Fund Information Home

Investment Manager:
  American Beacon Advisors

4151 Amon Carter Blvd
Md 2450
Fort Worth, TX 76155
 
Asset Class and Objective Specialty U.S. stock fund, focusing on value-oriented small capitalization stocks
Product Benchmark Russell 2000 Value Index
Marketing Company AIG Retirement
Restrictions on Transfers Investment funds in the FRS Investment Plan are subject to excessive trading restrictions as detailed in the FRS Investment Plan Summary Plan Description and FRS Excessive Fund Trading Policy.
How mutual fund fees work On an annual basis, marketing companies estimate the fees that FRS Investment Plan participants will pay as a percentage of their mutual fund account assets; e.g., 0.50% per year. These figures reflect any rebates or reductions negotiated by the State Board of Administration and are published in the Fund Profiles and other plan materials.

However, the actual fees you would pay as an investor in a mutual fund are not guaranteed and will vary over time when expressed as a percent of asset values. Mutual fund boards of directors can change fees without the FRS's permission. Changes occur throughout the year in the day-to-day expenditures made by mutual funds to cover their operating expenses and these changes are passed through to shareholders. The amount of assets under management changes from period to period and so fees expressed as a ratio of assets will vary, even if the actual dollar expenditures do not. Also, some mutual funds have fees that can rise or fall depending on performance compared to a benchmark.

The actual expenses paid for mutual funds included in the FRS Investment Plan are detailed in their annual or semi-annual reports for previous periods. These reports are available free of charge by calling the MyFRS Financial Guidance Line (1-866-446-9377). Please note that these reports will not reflect any rebates or reductions negotiated by the State Board of Administration.

