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Kensington ETF 485A SEC Response Letter - Follow-Up Comments1

Managed Portfolio Series

c/o U.S. Bancorp Global Fund Services

615 East Michigan Street

Milwaukee, WI 53202

August 28, 2024

VIA EDGAR TRANSMISSION

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

 Kensington Hedged Premium Income ETF (S000087366)

Dear Ms. Marquigny,

The purpose of this letter is to respond to the comments you provided on August 23, 2024, with respect to

the Registrant’s responses previously submitted in its letter filed with the SEC on August 21, 2024 (the

“August 21, 2024 Letter”) regarding the Trust’s Post-Effective Amendment (“PEA”) No. 601 to its

Registration Statement on Form N-1A (the “Registration Statement”), filed for the purpose of adding the

Kensington Hedged Premium Income ETF (the “Fund”) as a series of the Trust. PEA No. 601 was filed

with the U.S. Securities and Exchange Commission (“SEC”) pursuant to Rule 485(a) under the Securities

Act of 1933, as amended (“1933 Act”), on Form N‑1A on June 17, 2024. 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 and the August 21, 2024

Letter.

The Trust’s responses to your comments are as follows:

1.Staff Comment: The Staff notes that the completed Fees and Expenses of the Fund table provided

in response to Staff Comment 3 in the August 21, 2024 Letter includes Acquired Fund Fees and

Expenses (“AFFE”). However, the Staff further notes the footnotes to the table do not indicate

that AFFE is excluded from the expense that the Adviser has agreed to pay. If accurate, please

revise Footnote 1 to the Fees and Expenses of the Fund table to clarify that AFFE is not an

expense paid by the Adviser.

Response: The Trust responds by revising Footnote 1 to the Fees and Expenses of the Fund table

as follows (additions shown in underline and deletions shown in strikethrough):

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“(1)Kensington Asset Management, LLC (the “Adviser”) has agreed to pay all expenses of

the Fund, except for: (i) brokerage expenses and other fees, charges, taxes, levies or expenses

incurred in connection with the execution of portfolio transactions or in connection with creation

and redemption transactions; (ii) fees or expenses in connection with any arbitration, litigation or

pending or threatened arbitration or litigation, including any settlements in connection therewith;

(iii) extraordinary expenses; (iv) distribution fees and expenses paid by the Fund under any

distribution plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as

amended (“1940 Act”); (v) interest and taxes of any kind or nature; (vi) any fees and expenses

related to the provision of securities lending services; (vii) the advisory fee payable to the

Adviser; (viii) Acquired Fund Fees and Expenses; and (ix) all costs incurred in connection with

shareholder meetings and all proxy solicitations (except for such shareholder meetings and proxy

solicitations related to: (a) changes to the Adviser’s investment advisory agreement, (b) changes

in control at the Adviser or a sub-adviser, (c) the election of any Board member who is an

“interested person” of the Adviser (as that term is defined under Section 2(a)(19) of the 1940

Act), (d) matters initiated by the Adviser, or (e) any other matters that directly benefit the

Adviser).

2.Staff Comment: The Trust’s response to Staff Comment 5 in the August 21, 2024 Letter indicates

the that the MerQube Hedged Premium Income Index (MQKHPI) will be added as a secondary

index, along with a description of MQKHPI, but did not include a description of MQKHPI.

Response: The Trust supplementally responds that the MerQube Hedged Premium Income Index

is designed to be 100% invested in the Vanguard S&P 500 ETF (VOO) while purchasing 3-

Month put options and selling 1-Month call options on the SPDR S&P 500 ETF (SPY). The

Index aims to generate income from selling call spreads while providing downside protection

through the purchase of put spreads, maintaining exposure to the U.S. large-cap equity market.

This description will be added to the prospectus, as described in the response to Staff Comment 4

below.

3.Staff Comment: The Trust’s response to Staff Comment 12 in the August 21, 2024 Letter

indicates that the Fund expects securities lending opportunities would be very limited given the

Fund’s expected portfolio holdings. If securities lending will be that limited, please consider

whether it is appropriate to list such an investment strategy as a principal strategy of the Fund or

if the disclosure should be contained only in the SAI.

Response: The Trust responds by removing the disclosure related to securities lending from the

Prospectus and including the disclosure in the SAI only.

