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October 1, 2015

Ms. Ashley Vroman-Lee

Division of Investment Management

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549

	Re:	American Beacon Funds (File Nos. 333-206688 and 811-04984)
		Registration Statement on Form N-14

Dear Ms. Vroman-Lee:

The following are responses to the comments that we received from you by telephone on September 24, 2015 regarding the Registration Statement on Form N-14 (“Registration Statement”) of American Beacon Bridgeway Large Cap Growth Fund (“AB Fund”), a series of the American Beacon Funds (“Registrant”),that was filed with the Securities and Exchange Commission (“SEC”) on August 31, 2015.  Your comments and the Registrant’s responses are set forth below.  Defined terms used but not defined herein have the respective meanings assigned to them in the Registration Statement.

The Registrant acknowledges that: (1) it is responsible for the adequacy and accuracy of the disclosure in its Registration Statement; (2) Staff comments or changes to disclosure in response to Staff comments in the Registration Statement reviewed by the Staff do not foreclose the SEC from taking any action with respect to its Registration Statement; and (3) it may not assert Staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States.

1.	In your response to the sixth question in the Q&A section of the Registration Statement, move the first sentence in the second paragraph immediately behind the first sentence of the first paragraph.

The Registrant has revised the disclosure to make it more easily understandable to shareholders and moved the disclosure as requested.

2.

In your response to the seventh question in the Q&A section of the Registration Statement, you state that you “expect that neither the Bridgeway Fund nor its shareholders will recognize any gain or loss for federal income tax purposes as a direct result of the Reorganization, and the Company and the AB Trust expect to

 

The Registrant confirms that a similar statement is made on page 1 of the Proxy/Prospectus.

3.	Confirm that any material differences between the Bridgeway Fund and the AB Fund have been disclosed under the section titled “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds” in the Proxy/Prospectus.

The Registrant confirms that all material differences between the Bridgeway Fund and the AB Fund have been disclosed under “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds” in the Proxy/Prospectus.

4.

Footnote two to the fee table in the “Comparison of Expenses” section of the Proxy/Prospectus discusses the Manager’s contractual agreement to waive fees and/or reimburse expenses of the AB Fund’s Institutional Class shares through December 31, 2017 (“Agreement”).  Confirm that the Manager may not be reimbursed by the AB Fund for any contractual fee waivers or expense reimbursements after the Manager ceases to be the AB Fund’s investment adviser.

In connection with its approval of the Agreement, the Registrant’s Board of Trustees (“Board”) approved the recovery by the Manager of any fees waived and/or expenses reimbursed if during the three years following such waiver or reimbursement the expense ratio falls below the limit on total annual operating expenses for the AB Fund as set forth in the Agreement.  The Board did not place any limitations on the Manager’s ability to recover such expenses, except those provided in the resolution.  In light of the Staff’s position that expenses cannot be recouped after an adviser ceases to provide investment advisory services to a fund, the Registrant agrees that, in the event the Manager ceases to be the Fund’s investment adviser, the Manager’s ability to recoup fees waived and expenses reimbursed to the AB Fund will terminate.

5.	In the third sentence of the Expense Example in the Proxy/Prospectus, replace “through the time period described above” with “through December 31, 2017”.

The Registrant has revised the disclosure as requested.

6.	In the “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds−Principal Investment Strategies,” section of the Proxy/Prospectus, the

 

 

The Registrant discloses that the AB Fund determines the eligibility of companies for investment by reference to the Russell 1000 Index at the time of investment.  This practice has been sanctioned by the SEC in the adopting release for Rule 35d-1 under the Investment Company Act of 1940 regarding Investment Company Names (Investment Company Names, 1940 Act Release No. 24828 (January 17, 2001) (“Adopting Release”) and related Staff guidance.

The Registrant respectfully submits that the AB Fund’s definition of large-cap stocks is appropriate.  In the Adopting Release, the SEC stated in footnote 43 that: “[a]s a general matter, an investment company may use any reasonable definition of the terms used in its name and should define the terms used in its name in discussing its investment objectives and strategies in the prospectus.”  The Staff further elaborated as to the meaning of a “reasonable definition” in “Frequently Asked Questions about Rule 35d-1,” issued on December 4, 2001.   There, the Staff stated in its answer to Question 6 that “[t]erms such as “small-, mid-, or large-capitalization” suggest a focus on a particular type of investment, and investment companies that use these terms will be subject to the 80% investment requirement of the rule. As a general matter, an investment company may use any reasonable definition of these terms and should define these terms in its discussion of its investment objectives and strategies in its prospectus. In developing a definition of the terms “small-, mid-, or large-capitalization,” registrants should consider all pertinent references, including, for example, industry indices, classifications used by mutual fund rating organizations, and definitions used in financial publications” (emphasis added).

The Russell 1000 Index is commonly used to refer to the large-cap segment of the U.S. equity universe. Russell Investments states that: “[t]he Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected.”

 

 

 

The Registrant has identified over 50 funds with the term “large cap” in their name that define large-capitalization securities by reference to the Russell 1000 Index or the Russell 1000 Growth Index, a subset of the Russell 1000 Index.  Accordingly, the Registrant believes that the AB Fund’s definition of large-cap stocks using the Russell 1000 Index capitalization range as a reference complies with the relevant SEC and Staff guidance and is consistent with industry practice.

7.

In the “Comparison of Principal Risks” section of the Proxy/Prospectus, the AB Fund includes in the second paragraph of “Large Capitalization Companies Risk” disclosure regarding the risks associated with investments in mid-cap companies.  If the AB Fund will invest in mid-cap companies, include disclosure to this effect in the discussion of the AB Fund’s principal investment strategies.

