Correspondence 0000894189-24-004998 from Managed Portfolio Series (CIK 0001511699)
Managed Portfolio Series (CIK 0001511699)
Date: Aug. 23, 2024 · CIK: 0001511699 · Accession: 0000894189-24-004998
AI Filing Summary & Sentiment
File numbers found in text: 333-172080, 811-22525
Letter
VIA EDGAR TRANSMISSION Division of Investment Management Leuthold Global Fund Leuthold Grizzly Short Fund Leuthold Core ETF Leuthold Select Industries ETF (together, the “Funds”)
Dear Ms. Marquigny:
The purpose of this letter is to respond to the comments you provided to John Hadermayer on November 9 and 14, 2023, regarding the Trust’s Post-Effective Amendment (“PEA”) No. 576 to its Registration Statement on Form N-1A (the “Registration Statement”), filed for the purpose of adding the Funds as new series to the Trust. PEA No. 576 was filed with the U.S. Securities and Exchange Commission pursuant to Rule 485(a) under the Securities Act of 1933, as amended, on Form N-1A on September 29, 2023. The Trust delayed effectiveness of the Registration Statement and filed delaying amendments on December 11, 2023 (PEA No. 580), January 10, 2024 (PEA No. 583), February 8, 2024 (PEA No. 586), March 8, 2024 (PEA No. 588), April 9, 2024 (PEA No. 592), May 9, 2024 (PEA No. 598), June 7, 2024 (PEA No. 600), July 8, 2024 (PEA No. 602) and August 8, 2024 (PEA No. 606).
For your convenience in reviewing the Trust’s responses, your comments and suggestions are included in bold typeface immediately followed by the Trust’s response. Capitalized terms used in this response letter, but not defined herein, shall have the same meaning as in the Registration Statement.
The Trust’s responses to your comments are as follows:
1.Staff Comment: The Staff notes with respect to Item 1(a)(ii) of Form N-1A, please provide the associated ticker symbol for the Leuthold Select Industries ETF on the cover page of both the Prospectus and Statement of Additional Information (“SAI”).
Response: The Trust responds by providing the requested ticker symbol (LST) on the cover pages of the Prospectus and SAI.
2.Staff Comment: Confirm supplementally that shares of each Fund will not be sold until the merger has been approved, the related N-14 registration statement is effective, and closing has taken place.
Response: The Trust responds supplementally by confirming that no public sale of shares will occur until the merger has been approved, the related N-14 registration statement is effective, and closing has taken place.
Prospectus
3.Staff Comment: The Staff notes that the total return investment objective of certain Funds is qualified with language such as “in amounts attainable by assuming only prudent investment risk over the long term.” Please remove this qualification where applicable.
Response: The Trust responds by removing this language where applicable.
4.Staff Comment: The Staff notes that the fee tables of certain Funds include references to fees that are not charged or applicable to the Fund. Please consider removing such fee references where applicable.
Response: The Trust responds by removing these references where applicable.
5.Staff Comment: The Staff notes that the fee tables of certain Funds do not include reference to an expenses limitation arrangement that would limit expenses to a certain level. Please confirm supplementally if such an arrangement will only be in place for certain Funds.
Response: The Trust responds supplementally by confirming that each Fund will have an expense cap in place pursuant to an expense limitation arrangement. Such arrangement is not discussed in the fee tables for those Funds where the anticipated expenses for the first year of operation are below the contractual expense cap. The Trust further confirms supplementally that disclosure will be added to the statutory prospectus to disclose this arrangement for all Funds. Currently, such disclosure is only in the SAI.
6.Staff Comment: With respect to the Core Investment Fund’s Example section, please correct the “10 Years” number where a decimal is included rather than a comma.
Response: The Trust responds by making the requested change.
