I received a thick booklet from Mairs & Power asking me, a shareholder in two of their funds, for a proxy vote approving a proposed reorganization from its present Trust status to something else. In 83 pages of print the details of the Something Else are not made explicit. I phoned the supplied number for more info and got someone who seemed to sincerely believe she was giving me useful information by robotically reading sentences from the booklet I had already read. I asked her if she, like me, also did not understand what was being voted upon. Her answer was to recite the names of the three Mairs & Power funds. I thanked her for her time and called the shareholder phone number instead. I got a polite but ignorant person who kept putting me on hold while she asked her supervisor for information, After 15 minutes of brief conversation, separated by 3 minute holds accompanied by music that was not annoying, I was advised to phone the Proxy info number.
Does anyone here understand what is actually being proposed by M&P? I understand that the proposition is to switch to a "multiple series trust platform" and I understand in principal what that is, but no details are given. Part of the murkiness of the proposal is due to what seems to me to be poor English usage, particular the use of the word "series" as a plural without an article ("series" instead of " a series" for instance) and "reorganizations" in place of "reorganization" in a situation where one event of reorganization is proposed. An example: " If the reorganizations (as described below) are completed, the Target Funds would become series of a multiple series trust platform comprised of the Target Funds and other third-party funds". No one I asked on the phone could tell me what that meant or what the third-party funds would be. To add to the confusion, on another page each of the three M&P funds is described as being a "series". What?
Does anyone in this forum know the details of what is being proposed? And if so would you be so kind as to explain them to this simple-minded investor? Thank you in advance.
Comments
You said the music was pleasant. Let’s look on the bright side. BTW, your parents had good taste in names.
It seems like they want to leave Minnesota--not physically but legally--and reincorporate or reorganize in Delaware. American corporations love Delaware because of its lax pro-business regulations. A tiny state, that has probably the most incorporations in the nation.
Far more important is the second proposal, that will change the funds' investment restrictions, making them much more lax, giving the funds' more flexibility, which is obviously a double-edged sword. These changes start on page 14, and include shifts in stock concentration, industry concentration limits, the ability to hedge with options or short sales and invest in real estate. It's hard to say how many of these options the funds will avail themselves of, but the new rules in this filing would allow them to do things very differently from what they currently are doing.
@LewisBraham: page 14 of the booklet I was sent lists the managers of the Growth Fund. The linked document is similar to and sometimes apparently identical to what I was sent but with the sections in a different order.
It seems to me that the previous limits on their funds made the funds stronger. If management wants to make these funds into something else then maybe this is the beginning of the end of Mairs & Power. I hope not.
https://docoh.com/company/1141819/trust-for-professional-managers
The relaxing of restrictions is in part simply cleanup. As noted in the proxy, it has been over sixty years since the funds have taken a good look at their fundamental restrictions. Since that time, a lot has changed in fund regulations and the industry has grown more sophisticated. It's not unreasonable to look at bringing the restrictions up to date. Many funds have been gone through this process.
It's hard to say how many of these options the funds will avail themselves of, but the new rules in this filing would allow them to do things very differently from what they currently are doing.
That's the key question. To put it another way, how much do you trust the management? I would read the prospectuses of Michael Price's Mutual Series funds and marvel at how wildly he was permitted to run the funds. And yet they were among the least risky around. Regardless of what the restrictions are, management matters.
FWIW, also in the proxy is this statement: "The Adviser has advised each Board that if the recommended changes are approved, the Adviser does not presently intend to change the manner in which it manages the Funds, or to materially increase the Funds’ risk profiles."
https://www.mairsandpower.com/about-us/company-news/item/132-proxy-vote-proposed-reorganization-mairs-power-mutual-funds
FAQs:
https://www.mairsandpower.com/images/resources/Mairs__Power_Funds_Reorganization_FAQs.pdf
1) "Trust For Professional Managers" of which Mairs & Power proposes to become a series, or to "become series" as the proxy booklet puts it, seems to be *already" incorporated in Delaware.
and
2) The question about how much I trust management is well put and on target. At this point I don't know the answer other than to say I have been trusting them a long time and I have not found my trust to be misplaced. But when a fund company that has been sending me reports and statements for 25 years which have been written in clear English sentences with nothing obscure now sends me 83 pages containing difficult-to-penetrate language I naturally wonder why the language is obscure. George Mairs and his successors did not write in scintillating prose. Bob Torray back in the day was certainly more entertaining. But I did know what every sentence in each M&P missive meant without having to read it over and over.
https://www.sec.gov/Archives/edgar/data/0001521353/000089418922001123/mairspowertpmproxy.htm
The 2011 restructuring into a Delaware trust did take place; the current SAI reads: This vote is much more innocuous. It's merely moving the funds from the Mairs and Powers Trust (already incorporated in Delaware) into a larger Delaware Trust under which funds from various families already operate.
And who will pay the other 2/3 ?! Shareholders one way or the other to my way of thinking !
FWIW , Derf
The analogy is not perfect because sometimes waived fees can be clawed back, but not always.
Every fund's and ETF's assets are held in a trust, and that trust is managed by the advisors, just like a personal trust might be held by a bank and managed by you. M&P just wants to replace the current trust company with a bigger trust company, one that also holds assets for other funds. The benefit is some economy of scale in the new trust's operations. They estimate a net reduction in fund fees by 0.01%.
The cost of the transition, $729,000, is a drop in the bucket compared with the billions in assets held by the funds.
