between counterparties are dependent upon the price of
the underlying commodity or commodity index over the life of the swap. Commodity futures
contracts are standardized, exchange-traded contracts that provide for the sale or purchase of, or economic exposure to the price of, a commodity or a specified basket of commodities at a future time. An option on commodities gives the
purchaser the right (and the writer of the option the obligation) to assume a position in a commodity or a specified basket of commodities at a specified exercise price within a specified period of time. The value
of these commodity-linked derivatives will rise and fall in response to changes in the underlying commodity or commodity index. Commodity-linked derivatives expose the ART Subsidiary and the Fund
economically to movements in commodity prices. Such instruments may be leveraged so that small
changes in the underlying commodity prices would result in disproportionate changes in the
value of the instrument. Neither the Fund nor the ART Subsidiary invests directly in physical commodities. The ART Subsidiary may also invest in other instruments, including fixed income securities, either as
investments or to serve as margin or collateral for its swap positions, as well as volatility index derivatives and foreign currency transactions (including forward contracts).
The Fund may from time to time hold foreign currencies. Additionally, as a result of the Fund’s use of derivatives, the Fund may also hold as collateral significant
amounts of U.S. Treasury or short-term investments, including money market funds, repurchase agreements, cash and time deposits. In managing the collateral portion of the Fund’s investment strategy, the
Investment Adviser generally seeks capital preservation.
The weighting of a Market Exposure or Trading Strategy within the Fund may be positive or negative. A
negative weighting will result from establishing a short position with respect to a Market Exposure or Trading Strategy. As a result of the Fund’s negative weightings in various Market Exposures or
Trading Strategies from time to time, the Fund’s net asset value (“NAV”) per share may decline during certain periods, even if the value of any or all of the Market Exposures or Trading Strategies increases during
that time. Additionally, the sum of the Fund’s target weightings to each Market Exposure or Trading Strategy may not equal 100%.
The
Fund may make investment decisions that deviate from those generated by the Investment Adviser’s proprietary investment model, at the discretion of the Investment Adviser. In addition, the Investment Adviser may, in its discretion, make
changes to the quantitative methodology used by the Fund, and the Fund may use other proprietary methodologies based on the Investment Adviser’s proprietary research.
The Fund does not invest in hedge
funds.
The Fund’s benchmark index is the ICE Bank of America Merrill Lynch Three-Month U.S. Treasury Bill Index.
Principal Risks of the Fund |
Loss of money is a risk of investing in the Fund. The investment program of the Fund is speculative, entails substantial risks and
includes alternative investment techniques not employed by
traditional mutual funds. The Fund should not be relied upon as a complete investment program. The Fund’s investment techniques (if
they do not perform as designed) may increase the volatility of performance and the risk of investment loss, including the loss of the
entire amount that is invested, and there can be no assurance that the investment objective of the Fund will be achieved. Moreover, certain investment techniques which the Fund may employ in its
investment program can substantially increase the adverse impact to which the Fund’s investments may be subject.
There is no assurance that the
investment processes of the Fund will be successful, that the techniques utilized therein will be implemented successfully or that they are adequate for their intended
uses, or that the discretionary element of the investment processes of the Fund will be exercised in a manner that is successful or that is not adverse to the Fund. An investment in the
Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any
government agency. Investors should carefully consider these risks before
investing.
In addition, the Fund’s NAV may fluctuate substantially over time.
Because the Fund attempts to approximate the return and risk
patterns of a diversified universe of hedge funds, the Fund’s performance may potentially be lower than the returns of the broader
stock market. Accordingly, the Fund should be considered a speculative investment entailing a high degree of risk and is not suitable for all investors. The Fund’s principal risks are presented
below in alphabetical order, and not in the order of importance or potential exposure.
Absence of Regulation Risk. The Fund engages in over-the-counter (“OTC”) transactions, which trade in a dealer network,
rather than on an exchange. In general, there is less governmental regulation and supervision
of transactions in the OTC markets than of transactions entered into on organized
exchanges.
Commodity Sector Risk. Exposure to the commodities markets may subject the Fund to greater volatility than investments in more traditional securities. The value of
commodity-linked investments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as
drought, floods, weather, livestock disease, embargoes, tariffs and international economic,
business, political and regulatory developments. The prices of energy, industrial
metals, precious metals, agriculture and livestock sector commodities may fluctuate widely due to factors such as changes in value, supply and demand and governmental regulatory policies. The commodity-linked investments in which
the ART Subsidiary enters into may involve counterparties in the financial services sector, and events affecting the financial services sector may cause the ART Subsidiary's, and therefore the
Fund’s, share value to fluctuate.
Counterparty Risk. Many of the protections afforded to cleared transactions, such as the security afforded by transacting
through a clearing house, might not be available in connection with OTC transactions.
Therefore, in those instances in which the Fund enters into uncleared OTC transactions, the Fund will be subject to the risk that its direct counterparty will not perform its obligations under the transactions and that the Fund will sustain losses.
Credit/Default Risk. An issuer or guarantor of fixed income securities or instruments held by the Fund (which may have low
credit ratings) may default on its obligation to pay interest and repay principal or default
on any other obligation. The credit quality of the Fund’s portfolio securities or instruments may meet the Fund’s credit quality requirements at the time of purchase but then deteriorate thereafter, and such a deterioration can occur
rapidly. In certain instances, the downgrading or default of a single holding or guarantor of the Fund’s holding may impair the Fund’s liquidity and have the potential to cause significant deterioration in
net asset value (“NAV”). These risks are more pronounced in connection with the Fund’s investments in non-investment grade fixed income securities.
Derivatives Risk. The Fund’s use of options, futures, forwards, swaps, options on swaps, structured securities and
other derivative instruments may result in losses. These instruments, which may pose risks in