7.Staff Comment: With respect to the Principal Investment Strategies section of the Core Investment Fund, beginning on page 4 of the Prospectus:
a.The disclosure lists a broad range of investment types (equity, debt, commodities, REITs, etc.). If an investment type is not principal, remove the reference from this section. If it is principal, ensure there is a corresponding risk disclosure. Supplementally, please confirm each investment type identified is consistent with actual holdings in the Predecessor Fund or explain why not.
Response: The Trust responds by confirming that the investment types listed in the Principal Investment Strategies section on page 4 are principal, and that the Prospectus will contain a
corresponding risk disclosure for each such principal strategy. The Trust confirms supplementally that although each investment type listed is not currently held in the Fund’s portfolio, each type has been held in the past and there is a strongly likelihood it will be held in the future, depending on the results of the quantitative models used by the Adviser in the portfolio management of the Fund.
b.Where references are made to bonds rated below investment grade, add disclosure identifying them as “junk” bonds and “speculative” investments.
Response: The Trust responds by making the requested revision.
c.In the paragraph where it states, “[t]he Adviser considers a number of factors when making these allocations,” please revise to explain how the stated factors that follow apply in various scenarios (e.g., how do they apply in an up market versus a down market).
Response: The Trust responds by revising the identified paragraph as follows:
“The Adviser considers a number of factors when making these allocations, including economic conditions and monetary factors, inflation and interest rate levels and trends, investor confidence, and technical stock market measures. The Adviser analyzes the factors listed as a whole and does not rely on any one factor to make allocation decisions. The Major Trend Index is designed to recognize the stock market’s overall underlying health in terms of its longer-term path. This analysis of the investment environment guides the Adviser's decision about how much risk is prudent to take within the Fund's equity allocation.”
d.With respect the last two paragraphs on page 4, please provide a more tailored discussion of the “Select Industries Strategy,” and discuss how the Adviser identifies and maintains a cohesive portfolio of holdings from the 120 industry sub-groups it monitors. On what basis does the Adviser identify the “most attractive” groups and how does that translate into individual security selection? Please revise accordingly. If the Predecessor Fund’s investments are focused in any areas (e.g., industry, geographic, etc.), please add appropriate strategy and risk disclosure.
Response: The Trust responds by revising the following disclosure:
“In investing in equity securities and debt securities, the Fund uses a disciplined, unemotional, quantitative investment approach that is based on the belief investors can achieve superior investment performance through group selection (Select Industries Strategy).
Pursuant to the Select Industries Strategy, the Adviser believes that as shifts among industry groups in the equity market have become more dramatic, group selection has become as important as individual stock selection in determining investment performance. The Adviser considers a group to be a collection of stocks whose investment performance tends to be similarly influenced by a variety of factors. The Adviser currently monitors about 120 groups. The major types of groups the Adviser monitors as part of the Select Industries Strategy are specific groups within each industry sector comprised of narrower themes. Examples include “Airlines,” “Health Care Facilities” or “Semiconductors."
In implementing the Select Industries Strategy, the Adviser uses a proprietary model that evaluates sectors, groups and individual securities using a number of factors. Factors evaluated under the model include:
•Technical: measures of equity performance that differentiate groups that have outperformed versus underperformed
•Relative Value: finding undervalued industries and groups relative to their fundamentals, such as earnings, sales, cash flow book value
•Growth: industry groups with the ability to persistently grow earnings and revenues
•Profitability: industries that generate a high degree of consistent profitability
•Very Long Momentum: identify through securities’ price action industries that are overbought or oversold
•Capital Discipline: companies that have favorable debt to equity ratios
The Adviser constructs the Select Industries Strategy portfolio by first evaluating industry sectors and industry groups to help determine attractive segments of the market, evaluating factors related to each sector and group. Each factor is assigned a potential weight determined by the Adviser based on its experience with equity group analysis. Industries that exhibit particularly strong leadership and/or appear poised to gain momentum in the existing market environment are chosen for possible inclusion in the portfolio.
