News

President’s Letter

November 29, 2021

Dear Oakmark Funds’ Shareholders,

It brings me joy to write to you as president of the Oakmark Funds. Although I was appointed as president, principal executive officer and trustee at the beginning of this year, I have been general counsel at Harris Associates and vice president, secretary and chief legal officer of the Oakmark Funds since 2018.

What an extraordinary journey this has been for all of us over the past few years as we have weathered the extreme challenges of the ongoing pandemic and its resulting impact on our families and work environments. After nearly 20 years in the mutual fund industry, I am keenly aware that my tenure at Harris Associates started at a unique point in history. Throughout my time here, I have been consistently impressed by the team’s unwavering commitment to our time-tested value investment philosophy and core values that have guided each of us through the challenges presented. My experience reaffirms why I joined Harris Associates—my principles are aligned with those of my colleagues and they serve our shareholders well. I have watched every member of the team live the firm’s tenets of patient, long-term active management, with high conviction in our process and philosophy that are in complete alignment with our client-first mission. The team’s stability and clarity of focus have provided certainty for our shareholders in an environment of ongoing change and uncertainty.

Oakmark Funds Update
At the onset of the Funds’ fiscal year, value started to outperform growth and we saw an unusually large opportunity for our Funds as valuations remained near historic lows. By the time the first quarter of 2021 ended, six out of seven Oakmark Funds experienced their single best one-year returns of all time. Though the arrival of vaccines produced a sense of hope for a return to normal, the recovery was uneven. The Delta variant led to more uncertainty around economic reopening during the summer, which caused weakness in the prices of many of our economically sensitive businesses. At fiscal year-end, each Oakmark Fund is posting strong absolute returns, outpacing its respective value benchmark and nearly keeping pace with its growth-fueled benchmark. As we now digest the market’s latest topic du jour—inflation—and as valuations remain attractive relative to price, we continue to believe prospects for better than average returns are bright.

This year marked important anniversaries for the Oakmark Fund family: 30 years for the Oakmark Fund, 25 years for the Oakmark Select Fund and 15 years for the Oakmark Global Select Fund. In honoring these achievements, I extend congratulations to the portfolio managers and all employees, past and present, who have supported these Funds and their shareholders throughout the years. These milestone moments are a testament to the firm’s adherence to our longstanding investment philosophy and process that I previously mentioned.

This year we celebrate the one-year anniversary of the Oakmark Bond Fund, our first solely dedicated fixed income product. I am proud to announce that the Oakmark Bond Fund will be offered through Investor Class shares on January 28, 2022.

We also made other changes to our share class structure to better serve the different shareholders who invest in the Oakmark Funds. On December 17, 2021, the Service Class will be terminated and those shares will be converted into the Investor Class. The Service Class shares have lower asset levels and higher expense ratios than the Investor Class, so all current Service Class investors will see expense ratio reductions. We believe that our current share class structure, which includes Investor, Advisor, Institutional and R6, provides a range of access points for our shareholders to receive the share class that best meets their investment and servicing needs.

Leadership Update
I am also pleased to announce that we have completed our leadership transition at Harris Associates. As you may recall, Kristi Rowsell retired from her role as president of Harris Associates and the Oakmark Funds earlier this year. Chris Keller serves as president of Harris Associates and vice president of the Oakmark Funds. Kristi now serves as an Oakmark Funds’ trustee and we are grateful for her continued service to our shareholders.

Personal Investment in the Oakmark Funds
Each year, we share our level of personal investments in the Oakmark Funds as a further demonstration of our belief in what we do at Harris Associates. For every holding in our portfolios, we look for management teams that think and act like owners of the business and treat their shareholders like partners. We stand beside you as fellow shareholders. We are indeed proud to report that as of September 30, 2021, the value of Oakmark Funds owned by Harris Associates employees, our families, the Funds’ officers and our trustees was more than $876 million. This level of investment exemplifies our personal conviction in Harris Associates’ investment philosophy and our commitment to managing your Fund with integrity.

