DEF: Angel Oak Funds Face Shareholder Vote on Advisory Agreement Amid Brookfield Acquisition

Shareholders of Angel Oak Funds are being asked to approve new investment advisory agreements following Brookfield's acquisition of a majority stake in Angel Oak Companies, LP, the parent company of the Funds' investment adviser.

Summary

• Angel Oak Funds Trust and Angel Oak Strategic Credit Fund are holding special meetings on June 26, 2025, to seek shareholder approval on two key matters.
• The first matter involves approving new investment advisory agreements with Angel Oak Capital Advisors, LLC (the Adviser) due to Brookfield Asset Management Ltd.'s acquisition of a majority stake in Angel Oak Companies, LP, the Adviser's parent company.
• The transaction is expected to close by September 30, 2025, and will not result in material changes to the day-to-day management and operations of the Funds or any increase in fees.
• However, the acquisition triggers a legal requirement to obtain shareholder approval for new, substantially identical advisory agreements.
• The second matter involves electing Clayton Triick as a Trustee of the Boards of Trustees of the Funds, as he was initially appointed by the Trustees in 2024 to fill a vacancy.
• Shareholders of record as of April 28, 2025, are eligible to vote.
• The Board of the Funds recommends voting FOR the new investment advisory agreements and FOR the election of Clayton Triick.

Sentiment

Score: 7

Explanation: The document is generally positive, emphasizing the continuity of fund management and operations. The acquisition by Brookfield is presented as a non-disruptive event, and the Board recommends voting in favor of the proposals. However, there is a slight negative sentiment due to the need for shareholder approval and the resignation of a board member.

Positives

• The transaction will not result in material changes to the day-to-day management and operations of the Funds.
• The transaction will not result in any increase in fees.
• The personnel, officers, and managers of the Adviser are expected to remain the same.
• The Board has been assured that there will be no reduction in the nature or quality of the investment advisory services provided to each Fund due to the Transaction.
• The Adviser has agreed to extend the current Operating Expense Limitation Agreements through September 30, 2027 if the New Investment Advisory Agreements are approved by shareholders and the Transaction closes on or before September 30, 2025.
• The Funds could benefit from the potential synergies and collaboration between the Adviser and Brookfield.

Negatives

• The current investment advisory agreements will terminate due to the change in control of the Adviser, requiring shareholder approval of new agreements.
• Cheryl M. Pate will be resigning from the Board before the closing of the Transaction in order to comply with the requirement that at least 75% of the Board must not be interested persons (as defined in the 1940 Act) of Brookfield or the Adviser.

Risks

• The closing of the Transaction is subject to certain conditions, and there can be no assurance that the Transaction will be completed as planned, or that the necessary conditions will be satisfied.
• Beginning in 2027, Brookfield will have a right to acquire additional beneficial ownership in Angel Oak Companies, LP, which over time could result in Brookfield taking control of the board of directors of Angel Oak Companies, LP.

Future Outlook

The document indicates that the Funds will continue to operate under substantially the same terms and conditions, with the same personnel, following the completion of the transaction.

Management Comments

• The Transaction will not result in material changes to the day-to-day management and operations of the Funds or any increase in fees.
• The Board has been assured that there will be no reduction in the nature or quality of the investment advisory services provided to each Fund, as applicable, due to the Transaction.

Industry Context

This announcement reflects a trend of consolidation and acquisitions in the asset management industry, where larger firms like Brookfield are seeking to expand their reach and diversify their offerings by acquiring specialized asset managers.

Comparison to Industry Standards

• The document compares the Funds' management fees and net expense ratios to those of their peer groups.
• For example, the management fee of the Angel Oak Strategic Credit Fund was lower than the median management fee in its Peer Group.
• The net expense ratio of each of the Multi-Strategy Income Fund, UltraShort Income Fund and Angel Oak Strategic Credit Fund was lower than the median net expense ratio for funds in their respective Peer Groups.
• The management fee of each of the UltraShort Income Fund, UltraShort Income ETF, Mortgage-Backed Securities ETF, High Yield Opportunities ETF, and Income ETF was higher than the median management fee in their respective Peer Groups.
• The net expense ratio of each of the UltraShort Income ETF, Mortgage-Backed Securities ETF, High Yield Opportunities and Income ETF was higher than the median net expense ratio for funds in their respective Peer Groups.

Management Changes

Stakeholder Impact

• Shareholders are asked to vote on the new advisory agreements and the election of a trustee.
• The document states that the transaction will not result in material changes to the day-to-day management and operations of the Funds or any increase in fees, suggesting a neutral impact on shareholders.
• Employees of the Adviser are expected to remain the same, indicating a stable employment situation.

Next Steps

• Shareholders need to vote on the proposals by June 25, 2025.
• The transaction between Brookfield and Angel Oak Companies, LP is expected to close by September 30, 2025.

Key Dates

Keywords

investment advisory agreement, Brookfield, Angel Oak, proxy statement, shareholder vote, investment adviser, fund, trustee