The Registrant has included in its principal investment strategies disclosure to the effect that the AB Fund may invest in mid-cap stocks.

8.

In the “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds - Principal Investment Strategies,” section of the Proxy/Prospectus, the disclosure for the AB Fund states “[a]lthough the Fund seeks investments across a number of sectors, from time to time, based on portfolio positioning to reflect its benchmark index, the Fund may have significant positions in particular sectors.”  If known, disclose the sectors in which the Fund may, from time to time, have significant positions.  If not disclosed in the prospectus, explain supplementally how investors will know the sectors in which the Fund has significant positions.

Bridgeway Capital Management, Inc. (“Sub-Advisor”), the sub-advisor to the AB Fund will selects stocks within the large-cap growth category using a statistically driven approach.  While the Sub-Advisor’s investment process may cause the AB Fund to hold significant positions in certain sectors from time to time, at the present time the Sub-Advisor cannot predict these sectors with any certainty.  The sectors in which the AB Fund has significant positions will be disclosed in the AB Fund’s schedule of portfolio holdings, which will be filed with the SEC within 60 days after the AB Fund’s fiscal year end and second fiscal quarter in the AB Fund’s annual and semi-annual reports to shareholders on Form N-CSR, and after the AB Fund’s first and third fiscal quarters on Form N-Q.

9.

The disclosure in the “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds−Principal Investment Strategies,” section of the Proxy/Prospectus states that the AB Fund may invest in derivatives.  Please state supplementally whether derivatives are included for purposes of determining compliance with the AB Fund’s policy to invest at least 80% of its net assets (plus borrowings for investment purposes) in large-cap stocks.  If derivatives are included

 

The Registrant does not currently intend to include derivatives for purposes of calculating compliance with the AB Fund’s 80% policy.

10.	For the reasons stated in Comment 6 above, explain supplementally why the Russell 1000 Growth Index is an appropriate benchmark index for the Fund.

The AB Fund’s use of the Russell 1000 Growth Index, an unaffiliated broad-based securities market index, as the Fund’s primary benchmark index is appropriate given the alignment of the AB Fund’s principal investment strategy with the Russell 1000 Growth Index.

The AB Fund’s principal investment strategy is to invest “[u]nder normal circumstances,  . . . at least 80% of its net assets (plus borrowings for investment purposes) in stocks from among those in the large cap growth category at the time of purchase. . . . “Growth stocks” are those [the Sub-Advisor] believes have above average prospects for economic growth.”  Russell Investments states that “[t]he Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics.”

The use of the Russell 1000 Growth Index also is consistent with prevailing industry practice.  The Registrant notes that of the mutual funds surveyed for purposes of the Registrant’s response to Comment 6, of the 74 funds with “large-cap growth” in their name, 64 used the Russell 1000 Growth Index as their primary benchmark index.

11.	In the section of the Proxy/Prospectus titled “Comparison of Principal Risks”, the second paragraph of “Large Capitalization Companies Risk” discusses the risks of investments in mid-cap companies.  Please include this disclosure under a separate heading for mid-cap companies risk.

The discussion of the risks of investments in mid-cap companies has been included under a separate heading for “Mid-Capitalization Companies Risk.”

12.	Confirm whether the three portfolio managers listed in the section of the Proxy/Prospectus titled “Comparison of Principal Investment Objectives, Strategies and Policies of the Funds” are jointly and primarily responsible for the day-to-day management of the Fund's portfolio.

 

 

The Registrant confirms that the portfolio managers are jointly and primarily responsible for the day-to-day management of the Fund’s portfolio.  The Registrant has inserted a statement to this effect in the disclosure immediately preceding the named portfolio managers.

13.

The Bridgeway Fund had approximately $12.8 million in capital loss carryovers as of June 30, 2015.  In the section of the Proxy/Prospectus titled “Key Information about the Proposal−Federal Income Tax Consequences” disclose information on any potential limitations on the AB Fund’s use of the Bridgeway Fund’s capital loss carryovers, including an appropriate level of detail regarding the amount and expiration dates of such capital loss carryovers.

The Registrant has added the requested disclosure to the Proxy/Prospectus.

14.	In the section of the Proxy/Prospectus titled “Key Information about the Proposal−Federal Income Tax Consequences,” disclose whether the Bridgeway Fund plans to sell certain portfolio securities in anticipation of the Reorganization, including the following:

a.

estimated portion of the portfolio that will be disposed of in connection with the reorganization;

b.

estimated portfolio transaction costs expected to be generated as a result of these sales;

c.

estimated capital gains distributions, if any, to shareholders; and

d.

if sales of portfolio securities will result in capital gains, the per share amount of the distributions.

Please choose a current date for purposes of calculating the requested estimates.

The Bridgeway Fund does not expect to sell any portfolio securities in anticipation of the Reorganization.

15.	In the section of the Proxy/Prospectus titled “Key Information About the Proposal−Capitalization” include capitalization table data as of a date within 30 days of the date of the Registration Statement.

The Registrant has updated the information in the capitalization table as of September 22, 2015, the Record Date for the Meeting.

 

If you have any questions regarding the matters discussed above, please feel free to call me at (202) 778-9015.

 

	Sincerely,
	/s/ Kathy Kresch Ingber
	Kathy Kresch Ingber

 

 

cc:	Rosemary Behan
	Teresa A. Oxford
	American Beacon Advisors, Inc.