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Investment in the Fund entails certain risks. Investment returns and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Some of the principal risks of investing in the Fund include:
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Capitalizing on evolving private credit opportunities, such as speciality finance and aviation leasing.
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Providing access to a mix of return streams across the US, Europe and Emerging Markets as a core component of a credit portfolio.
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Seeking to limit volatility through short underlying asset duration and lender protections.
Portfolio Management Team
Investment Risks to Consider
These and other risks are described in the Fund's prospectus
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Aircraft and Aviation Industry Risk: The Fund's investments in aviation-related assets face several risks, including reduced demand for aircraft, maintenance issues, and regulatory challenges. The bankruptcy of lessors or lessees can complicate financial recoveries, impacting the value of these securities. Additionally, economic downturns, geopolitical conflicts, and events like pandemics can adversely affect the aviation industry.
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Allocation risk: The risk that the allocation of investments between growth and value companies may have a more significant effect on the Portfolio’s Net Asset Value (NAV) when one of these strategies is not performing as well as the other. In addition, the transaction costs of rebalancing the investments may, over time, be significant.
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Collateralized Loan Obligations (CLO) Risk: The Fund can invest in CLOs, which issue securities in tranches with varying risk levels, such as senior, mezzanine, and subordinated/equity. CLOs carry risks similar to other debt obligations, including credit, market, and prepayment risks, with additional risks like inadequate collateral distributions, declining collateral quality, and complex structures that may lead to unexpected results. CLOs rely on the accuracy of borrower representations, and defaults can adversely affect performance. The leveraged nature of CLOs magnifies the impact of loan defaults, and the Fund may face reduced payments if CLOs fail financial covenants.
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Currency risk: Investments may be denominated in one or more currencies which are different from the Portfolio’s base currency. Currency movements in the investments may significantly affect the net asset value of the Portfolio.
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Debt Securities Generally Risk: Debt securities, whether rated or not, can be speculative and subject to uncertainties that may affect issuers' ability to meet payment obligations. Interest rate changes can impact the value of the Fund's fixed-income investments, with rate increases potentially reducing the value of debt holdings.
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Emerging-markets risk: Where the Portfolio invests in emerging markets, these assets are generally smaller and more sensitive to economic and political factors, and may be less easily traded, which could cause a loss to the Portfolio.
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Emerging Markets Risk: Investing in emerging markets carries significant risks due to less developed and stable economic and political systems compared to developed countries. These markets often have less publicly available information, more volatility, weaker regulatory frameworks, and higher risks of inflation, currency instability, and expropriation. Restrictions on foreign investment and withdrawal, dependency on global commodity prices, and lower market efficiency further complicate investments. Additionally, emerging market issuers may not adhere to uniform accounting standards, increasing fraud risk, and custodial expenses are typically higher. Legal and enforcement challenges also exist for U.S. entities in these markets.
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Foreign risk: Investing in overseas assets may be more volatile because of political, regulatory, market and economic uncertainties associated with them. These risks are magnified in assets of emerging or developing markets.
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Interest Rate Risk: When interest rates rise, debt securities values generally fall. This risk is generally greater the longer the duration of a debt security investment.
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Investment in Alternative Energy Risk: The Fund's investments in alternative energy companies face significant risks due to the nascent and unproven nature of many technologies, such as wind, solar, and fuel cells. These companies may struggle with commercial viability, high production costs, and competition from traditional energy sources. Additionally, patent disputes and the limited operating history of many alternative energy companies add to the uncertainty. Consequently, these investments may be more volatile and riskier compared to those in established industries.
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Lack of Control Risk: The Fund may invest in debt and equity securities of companies it does not control, either through market transactions or direct purchases. These investments carry the risk that the issuer may make decisions contrary to the Fund's interests, or that majority stakeholders or management may take actions that are not aligned with its goals. Additionally, shared control with co-investors can complicate implementing investment strategies or exiting investments.
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Leverage for Investment Purposes Risk: The Fund uses leverage to finance operations and make additional investments, increasing its asset exposure beyond its capital. While leverage can enhance returns, it also involves significant financial risk, as it magnifies the impact of adverse economic conditions, such as rising interest rates or economic downturns, and increases portfolio volatility. Although leverage is subject to certain limits, these do not account for all risks.
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Loan Portfolios and Debt Obligations Risk: The Fund's debt portfolios often consist of diverse, bilaterally negotiated loans, which may be performing, sub-performing, or in default, with some obligors possibly in bankruptcy or liquidation. These portfolios face various risks, including limited seller warranties, improperly recorded liens, incomplete documentation, and collateral issues. Payment amounts and timing are uncertain.
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Mortgage REITs Risk: The Fund may invest in mortgage REITs. A mortgage REIT is a real estate investment trust that invests primarily in loans that are secured by real estate collateral and other fixed income instruments. Mortgage REITs are subject to certain specific risks: real estate market risk, interest rate risk, leverage risk, credit risk and prepayment risk.
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Non-EU Investments Risk: The Funds's investments in non-EU securities involve risks such as political instability, economic volatility, and regulatory differences, which can affect liquidity and value. Non-EU markets may have less regulation, different accounting standards, and higher transaction costs. Currency exchange risks and geopolitical events, like international wars and conflict, can further impact investments. The UK's EU withdrawal adds compliance complexities. Additionally, trading on non-EU exchanges exposes the Fund to counterparty risks and fewer regulatory protections compared to EU markets.
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Securities lending risk: If a Portfolio lends securities, it takes on counterparty risk with respect to the borrower as well as the risk that any collateral from the counterparty may prove insufficient to cover all costs and liabilities incurred.
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Uncertain Exit Strategies Risk: Due to the illiquid nature of many positions, the Fund’s exit strategies for investments are unpredictable and may be unavailable when needed due to various factors. The Fund often invests alongside other AllianceBernstein Funds, which may hold different levels of an issuer's capital structure. This can complicate exit decisions, the interests of other funds may be prioritized, potentially reducing the Fund's liquidity and leading to suspended or delayed redemptions.