes Against | | | Abstentions | |
1290 Retirement 2020 Fund | | | 685,151.373 | | | | 672,125.653 | | | | 0.120 | |
1290 Retirement 2025 Fund | | | 1,428,723.562 | | | | 1,371,997.550 | | | | 14,353.696 | |
1290 Retirement 2030 Fund | | | 856,101.237 | | | | 499,504.905 | | | | 2,872.728 | |
1290 Retirement 2035 Fund | | | 882,424.095 | | | | 798,922.992 | | | | 34,372.847 | |
1290 Retirement 2040 Fund | | | 526,900.407 | | | | 504,952.876 | | | | 16,698.531 | |
1290 Retirement 2045 Fund | | | 652,625.231 | | | | 562,179.128 | | | | 71,106.102 | |
1290 Retirement 2050 Fund | | | 619,448.677 | | | | 502,092.372 | | | | 46,342.986 | |
1290 Retirement 2055 Fund | | | 415,832.511 | | | | 401,319.268 | | | | 6,412.826 | |
1290 Retirement 2060 Fund | | | 456,219.078 | | | | 421,060.546 | | | | 34,806.868 | |
199
CONTROL PERSON AND PRINCIPAL HOLDERS OF SECURITIES (UNAUDITED)
Equitable Investment Management Group, LLC, a wholly-owned subsidiary of Equitable Financial Life Insurance Company, 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.
200
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Visit the Funds’ Website: 1290Funds.com | |  |
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| Must be accompanied or preceded by a Prospectus. 1290 Funds are distributed by ALPS Distributors, Inc. | | 1290AR103123 DFIN#850552 |
© 2023 Equitable Holdings, Inc. All rights reserved.
1345 Avenue of the Americas, New York, NY 10105.
Equitable Financial Life Insurance Company
Item 1(b):
Not applicable.
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 13(a)(1).
| Item 3. | Audit Committee Financial Expert. |
The registrant’s board of trustees has determined that Michael Clement and Donald E. Foley serve on its audit committee as “audit committee financial experts” as defined in Item 3. Mr. Clement 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 2023: $560,388 and for fiscal year 2022: $494,799.
(b) Audit-Related Fees fiscal year 2023: $0 and for fiscal year 2022: $0.
Audit-Related Fees represent fees billed for assurance and related services that are reasonably related to the performance of the audit or the review of the fund’s financial statements that are not reported under Audit Fees.
(c) Tax Fees for fiscal year 2023: $259,455 and for fiscal year 2022: $145,799.
Tax fees include amounts related to tax compliance, tax advice and tax planning.
(d) All Other Fees for fiscal year 2023: $0 and for fiscal year 2022: $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 the pre-approval of services performed by the registrant’s principal accountant. Audit, audit-related and non-audit services (including tax services) provided to the registrant require pre-approval by the audit committee. In the event that the estimated fees for such pre-approved audit, audit-related and non-audit services exceed the pre-approved estimated fees for such services, the excess amount must be approved by the audit committee or its delegate prior to payment.
(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 2023: $0 and for fiscal year 2022: $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.
(i) Not applicable.
(j) Not applicable.
| 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 change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during 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
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| By: | | /s/ Steven M. Joenk |
| | Steven M. Joenk |
| | President, Chief Executive Officer |
| | January 3, 2024 |
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 |
President and Chief Executive Officer |
January 3, 2024 |
|
/s/ Brian E. Walsh |
Brian E. Walsh |
Chief Financial Officer and Treasurer |
January 3, 2024 |
