Details about investment offerings
Welcome to OneAmerica Funds, Inc.
OneAmerica Funds, Inc.
A Message From the Fund President
Welcome to the OneAmerica® Funds website. OneAmerica Funds, Inc. has been in operation since 1989 and currently offers four portfolios: Value, Investment Grade Bond, Asset Director and Socially Responsive. This website includes financial information, prospectuses and annual reports for each portfolio as well as insights from each portfolio's investment managers. I trust that you will find this information useful as you review your investments.
The S&P 500 experienced its second correction of the last twelve months in February following the collapse of commodities prices. Commodities prices have since recovered meaningfully and stocks have followed, with the S&P 500 turning in a 2.7 percent positive price return through the first half of 2016. Subsequent to quarter end, stock markets have continued their upward climb, with the Dow Jones Industrial Average and S&P 500 both posting new all-time record highs in July. This is remarkable as it is occurring in a time when the economic outlook is relatively weak and earnings have been under pressure.
Bonds have performed remarkably well, with the Barclays Aggregate Index up by over 5 percent in the first half of 2016. Government bond yields have continued to decline as major central banks in Europe and Japan pursue aggressive easing of monetary policy. Negative interest rate policies exist in a growing number of major economies and a substantial portion of the sovereign debt markets globally are trading with negative yields. Negative interest rates are highly unusual and are indicative of how challenging it has been for policymakers to stimulate economic growth and counteract deflationary forces.
One of the drivers of volatility early in 2016 was the divergence of U.S. policy from that of other major economies, particularly in Europe and Japan. Global macroeconomic concerns and geopolitical uncertainty including the so called “Brexit” vote in the U.K. to exit the European Union have caused the Fed to strike a more dovish tone in recent weeks. Risk markets have reacted favorably to the Fed’s more patient approach toward tightening monetary policy.
Recently, domestic economic data has been mixed but indicative of continued slow growth and low inflation. Together, the policies being pursued by European and Japanese central banks, weak growth prospects and low inflation expectations are all exerting additional downward pressure on U.S. interest rates. As less yield is available in high quality assets, market participants have been forced to move out the risk spectrum in search of yield wherever it can be found. As a consequence, credit spreads have been narrowing and stocks have been well supported.
The outlook for diminished economic growth in the U.S. and abroad and weak corporate fundamentals are at odds with risk assets at current prices. However, the forces of central bank accommodation are quite strong and this environment could persist for an extended period of time. Ultimately though, fundamentals need to improve to catch up with markets. More volatility should be expected as market participants assess the economic outlook, the impact of the Brexit vote and the outcome of our elections, just to name a few sources of uncertainty.
The Future of OneAmerica Funds
The OneAmerica Funds have been in existence for over 25 years. As the funds’ markets have grown more and more crowded, it has become increasingly difficult to maintain sufficient scale of assets under management to operate the funds effectively. I am proud of what the funds have accomplished over their existence, and I am proud of the portfolio managers who have worked tirelessly to deliver products that are true to their style and investment objectives. However, it is with sadness that I announce our intent to close the funds, likely by the end of 2016. More information can be found in the footnotes to this report and in proxy materials that you will receive in coming weeks.
An Overview of OneAmerica Funds, Inc. Performance
OneAmerica Funds, Inc. is comprised of four portfolios, each with a different directive. The Value Portfolio is an equity portfolio utilizing a multicap, value approach. The Investment Grade Bond Portfolio focuses primarily on intermediate investment grade bonds. The Asset Director Portfolio is a managed portfolio investing in stocks, bonds and cash based on our outlook for these various asset classes. And finally, the Socially Responsive Portfolio typically invests in financially strong companies that also adhere to specific moral beliefs.
Investment performance for each portfolio in OneAmerica Funds, Inc. for the first half of 2016 has been listed below.
|Portfolio||Class O||Advisor Class|
|Investment Grade Bond Portfolio||5.5%||5.4%|
|Asset Director Portfolio||4.1%||4.0%|
|Socially Responsive Portfolio||3.4%||3.3%|
Performance numbers for the OneAmerica portfolios are net of investment advisory fees and other expenses paid by each portfolio, but do not reflect specified contract, mortality and expense risk charges.
As always, I am grateful for the confidence you have placed in us by investing in the OneAmerica Funds, Inc.
John C. Mason
OneAmerica Funds, Inc.
August 12, 2016
The views expressed in this commentary are those of the author as of August 12, 2016 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation to buy, sell, or hold any specific security and are subject to change at any time.
Investing involves risk which includes potential loss of principal. Past performance is not a guarantee of future results. Investing in international markets involves risks not associated with investing solely in the U.S., such as currency fluctuation, potential political and diplomatic instability, liquidity risks, and differences in accounting, taxes, and regulations.