I look forward to continuing to serve you as president of the Oakmark Funds. You can be assured that our focus remains squarely on the consistent application of our value investment philosophy with the goal of achieving positive rates of return for our shareholders. We are excited about the opportunities we see in the market and believe our Funds remain attractive investments for the future. We are thankful for the trust you have placed with us as shareholders of the Oakmark Funds and look forward to continuing to add value for you over the long term.

Rana Wright
President, Oakmark Funds

Average Annual Returns as of 09/30/21:

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark (Investor Class)1.85%59.18%14.96%16.03%16.33%13.09%
S&P 500 Index0.58%30.00%15.99%16.90%16.63%10.55%

Gross Expense Ratio: 0.93%
Net Expense Ratio: 0.91%
Fund Inception: 08/05/1991

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark Select (Investor Class)3.40%64.01%12.78%11.94%14.09%12.33%
S&P 500 Index0.58%30.00%15.99%16.90%16.63%9.58%

Gross Expense Ratio: 1.03%
Net Expense Ratio: 1.01%
Fund Inception: 11/01/1996

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark Global (Investor Class)-3.33%47.96%10.41%12.35%11.37%10.21%
MSCI World Index-0.01%28.82%13.14%13.74%12.68%6.07%

Gross Expense Ratio: 1.14%
Net Expense Ratio: 1.12%
Fund Inception: 08/04/1999

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark Global Select (Investor Class)-1.65%45.02%11.86%11.90%12.52%8.91%
MSCI World Index-0.01%28.82%13.14%13.74%12.68%7.47%

Gross Expense Ratio: 1.11%
Net Expense Ratio: 1.09%
Fund Inception:  10/02/2006

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark International (Investor Class)-5.02%41.96%5.60%8.27%9.02%9.28%
MSCI World ex U.S. Index-0.66%26.50%7.87%8.88%7.88%6.28%

Gross Expense Ratio: 1.06%
Net Expense Ratio: 1.04%
Fund Inception: 09/30/1992

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark International Small Cap-1.82%48.51%10.58%9.77%9.31%9.33%
MSCI World ex U.S. Small Cap Index0.72%30.15%9.50%10.33%10.03%N/A

Gross Expense Ratio: 1.39%
Net Expense Ratio: 1.37%
Fund Inception:  11/01/1995

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark Equity and Income (Investor Class)0.39%36.19%11.35%10.88%10.31%10.22%
Lipper Balanced Fund Index-0.32%18.69%10.71%9.98%9.76%7.37%

Gross Expense Ratio: 0.86%
Net Expense Ratio: 0.84%
Fund Inception:  11/01/1995

Returns for periods of less than one year are not annualized.
The net expense ratio reflects a contractual advisory fee waiver agreement through January 27, 2022.
Expense ratios are based on estimated amounts for the current fiscal year; actual expenses may vary.

Fund3 Month1 Year3 Year5 Year10 YearInception
Oakmark Bond Fund (Institutional Class)0.38%3.88%N/A N/A N/A4.58%
Bloomberg Barclays U.S. Aggregate Bond Index0.05%-0.90% N/A N/A N/A0.11%

Gross Expense Ratio: 2.82%
Net Expense Ratio: 0.59%
Fund Inception:  06/10/2020

Returns for periods of less than one year are not annualized.
The Fund’s Adviser has contractually undertaken to waive and/or reimburse certain fees and expenses so that the total annual operating expenses of each class are limited to 0.64%, 0.59%, and 0.44% of average net assets, respectively. Each of these undertakings lasts until 1/27/2022 and may only be modified by mutual agreement of the parties. The Fund is recently established and has limited operating and performance history. Expense ratios are based on estimated amounts for the current fiscal year; actual expenses may vary.

Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. The investment return and principal value vary so that an investor’s shares when redeemed may be worth more or less than the original cost. To obtain the most recent month-end performance data, view it here.

The S&P 500 Total Return Index is a float-adjusted, capitalization-weighted index of 500 U.S. large-capitalization stocks representing all major industries. It is a widely recognized index of broad, U.S. equity market performance. Returns reflect the reinvestment of dividends. This index is unmanaged and investors cannot invest directly in this index.

The Lipper Balanced Fund Index measures the equal-weighted performance of the 30 largest U.S. balanced funds as defined by Lipper. This index is unmanaged and investors cannot invest directly in this index.