Fees and expenses are only one of several factors that should be considered when making investment decisions.For more information about fees and expenses see this FAQ.
Investment Philosophy The fund employs sub-advisors to invest in small market capitalization companies with above average earnings growth prospects and that are also selling at a discount to the market. Barrow, Hanley, Mewhinney & Strauss, Inc., Brandywine Global Investment Management, LLC, Hotchkis and Wiley Capital Management, LLC, Opus Capital Management, Dreman Value Management, Metropolitan West Capital Management, LLC and State Street Global Asset Management have been selected as sub-advisors to the Fund because of their disciplined value investment process. Dreman, Met West, and SSgA have been hired to provide capacity as the fund's assets grow and are not yet allocated assets.
Research Process Barrow, Hanley, Mewhinney & Strauss, Inc. (Barrow)
The small cap team comprised of Jim McClure and John Harloe performs the vast majority of their quantitative and qualitative securities analysis internally, on a primary basis. Approximately 80% of the research is generated in-house and the remaining 20% is "street" research. The assumptions and forecasts developed through the quantitative and qualitative analyses are then installed in two real-time models used to ensure consistency and discipline in the investment process. The Cash Flow Yield model documents the "value gap" using prospective free cash flow yields and the Relative Return Model documents under-valuation using relative earnings growth and various historical valuation parameters. Stocks that appear undervalued on both models are candidates for purchase. New investment candidates are evaluated against existing holdings and those holdings with the smallest remaining "value gap" are considered for sale.
Brandywine Global Investment Management, LLC (BGIM)
As lead portfolio managers, Henry Otto and Steve Tonkovich have specific responsibility for the small cap value portfolio. However, investment decisions are made with the entire team that includes Henry Otto and Steve Tonkovich, three dedicated small cap research analysts, a dedicated small cap trader and eleven industry specialists (across the market capitalization spectrum). Investment meetings are held regularly on a formal and informal basis. Individuals are given responsibility for analyzing a portion of the quantitatively screened small cap value universe and their recommendations to hold or to eliminate securities are thoroughly discussed and critiqued.
Hotchkis and Wiley Capital Management, LLC (Hotchkis)
Hotchkis subscribes to a team-oriented investment process, where portfolios are constructed on a bottom-up basis by the investment team. Continual informal investment strategy sessions (weekly formal sessions are also scheduled) allow analysts and portfolio managers to promote current investment ideas within their assigned industries. Their research team of 14 analysts/portfolio managers, led by the small cap managers, debates the merits of each recommendation, taking into account the prevailing market environment, the Fund's current research process is subject to peer review with Jim Miles and David Green having final responsibility for the product.
The Boston Company Asset Management, LLC (TBCAM)
TBCAM believes successful small cap investing is achieved through a program that is focused on valuation, mitigates downside risk, is research driven and has a disciplined repeatable investment process.
Opus Capital Management, Inc.(Opus)
Opus invests in small capitalization stocks that are fundamentally undervalued, financially strong and exhibit strong earnings growth and positive earnings momentum.
Dreman Value Management (Dreman)
Dreman believes the best way to capture higher potential returns in small cap socks is to employ a low P/E value approach that is a direct extension of the value philosophy the firm has employed in large cap stocks for over 25 years.
Metropolitan West Capital Management, LLC (MetWest)
MetWest employs a bottom up, fundamental, research driven style designed to uncover and capitalize on misunderstood, under-followed and mis-priced companies selling at material discounts to their intrinsic values.
State Street Global Asset Management (SSgA)
SSgA's small cap value index plus strategy can be defined as an enhanced, quantitative, small cap value portfolio that is neutral to its benchmark and seeks to provide a bridge between low risk/low value-added passive instruments and high risk/high value added active management alternatives.
Security Selection The sub-advisers seek stocks, which, in their opinion, have most or all of the following characteristics: above-average earnings growth potential, below-average price to earnings ratio, below-average price to book value ratio, and other favorable risk characteristics. Each of the sub-advisers determines the earnings growth prospects of companies based upon a combination of internal and external research using fundamental analysis and considering changing economic trends in order to determine a stock's value. Each sub-adviser is responsible for making security selection decisions based upon his/her economic forecasts, market views, research, and guideline limitations imposed by AMR Investments.
Portfolio Construction The Fund's sub-advisers utilize several criteria and screens to select securities for the American Beacon Small Cap Value Fund. The sub-advisors share of assets as of 8/31/2005 are weighted as follows:
Barrow, Hanley, Mewhinney & Strauss, Inc. 10%
Brandywine Global Investment Management, LLC 43%
Hotchkis and Wiley Capital Management, LLC 9%
TBCAM 20%
Opus Capital Management, Inc. 14%
Dreman Value Management N.A. *
Metropolitan West Capital Management, LLC N.A. *
State Street Global Assets N.A. *
Unallocated Cash 4%
* No Allocation.
Sell Discipline The Fund's sub-advisers sell stocks when they:
  • No longer represent value
  • Are no longer small cap
  • Exhibit deterioration of financial strength or other business fundamentals
Companies that reach $5 billion in market capitalization may not be held without discussion and explicit permission of AMR Investments.
Portfolio Manager(s)
Name Investment Experience Experience Last 5 Years
William Quinn, American Beacon Advisors 27 years Chairman
Doug Herring, American Beacon Advisors 18 years President
Adriana Posada, American Beacon Advisors 13 years Portfolio Manager
Sub-advisers of the Fund (Years joined their respective firms)  
James McClure, Barrow, Hanley, et. al. 32 years Principal, Senior Portfolio Manager
John Harloe, Barrow, Hanley, et. al. 28 years Principal, Portfolio Manager
Henry Otto, Brandywine Global Investment Management 26 years Portfolio Manager
Steve Tonkovich, Brandywine Global Investment Management 19 years Portfolio Manager
James Miles, Hotchkis and Wiley Capital 18 years Portfolio Manager
David Green, Hotchkis and Wiley Capital 18 years Portfolio Manager
Joseph Corrado, The Boston Company 28 years Portfolio Manager
Stephanie Brandaleone, The Boston Company 15 years Portfolio Manager
Edward Walter, The Boston Company 17 years Portfolio Manager
Len Haussler, Opus Capital 24 years President, Portfolio Manager
David N. Dreman, Dreman Value 32 years Chairman, CIO, Founder
Nelson P. Woodward, Dreman Value 22 years Managing Director, Senior Portfolio Manager
Gary W. Lisenbee, MetWest Capital 35 years President, Portfolio Manager
Sandra L. Incontro, MetWest Capital 14 years Senior Vice President, Portfolio Manager
Ric Thomas, SSgA Funds 18 years Principal, Portfolio Manager
Chuck Martin, SSgA Funds 15 years Principal, Portfolio Manager
IMPORTANT NOTE: The information on investment philosophy, research process, security selection, portfolio construction, sell discipline and personnel was provided to the FRS by product marketing companies or investment managers. The FRS has taken this information as given for the purposes of this document.


FRS Investment Plan Detailed Fund Operations
American Beacon Small-Cap Value Fund (S99)
Profile Issued 02/08