4.Staff Comment: The Trust’s response to Staff Comment 13 in the August 21, 2024 Letter

includes a graphic, but it is not clear how the graphic works with the Fund’s strategy.

Additionally, it is not clear how the strategy will work with or follow the MerQube Hedged

Premium Income Index. Please consider revising the disclosure to more clearly describe how the

Fund will implement the options strategy to show the effect of put spreads and call spreads on the

performance of the Fund relative to the S&P 500 Index and/or the S&P 500 ETF. In doing so,

please consider including revised graphics illustrating to a reader how the Fund’s options will

behave under typical market conditions. To the extent the Fund will deviate from the

methodology of the MerQube Hedged Premium Income Index, please add disclosure address the

extent to which and the conditions under which the Fund do so.

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Response: The Trust responds by amending the Principal Investment Strategies section as

follows, including the addition of the graphs included below (additions shown in underline and

deletions shown in strikethrough to show changes from the August 21, 2024 Letter):

“The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its

investment objective by gaining exposure to the S&P 500® Index (the “S&P 500”). The

foundation of the Fund’s strategy involves buying shares of one or more cost-effective ETFs that

track the S&P 500, providing direct exposure to the broad market's performance. The Fund

simultaneously implements a monthly call option strategy to generate income and a quarterly put

option strategy to protect against large declines in the S&P 500. In strategically buying and

selling put and call options on the S&P 500, the Fund seeks to provide a partial buffer against

market downturns, as well as provide additional income in flat to down markets, but resulting in

lower upside potential during strong market rallies.

In implementing its strategy, the Fund employs a methodology similar to the MerQube Hedged

Premium Income Index (the “MQKHPI”). The MQKHPI is designed to be 100% invested in the

Vanguard S&P 500 ETF (VOO) while selling 1-Month call options and purchasing 3-Month put

options on the SPDR S&P 500 ETF (SPY). The MQKHPI aims to generate income from selling

call spreads while providing downside protection through the purchase of put spreads,

maintaining exposure to the U.S. large-cap equity market.

The Fund will actively manage the risk-to-reward ratio of the option strategies. If the reward

(premium or cost to close out a position) is not proportional to the risk (maximum potential loss),

the Fund's Sub-advisor will use its discretion to adjust or close the position. The Fund’s Sub-

adviser, however, will use independent judgement in determining when to buy, sell and exercise

particular options, and what particular option spreads to buy and sell.  Compared to the MQKHPI,

the Fund may, for example, elect to close out an option position prior to its expiration if it no

longer offers an attractive balance of risk and reward, or exercise an option if determined to be

advantageous to the portfolio. Although the Fund’s strategy is not expected to materially change

in different interest rate environments, varying levels of market volatility will impact the relative

costs of downside protection and relative option spreads. Additionally, the sequence of

investment returns will affect the various strikes prices, expiration dates, and intended purposes

of the options used by the Fund, and could significantly impact the Fund’s overall performance.

The Fund, based on current market conditions, seeks to achieve the best balance of premium

income/costs, downside protection, and upside potential to meet its investment objective of

current income with the potential for capital appreciation.

Monthly Call Options Strategy

Call options are derivative instruments that allow the option purchaser to contractually purchase a

particular security (or the security index) from the option issuer at a set price (the “strike price”)

up to the expiration date of the options. When the issuer sells the call option, it receives a

premium from the buyer in hopes that the option will not be exercised by the buyer.

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The monthly call options strategy consists of a mix of selling and purchasing call options on the

S&P 500 (“S&P 500 call options”).  The Fund seeks to generate income from the premiums

earned from the sold S&P 500 call options.  At the same time, the Fund seeks to realize capital

appreciation from its S&P 500 ETF holdings as the S&P 500 increases in value, but with

potentially reduced upside because of the sold S&P 500 call options it uses to generate premium

income. The Fund’s purchased S&P 500 call options, however, are intended to offset this reduced

upside potential and limit the risk of missing out on strong market rallies of the S&P 500.

On  a regular basis, typically monthly, Each month, the Fund sells S&P 500 call options to

generate premium income while simultaneously buying “out of the money” long S&P 500 call

options (i.e., options to purchase at a strike price that is higher than the current price of the

reference security or index) to hedge against the possibility that the sold S&P 500 call options are

exercised because the S&P 500 increases above the strike price of the sold S&P 500 call options.