How about the TRP funds that reorganized out of Massachusetts business trusts into Maryland corporations on Oct 30, 2017? Here's the proxy their shareholders were given.
https://www.sec.gov/Archives/edgar/data/773485/000079808617000024/mbtfiling.htm
While funds operate similarly whether organized as trusts or as corporations, it may be better to think in terms of the corporate model because people may be more familiar with that.
A corporation has shareholders who invest money, and a board of directors (analogous to a board of trustees) who have ultimate responsibility for the company and who answer to the shareholders. In order to run a conventional company, a board hires and oversees corporate officers. In the case of a fund (or series of funds), a board similarly hires investment advisory firms while retaining responsibility for the fund(s).
See this thread for examples of what can happen when the board fails to carry out its oversight responsibilities:
https://mutualfundobserver.com/discuss/discussion/58326/infinity-q-capital-management-plans-to-return-500-million-to-mutual-fund-investors
The current M&P board has five trustees, four of whom are independent including the Chair. The independent trustees are paid between $85K and $100K depending upon responsibilities (e.g. the independent Chair receives $100K). That is to oversee 3 funds run by one advisory firm.
The new trust (Trust for Professional Managers) currently has three trustees, two of whom are independent; the Chair is not an independent trustee. The two independent trustees are projected to be paid between $94.5K and $97K of which $1800 (for each) will come from the three M&P funds combined. That is to oversee approximately 27 funds from several families run by several advisory firms.
As noted in the M&P proxy, the new trust will be adding four unnamed trustees. Well, unnamed in the M&P proxy. The new trust has its own proxy where the nominees are named. And shareholders of the three M&P funds being absorbed will not have a say. Only shareholders of funds in the trust as of February 7th get a vote.
The trustees of the current M&P trust all have at least $100K invested in each of the three M&P funds (except for one trustee who has not invested in one of the three funds). The trustees of the new trust have no investments in any of the 24 funds they oversee.
Will any of this make a difference? Probably not. Being barred from the vote on trustees who will more than double the size of the board doesn't matter, since retail investors' votes can't influence these elections anyway. (And the nominees are running unopposed.) The timing just doesn't feel right, though.
New M&P prospectus draft (April [] 2022), including SAI
Trust for Professional Managers (new trust) proxy to elect four additional trustees
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Purely by luck, I ran across the fact that a couple of funds (SNOAX, SNWAX) recently left the new trust (Trust For Professional Managers). The management firm (Snow Capital Management) was acquired by Easterly, which you may recognize as James Alpha. Apparently Easterly wanted to move those funds into its own James Alpha Trust. In a sense, the opposite of what M&P is doing. Previously, James Alpha had moved its own funds out of the Saratoga Advantage Trust into its James Alpha Trust.
Worth noting (see 2nd link below) is that one sees the same rationale (cost savings) given, whether it is moving funds into a conglomerate-like trust (as with M&P) or spinning out a family into its own trust (as with James Alpha). The third link is the actual proxy for the James Alpha spinoff where one can read the rationales in detail. There the projected savings (16-21 basis points) was significant, as compared with one basis point for the M&P move.
https://www.sec.gov/Archives/edgar/data/1141819/000089418921005185/snowsupplement497e8-2021.htm
https://www.sec.gov/Archives/edgar/data/924628/000158064221000599/jamesalpha425.htm
https://www.sec.gov/Archives/edgar/data/1829774/000158064221000287/jaftn14a.htm
For small funds, there certainly is an economy of scale in banding together. Fourteen of the twenty-four funds in the new trust have under $100M in assets. In fact, one of them is the M&P ETF MINN. Only one of the 24 funds is significantly above $1B in size - the $6.7B fund PTIAX. Notably absent from the trust is the $10B JENSX, even though the two other Jensen funds, JGQIX ($36.5M) and JNVIX ($204.9M) are series in the trust.
Where would the $5.3B MPGFX be best served? That fund alone would increase the amount of assets in the trust by about 50%. And yet its shareholders get no say in the trustees. Because of timing.
Hmmmmm. Coincidentally, I own PTIAX. I've not been entirely unhappy with performance. But I take exception to the way they automatically take my very real, green money every month, and pay dividends every month--- but then they play games with words: "total shares" or "vested" shares. After a few extended conversations, including with a "Supervisor," I finally asked point blank: "Is the REAL issue here the fact that you don't have enough people hired to do the job of recording these transactions in a TIMELY manner?"
There was a LONG silence from the other end, but I knew he was still there. Then I finally broke the tension and offered to say: "Thank you. THAT tells me a great deal."
What gripes me is that the automatic transfer was set up long ago, and continues, every month. PTIAX is taking it from my bank account. That money should not have to wait around to be recognized by machines as a share purchase. In fact, it's an AUTOMATIC, AUTOMATED process. And with the monthly dividend? That's THEM giving ME money. So, what's the hold-up? It's bullshit, that's what it is. I wonder whether my experience enters into this picture? Could Mairs and Power shareholders begin to experience the same bullshit, after the upcoming switch of Trustee?
@msf.
https://www.ici.org/system/files/attachments/pdf/98fb_ch3.pdf
PTIAX and the three Mairs and Powers funds being moved all use the same transfer agent, US Bancorp Fund Services, LLC, according to their respective prospectuses.
PTIAX prospectus
Mairs and Power prospectus
Things get a little more complicated if one invests through a brokerage, though ultimately it seems it is still the transfer agent responsible for some record keeping.
(With omnibus accounts, where the brokerage combines all its customer accounts into one jumbo account to present to the fund, the brokerage has to do some of the record keeping, just to sort things out.)
I voted for it. Also, what type of Datsun do/did you have?