On September 1, 2011, GuideStone launched the Defensive Market Strategies Fund (“the Fund”) intended to serve GuideStone participants by offering an investment that seeks to achieve long-term returns consistent with the equity (stock) market, but with less fluctuation when compared to the overall U.S. equity market.

What is the Fund’s investment objective?

The Fund seeks to provide long-term capital appreciation consistent with equity markets but with lower short-term volatility or fluctuation. Since equity markets’ prices can fluctuate significantly over market cycles, the Fund’s objective is to produce a more stable return pattern when compared to the overall equity markets, represented by the S&P 500® Index, by limiting volatility.

Through sophisticated portfolio construction developed by GuideStone Capital Management (the GuideStone Funds’ Investment Adviser), the Fund uses multiple investment strategies, which together seek to achieve its objective. Because of the Fund’s unique structure, the returns may differ significantly from that of the S&P 500® Index over shorter periods of time, and the Fund’s objectives should only be evaluated over complete market cycles. The Fund will likely not capture all of the upside in a strong bull (up) market for U.S. equities. On the other hand, during a bear (down) market for U.S. equities, the Fund is expected to capture only about half of the returns, limiting the negative impact to a participant’s portfolio.

That is an important component to keep in mind. The Fund will not eliminate the potential of losses. It merely seeks to lessen negative performance during a down market for U.S. equities.

What securities does the Fund hold?

The Fund, through its four sub-advisers, will primarily hold equity (stock) securities and convertible bonds.

Equity securities give the investor an ownership right in a company. These securities fluctuate in price daily based on many factors, including the economy, the performance of the overall stock market, the individual company’s profits and prospects for future growth in the company’s profits.

Convertible bonds are a special type of fixed income security. These bonds allow the holder to receive income, typically semiannually, and be repaid the principal when the bond matures, just like any other bond. However, these bonds have a special feature (called an option) which allows the holder to convert the bond to stock of the issuing company based on a predetermined price (referred to as a conversion price). As a result of this option, convertible bonds can participate in equity market gains. These gains can be achieved as the option attached to the bond increases in value when the company’s stock price moves toward the conversion price.

What investment strategies does the Fund use?

The Fund is actively managed and invests mainly in equity securities with defensive characteristics. The Fund may invest to a lesser extent in convertible bonds. The Fund may utilize various investment strategies and sub-advisers from time to time in order to meet the Fund’s objectives. Each of the Fund’s current four sub-advisers utilizes a unique strategy that when combined provide a portfolio structure designed to achieve the Fund’s objective. All of the sub-advisers use active management techniques to achieve their investment goals.

• Equity — Value Yield. This strategy invests in equity securities which tend to deliver higher dividends than the overall stock market. The higher dividends are intended to provide a buffer for stock price downside risk, but allow participation as stock markets trend upward.
• Equity — Defensive Equity. This strategy invests in equity securities which tend to be more defensive in nature than the overall stock market. That is, companies which usually perform better during market downturns than the overall stock market.
• Equity — Long-short. This strategy invests in equity securities both by purchasing stock and selling stock short. By using a long-short strategy, the sub-adviser seeks to limit the risk of the portfolio and generate excess returns from both buying stocks believed to be undervalued and selling stocks short believed to be overvalued.
• Convertible Bond. This strategy invests primarily in convertible bonds. These bonds allow for the investor to receive not just the yield from the bonds, but also to participate in a portion of the upside of the equity markets. Like traditional bonds, the convertible bond provides a stable “floor” value associated with the face value of the bond.

Who might benefit from the Fund?

As with all the GuideStone Select Funds (asset class funds), the Fund is not designed to be a one-fund approach to retirement investing. Instead, it is designed to be a part of a well-diversified, age-appropriate investment portfolio.

The Defensive Market Strategies Fund might be appropriate as part of a diversified investment portfolio for the risk-sensitive investor who wants equity market exposure with greater downside risk protection. The Fund is available for direct investment by participants. In addition, some of the MyDestination Funds® and Asset Allocation Funds offered by GuideStone Funds invest in the Fund. The MyDestination® 2005, 2015 and 2025 Funds include an allocation of the Fund. Both the Conservative Allocation and Balanced Allocation Funds also invest in the Fund.

How can I know if the Fund is right for me?

Choosing the right fund can seem daunting. Fortunately, through GPS: Guided Planning Services,®* GuideStone retirement plan participants can determine if the Fund might be an appropriate part of their retirement investment portfolio. To use the free financial advice tool, participants can set up an appointment by calling 1-888-98-GUIDE (1-888-984-8433) or access their account through MyGuideStone™ to complete the service online.

Learn more about the fund.

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Disclosures

You should carefully consider the investment objectives, risks, charges and expenses of GuideStone Funds before investing. For a copy of the prospectus with this and other information about the funds, please  download a prospectus or call 1-888-98-GUIDE (1-888-984-8433). You should read the prospectus carefully before investing.

*Financial advice provided by GuideStone Advisors, a controlled-affiliate of GuideStone Financial Resources.

The Defensive Market Strategies Fund may be suitable for investors who have a medium- to long-term investment horizon, possess a moderate tolerance for risk and seek to participate in the return potential of stocks at a slightly lower risk level than an all-stock portfolio. This fund is subject to interest rate risk. Meaning, when interest rates rise, the value of the existing bonds decrease and vice versa. Changes in interest rates have a bigger impact on long-duration holdings than on short-duration holdings. The value of convertible securities increases and decreases with the value of the underlying common stock, but may also be sensitive to changes in interest rates. Foreign securities may be subject to greater risk than domestic securities due to currency volatility, reduced market liquidity, and political and economic instability. To the extent that the investment advisor misjudges current market conditions, the fund’s volatility may be amplified by its use of short sales and derivatives, and by its ability to select sub-advisers to allocate assets.

Short sales by a fund theoretically involve unlimited loss potential since the market price of securities sold short may continuously increase. Leverage may increase the risk of loss and cause fluctuations in the market value of the fund’s portfolio to have disproportionately large effects or cause the NAV of the fund to decline faster than it would otherwise. 


GuideStone Funds and GuideStone Capital Management are controlled-affiliates of GuideStone Financial Resources. GuideStone Funds shares are distributed by BNY Mellon Distributors Inc., not an adviser affiliate.