Following the selection of attractive groups, individual securities are chosen by the Adviser using the Adviser's selection model. Securities scoring in the upper tiers by the selection model are typically considered for investment. Equity portfolio weightings are determined in part by market capitalization, stock score, and trading volume.
e.With respect to the first full paragraph on page 5, the disclosure indicates that the Fund may have high portfolio turnover. Please supplementally explain how the Fund’s anticipated high turnover rate is (i) consistent with the capital appreciation element of total return in the Fund’s investment objective, and (ii) consistent with the turnover generated last year by the Predecessor Fund which was below 100%. As applicable, reconcile this disclosure and clarify how the turnover strategy will differ from its Predecessor Fund.
Response: The Trust responds by supplementally stating that the Fund’s turnover is generally reflective of the Adviser's assessment of what is happening in the markets and how various industry groups are moving. The Fund's turnover refers primarily to the equity portion of the portfolio, where the Adviser employs a sector rotation strategy that may result in high turnover as the Adviser balances the Fund’s dual objectives of capital appreciation and income. Select turnover has been above 100% the last two years but is not always above 100%. The turnover is not expected to materially differ from the Predecessor Fund as it will be managed under the same mandates established by the Adviser.
f.With respect to the last full paragraph on page 5 of the prospectus, the disclosure refers to weightings being driven by models. In general terms, describe the relevant data/metrics considered, how they relate to model outcomes, and how the Adviser uses this information to construct a portfolio and make transaction decisions. Consider providing examples to illustrate these relationships.
Response: The Trust responds by referencing the additional prospectus disclosure noted in response to Comment 7(d) above.
8.Staff Comment: With respect to the Principal Investment Risks section of the Core Investment Fund, beginning on page 5 of the Prospectus:
a.Please ensure that this section lists all principal risks as referenced in the Fund’s Principal Investment Strategies section. Revise each section as necessary to ensure they are reconciled.
Response: The Trust responds by making the requested changes to ensure that all principal strategies have corresponding principal risks, including by adding the following risks:
“Equity Risk: The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.”
“Growth Investing Risk: Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.”
“Real Estate and REITs Risk: REITs are companies that invest in real estate or interests therein. Investments in real estate securities are subject to risks inherent in the real estate market, including risks related to possible declines in the value of and demand for real estate, which may cause the value of the Fund to decline. Share prices of REITs may decline because of adverse developments affecting the residential and commercial real estate industry, residential and commercial property values, including supply and demand for residential and commercial properties, the credit performance of residential and commercial mortgages, the economic health of the country or of different regions, and interest rates. In particular, the commercial real estate segment of the real estate market has been under pressure in recent years due various factors, including the COVID pandemic, rising interest rates and the trend of more employees working from home. There is no way to predict how long this trend will continue, and investments tied to commercial real estate, as well as residential real estate, could see significant declines moving forward.”
“Medium and Small Capitalization Risk: Investing in medium and small capitalization companies may involve special risks because those companies may have narrower product lines, more limited financial resources, fewer experienced managers, dependence on a few key employees, and a more limited trading market for their stocks, as compared with larger companies. Securities of medium and smaller capitalization issuers may be subject to greater price volatility and may decline more significantly in market downturns than securities of larger companies.”
“Large Capitalization Risk: Larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Larger companies also may not be able to attain the high growth rates of successful smaller companies.”