The MSCI World Index (Net) is a free float-adjusted, market capitalization-weighted index that is designed to measure the global equity market performance of developed markets. The index covers approximately 85% of the free float-adjusted market capitalization in each country. This benchmark calculates reinvested dividends net of withholding taxes. This index is unmanaged and investors cannot invest directly in this index.

The MSCI World ex U.S. Index (Net) is a free float-adjusted, market capitalization-weighted index that is designed to measure international developed market equity performance, excluding the U.S. The index covers approximately 85% of the free float-adjusted market capitalization in each country. This benchmark calculates reinvested dividends net of withholding taxes. This index is unmanaged and investors cannot invest directly in this index.

The MSCI World ex U.S. Small Cap Index (Net) is designed to measure performance of small-cap stocks across 22 of 23 Developed Markets (excluding the United States). The index covers approximately 14% of the free float-adjusted market capitalization in each country. This benchmark calculates reinvested dividends net of withholding taxes. This index is unmanaged and investors cannot invest directly in this index.

The Oakmark, Oakmark Equity and Income, Oakmark Global, Oakmark International and Oakmark International Small Cap Funds’ portfolios tend to be invested in a relatively small number of stocks. As a result, the appreciation or depreciation of any one security held by the Fund will have a greater impact on the Funds’ net asset value than it would if the Fund invested in a larger number of securities. Although that strategy has the potential to generate attractive returns over time, it also increases the Funds’ volatility.

Because the Oakmark Select Fund and Oakmark Global Select Fund are non-diversified, the performance of each holding will have a greater impact on the fund’s total return, and may make the fund’s returns more volatile than a more diversified fund.

The stocks of medium-sized companies tend to be more volatile than those of large companies and have underperformed the stocks of small and large companies during some periods.

The Oakmark Equity and Income Fund invests in medium- and lower-quality debt securities that have higher yield potential but present greater investment and credit risk than higher-quality securities. These risks may result in greater share price volatility. An economic downturn could severely disrupt the market in medium or lower grade debt securities and adversely affect the value of outstanding bonds and the ability of the issuers to repay principal and interest.

The stocks of smaller companies often involve more risk than the stocks of larger companies. Stocks of small companies tend to be more volatile and have a smaller public market than stocks of larger companies. Small companies may have a shorter history of operations than larger companies, may not have as great an ability to raise additional capital and may have a less diversified product line, making them more susceptible to market pressure.

The Oakmark Bond Fund invests primarily in a diversified portfolio of bonds and other fixed-income securities. These include, but are not limited to, investment grade corporate bonds; U.S. or non-U.S.-government and government-related obligations (such as, U.S. treasury securities); below investment-grade corporate bonds; agency mortgage backed-securities; commercial mortgage- and asset-backed securities; senior loans (such as, leveraged loans, bank loans, covenant lite loans, and/or floating rate loans); assignments; restricted securities (e.g., Rule 144A securities); and other fixed and floating rate instruments. The Fund may invest up to 20% of its assets in equity securities, such as common stocks and preferred stocks. The Fund may also hold cash or short-term debt securities from time to time and for temporary defensive purposes.

Under normal market conditions, the Fund invests at least 25% of its assets in investment-grade fixed-income securities and may invest up to 35% of its assets in below investment-grade fixed-income securities (commonly known as “high-yield” or “junk bonds”).

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.

Bond values fluctuate in price so the value of your investment can go down depending on market conditions.

Investing in foreign securities presents risks that in some ways may be greater than U.S. investments. Those risks include: currency fluctuation; different regulation, accounting standards, trading practices and levels of available information; generally higher transaction costs; and political risks.

Investing in value stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods.

New Fund Risk: The Oakmark Bond Fund is recently established and has limited operating history. The Fund may not be successful in implementing its investment strategy.

The discussion of the Funds’ investments and investment strategy (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) represents the Funds’ investments and the views of the portfolio managers and Harris Associates L.P., the Funds’ investment adviser, at the time of this letter, and are subject to change without notice.

All information provided is as of 09/30/2021 unless otherwise specified.

Rana Wright
President, Oakmark Funds