For example, as the S&P 500 increases in value during the month, the holders of the sold S&P

500 call options may be more incentivized to exercise their options which will create some losses

for the Fund. However, if the price of the S&P 500 increases above the strike price of the

purchased S&P 500 call options, the Fund will be protected from larger losses because the Fund

will exercise its purchased S&P 500 call options, offsetting a portion of its losses on the sold S&P

500 call options.

The call option strategy aims to profit from stable or declining S&P 500 prices, with the ideal

scenario being the S&P 500 staying below the strike price of the sold S&P 500 call options. At

the same time, the strategy seeks to control and cap the risk of loss from rapid gains of the S&P

500 with the purchased S&P 500 call options. While the strike prices of the S&P 500 call options

may vary, the Fund will typically sell call options with a strike price between approximately

98-105% of the current value of the S&P 500, and purchase call options with a strike price

between approximately 101-110% of the current value of the S&P 500. Once the S&P 500

appreciates by approximately 5% from its current level (the strike price of the sold call), such call

spreads will begin to create a loss.  This loss will, however, typically be capped at approximately

3% (the difference in strike prices) after the net income from the call spreads.

Because the call option strategy is typically executed every month, it may have a larger impact on

the Fund’s returns than the put option strategy discussed below that is typically executed on a

quarterly basis.

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For illustrative purposes only. Figures are approximate and subject to change. Charts assume a quarterly net premium gain

of 3%, which results from three monthly call spreads and one quarterly put spread.

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Quarterly Put Options Strategy

Put options are derivative instruments that allow the option purchaser to contractually sell a particular

security (or the value of a security index) to the option issuer at a strike price up to the expiration date

of the options. When the issuer sells the put option, it receives a premium from the buyer in hopes

that the buyer will not exercise the option.

The Fund’s put options strategy, typically executed on a quarterly basis, is designed to protect

against large declines in the S&P 500. The quarterly put options strategy consists of a mix of

purchased (or “long”) put options and sold (or “written”) put options on the S&P 500 Index (“S&P

500 put options”).  While the strike prices of the put options may vary, each quarter the Fund

typically purchases S&P 500 put options that are approximately 4-6% below the 94-96% of the

current S&P 500 level, paying a premium for downside protection from a large decline in the S&P

500. The Fund simultaneously sells S&P 500 put options with a strike price that is approximately

15-25% below 75-85% of the current price of the S&P 500 to generate some premium income to

offset a portion of the cost of the purchased put options.  The quarterly options strategy of buying a

put slightly below the current market price and selling another put farther below the current market

price is designed to protect against significant market downturns at a reduced cost. While the strike

prices of the put options will vary, the put spreads will typically provide a payment to offset losses

once the S&P 500 declines by approximately 5% (the strike price of the purchased put) but will no

longer offset losses once the S&P 500 declines by more than an approximately 20% (the difference in

strike prices) after the net costs of the put spreads.

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For illustrative purposes only. Figures are approximate and subject to change. Charts assume a quarterly net premium gain

of 3%, which results from three monthly call spreads and one quarterly put spread.

Expected Relative Performance of the Strategy

The Fund’s performance will vary, at times substantially, from the performance of the MQKHPI

and the S&P 500.  In general, however, the Fund expects to perform somewhat in line with the

MQKHPI, with the Fund’s active decisions around the implementation of its options strategies

intended to improve the Fund’s performance relative to the MQKHP.  The Fund’s expected

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performance relative to the S&P 500 under various market conditions can be summarized as

follows:

When the S&P 500 is Flat or Declines: Expected Outperformance. In conditions months and

quarters where the S&P 500 shows minimal movement or decreases, the Fund’s overall

performance is generally expected to also be flat to negative.  However, the Fund would be

positioned to outperform the S&P 500 primarily due to the monthly premium income generated

from the monthly call options.

•This anticipated relative outperformance is expected to increase during quarters where the

S&P 500 declines by more than approximately 4-6%, due to the additional downside

protection from the quarterly put options.

•If the S&P 500 declines by more than approximately 20% from the purchase price of the put

options, the Fund would have no further downside protection other than the call option

premiums. The Fund would participate fully in the decline of the S&P 500 until new put

options are purchased.

When the S