"Managed Futures Strategy/Commodities Risk. Investments in managed futures programs may be subject to greater volatility than investments in traditional securities. Prices of commodities and related contracts may fluctuate significantly over short periods for a variety of reasons, including weather and natural disasters; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; acts of terrorism, tariffs and U.S. and international economic, political, military and regulatory developments. The demand and supply of these commodities may also fluctuate widely based on such factors as interest rates, investors’ expectation with respect to the rate of inflation, currency exchange rates, the production and cost levels of the producers and/or forward selling by such producers, global or regional political, economic or financial events, purchases and sales by central banks, and trading activities by hedge funds and other commo
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CORRESP 1 filename1.htm Document Managed Portfolio Series c/o U.S. Bank Global Fund Services 615 East Michigan Street Milwaukee, Wisconsin 53202 August 23, 2024 VIA EDGAR TRANSMISSION Ms. Rebecca Marquigny U.S. Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Re: Managed Portfolio Series (the “Trust”) File Nos.: 333-172080 and 811-22525 Leuthold Core Investment Fund Leuthold Global Fund Leuthold Grizzly Short Fund Leuthold Core ETF Leuthold Select Industries ETF (together, the “Funds”) Dear Ms. Marquigny: The purpose of this letter is to respond to the comments you provided to John Hadermayer on November 9 and 14, 2023, regarding the Trust’s Post-Effective Amendment (“PEA”) No. 576 to its Registration Statement on Form N-1A (the “Registration Statement”), filed for the purpose of adding the Funds as new series to the Trust. PEA No. 576 was filed with the U.S. Securities and Exchange Commission pursuant to Rule 485(a) under the Securities Act of 1933, as amended, on Form N-1A on September 29, 2023. The Trust delayed effectiveness of the Registration Statement and filed delaying amendments on December 11, 2023 (PEA No. 580), January 10, 2024 (PEA No. 583), February 8, 2024 (PEA No. 586), March 8, 2024 (PEA No. 588), April 9, 2024 (PEA No. 592), May 9, 2024 (PEA No. 598), June 7, 2024 (PEA No. 600), July 8, 2024 (PEA No. 602) and August 8, 2024 (PEA No. 606). For your convenience in reviewing the Trust’s responses, your comments and suggestions are included in bold typeface immediately followed by the Trust’s response. Capitalized terms used in this response letter, but not defined herein, shall have the same meaning as in the Registration Statement. The Trust’s responses to your comments are as follows: 1.Staff Comment: The Staff notes with respect to Item 1(a)(ii) of Form N-1A, please provide the associated ticker symbol for the Leuthold Select Industries ETF on the cover page of both the Prospectus and Statement of Additional Information (“SAI”). Response: The Trust responds by providing the requested ticker symbol (LST) on the cover pages of the Prospectus and SAI. 1 2.Staff Comment: Confirm supplementally that shares of each Fund will not be sold until the merger has been approved, the related N-14 registration statement is effective, and closing has taken place. Response: The Trust responds supplementally by confirming that no public sale of shares will occur until the merger has been approved, the related N-14 registration statement is effective, and closing has taken place. Prospectus 3.Staff Comment: The Staff notes that the total return investment objective of certain Funds is qualified with language such as “in amounts attainable by assuming only prudent investment risk over the long term.” Please remove this qualification where applicable. Response: The Trust responds by removing this language where applicable. 4.Staff Comment: The Staff notes that the fee tables of certain Funds include references to fees that are not charged or applicable to the Fund. Please consider removing such fee references where applicable. Response: The Trust responds by removing these references where applicable. 5.Staff Comment: The Staff notes that the fee tables of certain Funds do not include reference to an expenses limitation arrangement that would limit expenses to a certain level. Please confirm supplementally if such an arrangement will only be in place for certain Funds. Response: The Trust responds supplementally by confirming that each Fund will have an expense cap in place pursuant to an expense limitation arrangement. Such arrangement is not discussed in the fee tables for those Funds where the anticipated expenses for the first year of operation are below the contractual expense cap. The Trust further confirms supplementally that disclosure will be added to the statutory prospectus to disclose this arrangement for all Funds. Currently, such disclosure is only in the SAI. 6.Staff Comment: With respect to the Core Investment Fund’s Example section, please correct the “10 Years” number where a decimal is included rather than a comma. Response: The Trust responds by making the requested change. 7.Staff Comment: With respect to the Principal Investment Strategies section of the Core Investment Fund, beginning on page 4 of the Prospectus: a.The disclosure lists a broad range of investment types (equity, debt, commodities, REITs, etc.). If an investment type is not principal, remove the reference from this section. If it is principal, ensure there is a corresponding risk disclosure. Supplementally, please confirm each investment type identified is consistent with actual holdings in the Predecessor Fund or explain why not. Response: The Trust responds by confirming that the investment types listed in the Principal Investment Strategies section on page 4 are principal, and that the Prospectus will contain a 2 corresponding risk disclosure for each such principal strategy. The Trust confirms supplementally that although each investment type listed is not currently held in the Fund’s portfolio, each type has been held in the past and there is a strongly likelihood it will be held in the future, depending on the results of the quantitative models used by the Adviser in the portfolio management of the Fund. b.Where references are made to bonds rated below investment grade, add disclosure identifying them as “junk” bonds and “speculative” investments. Response: The Trust responds by making the requested revision. c.In the paragraph where it states, “[t]he Adviser considers a number of factors when making these allocations,” please revise to explain how the stated factors that follow apply in various scenarios (e.g., how do they apply in an up market versus a down market). Response: The Trust responds by revising the identified paragraph as follows: “The Adviser considers a number of factors when making these allocations, including economic conditions and monetary factors, inflation and interest rate levels and trends, investor confidence, and technical stock market measures. The Adviser analyzes the factors listed as a whole and does not rely on any one factor to make allocation decisions. The Major Trend Index is designed to recognize the stock market’s overall underlying health in terms of its longer-term path. This analysis of the investment environment guides the Adviser's decision about how much risk is prudent to take within the Fund's equity allocation.” d.With respect the last two paragraphs on page 4, please provide a more tailored discussion of the “Select Industries Strategy,” and discuss how the Adviser identifies and maintains a cohesive portfolio of holdings from the 120 industry sub-groups it monitors. On what basis does the Adviser identify the “most attractive” groups and how does that translate into individual security selection? Please revise accordingly. If the Predecessor Fund’s investments are focused in any areas (e.g., industry, geographic, etc.), please add appropriate strategy and risk disclosure. Response: The Trust responds by revising the following disclosure: “In investing in equity securities and debt securities, the Fund uses a disciplined, unemotional, quantitative investment approach that is based on the belief investors can achieve superior investment performance through group selection (Select Industries Strategy). Pursuant to the Select Industries Strategy, the Adviser believes that as shifts among industry groups in the equity market have become more dramatic, group selection has become as important as individual stock selection in determining investment performance. The Adviser considers a group to be a collection of stocks whose investment performance tends to be similarly influenced by a variety of factors. The Adviser currently monitors about 120 groups. The major types of groups the Adviser monitors as part of the Select Industries Strategy are specific groups within each industry sector comprised of narrower themes. Examples include “Airlines,” “Health Care Facilities” or “Semiconductors." 3 In implementing the Select Industries Strategy, the Adviser uses a proprietary model that evaluates sectors, groups and individual securities using a number of factors. Factors evaluated under the model include: •Technical: measures of equity performance that differentiate groups that have outperformed versus underperformed •Relative Value: finding undervalued industries and groups relative to their fundamentals, such as earnings, sales, cash flow book value •Growth: industry groups with the ability to persistently grow earnings and revenues •Profitability: industries that generate a high degree of consistent profitability •Very Long Momentum: identify through securities’ price action industries that are overbought or oversold •Capital Discipline: companies that have favorable debt to equity ratios The Adviser constructs the Select Industries Strategy portfolio by first evaluating industry sectors and industry groups to help determine attractive segments of the market, evaluating factors related to each sector and group. Each factor is assigned a potential weight determined by the Adviser based on its experience with equity group analysis. Industries that exhibit particularly strong leadership and/or appear poised to gain momentum in the existing market environment are chosen for possible inclusion in the portfolio. Following the selection of attractive groups, individual securities are chosen by the Adviser using the Adviser's selection model. Securities scoring in the upper tiers by the selection model are typically considered for investment. Equity portfolio weightings are determined in part by market capitalization, stock score, and trading volume. e.With respect to the first full paragraph on page 5, the disclosure indicates that the Fund may have high portfolio turnover. Please supplementally explain how the Fund’s anticipated high turnover rate is (i) consistent with the capital appreciation element of total return in the Fund’s investment objective, and (ii) consistent with the turnover generated last year by the Predecessor Fund which was below 100%. As applicable, reconcile this disclosure and clarify how the turnover strategy will differ from its Predecessor Fund. Response: The Trust responds by supplementally stating that the Fund’s turnover is generally reflective of the Adviser's assessment of what is happening in the markets and how various industry groups are moving. The Fund's turnover refers primarily to the equity portion of the portfolio, where the Adviser employs a sector rotation strategy that may result in high turnover as the Adviser balances the Fund’s dual objectives of capital appreciation and income. Select turnover has been above 100% the last two years but is not always above 100%. The turnover is not expected to materially differ from the Predecessor Fund as it will be managed under the same mandates established by the Adviser. f.With respect to the last full paragraph on page 5 of the prospectus, the disclosure refers to weightings being driven by models. In general terms, describe the relevant data/metrics considered, how they relate to model outcomes, and how the Adviser uses this information to construct a portfolio and make transaction decisions. Consider providing examples to illustrate these relationships. Response: The Trust responds by referencing the additional prospectus disclosure noted in response to Comment 7(d) above. 4 8.Staff Comment: With respect to the Principal Investment Risks section of the Core Investment Fund, beginning on page 5 of the Prospectus: a.Please ensure that this section lists all principal risks as referenced in the Fund’s Principal Investment Strategies section. Revise each section as necessary to ensure they are reconciled. Response: The Trust responds by making the requested changes to ensure that all principal strategies have corresponding principal risks, including by adding the following risks: “Equity Risk: The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual companies, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.” “Growth Investing Risk: Growth stocks can be volatile. Growth companies usually invest a high portion of earnings in their businesses and may lack the dividends of value stocks that can cushion stock prices in a falling market. The prices of growth stocks are based largely on projections of the issuer’s future earnings and revenues. If a company’s earnings or revenues fall short of expectations, its stock price may fall dramatically. Growth stocks may also be more expensive relative to their earnings or assets compared to value or other stocks.” “Real Estate and REITs Risk: REITs are companies that invest in real estate or interests therein. Investments in real estate securities are subject to risks inherent in the real estate market, including risks related to possible declines in the value of and demand for real estate, which may cause the value of the Fund to decline. Share prices of REITs may decline because of adverse developments affecting the residential and commercial real estate industry, residential and commercial property values, including supply and demand for residential and commercial properties, the credit performance of residential and commercial mortgages, the economic health of the country or of different regions, and interest rates. In particular, the commercial real estate segment of the real estate market has been under pressure in recent years due various factors, including the COVID pandemic, rising interest rates and the trend of more employees working from home. There is no way to predict how long this trend will continue, and investments tied to commercial real estate, as well as residential real estate, could see significant declines moving forward.” “Medium and Small Capitalization Risk: Investing in medium and small capitalization companies may involve special risks because those companies may have narrower product lines, more limited financial resources, fewer experienced managers, dependence on a few key employees, and a more limited trading market for their stocks, as compared with larger companies. Securities of medium and smaller capitalization issuers may be subject to greater price volatility and may decline more significantly in market downturns than securities of larger companies.” “Large Capitalization Risk: Larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Larger companies also may not be able to attain the high growth rates of successful smaller companies.” 5 "Managed Futures Strategy/Commodities Risk. Investments in managed futures programs may be subject to greater volatility than investments in traditional securities. Prices of commodities and related contracts may fluctuate significantly over short periods for a variety of reasons, including weather and natural disasters; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; acts of terrorism, tariffs and U.S. and international economic, political, military and regulatory developments. The demand and supply of these commodities may also fluctuate widely based on such factors as interest rates, investors’ expectation with respect to the rate of inflation, currency exchange rates, the production and cost levels of the producers and/or forward selling by such producers, global or regional political, economic or financial events, purchases and sales by central banks, and trading activities by hedge funds and other commo