DEF: Ellington Fund Seeks Shareholder Approval for New Advisory Agreements

Ellington Income Opportunities Fund seeks shareholder approval for new investment advisory and sub-advisory agreements with Princeton Fund Advisors and Ellington Global Asset Management, prompted by a potential change in control at Princeton, with no proposed fee increases.

Summary

• A special meeting of shareholders is scheduled for February 18, 2026, at 10:30 a.m. Central Time, to vote on two proposals.
• Shareholders are asked to approve a new investment advisory agreement between the Fund and Princeton Fund Advisors, LLC, the current investment adviser.
• Shareholders are also asked to approve a new investment sub-advisory agreement between Princeton Fund Advisors, LLC, and Ellington Global Asset Management LLC, the current sub-adviser.
• The need for new agreements arises because a proposed restructuring at Princeton Fund Advisors, involving the addition of four individuals to its Board of Managers, may be deemed a change in control, automatically terminating the current agreements under the Investment Company Act of 1940.
• The terms of both new agreements are identical in all material respects to the current agreements, with no fee increases proposed.
• Princeton Fund Advisors had approximately $781.8 million in assets under management as of December 31, 2025.
• Ellington Global Asset Management LLC had approximately $18.9 billion in assets under management as of November 30, 2025, and an estimated $20 billion as of December 31, 2025.
• The Fund incurred $553,476 in management fees for the fiscal year ended December 31, 2024.
• The annual advisory fee is 1.85% of the Fund's average daily net assets, and Ellington Global Asset Management receives 60% of the net advisory fee.
• Shareholders of record as of December 15, 2025, are entitled to vote, and an affirmative vote of a majority of outstanding shares is required for approval.
• The Board of Trustees unanimously approved both new agreements and recommends shareholders vote FOR their approval.

Sentiment

Score: 7

Explanation: The filing is largely procedural, seeking approval for new advisory agreements due to a technical change in control, with no fee increases. The Board's unanimous recommendation and satisfactory performance assessment are positive, though the high management fee relative to peers and short-term underperformance are minor concerns. The overall sentiment is neutral to slightly positive due to continuity and board confidence.

Positives

• No fee increases are proposed for either the investment advisory or sub-advisory agreements, maintaining current cost structures for shareholders.
• The Fund outperformed its peer group over the one-year period and its benchmark over the five-year and since inception periods.
• Princeton Fund Advisors has engaged a new senior compliance officer with over 20 years of experience in regulatory compliance, risk management, and operations.
• Princeton Fund Advisors reported no material litigation or administrative matters involving itself or any affiliate.
• Ellington Global Asset Management reported no material compliance issues in the past year.
• Ellington Global Asset Management explained the one-year underperformance was due to duration impacts in Q3 2024, noting subsequent outperformance from Q4 2024 onward, particularly during tariff-related market volatility.
• Ellington Global Asset Management stated that all sub-advisory fees had been waived for the past year.
• Neither Princeton Fund Advisors nor Ellington Global Asset Management realized a profit from their relationship with the Fund over the past year, indicating no excessive profitability.
• The Board of Trustees unanimously concluded that the advisory fee structure is reasonable and that approval of both agreements is in the best interests of the shareholders.

Negatives

• The Fund underperformed its benchmark over the one-year period, although this was attributed to specific market conditions and followed by outperformance.
• The Fund's management fee of 1.85% was tied with the high end of its peer group, though the expense ratio was below the peer group average due to expense limitations.
• Princeton Fund Advisors had not realized a profit from its relationship with the Fund over the past year.
• Ellington Global Asset Management had not realized a profit from its relationship with the Fund over the past year.

Risks

• If the New Advisory Agreement is not approved by shareholders, the Current Advisory Agreement will automatically terminate, potentially leading to the Board and Princeton considering other options, including a new or modified request for shareholder approval.
• The termination of the Current Advisory Agreement would automatically lead to the termination of the Current Sub-Advisory Agreement, requiring a new sub-advisory agreement to be approved.
• Broker non-votes and abstentions will have the same effect as a vote against the proposals, increasing the risk of non-approval.
• Ellington Global Asset Management may terminate the sub-advisory agreement if the Fund does not reach $75 million in net asset value within 24 months or $250 million within 36 months of Class I Shares inception, while maintaining a Class I Return of at least 5.50%.
• Ellington Global Asset Management may terminate the sub-advisory agreement if the expense cap is reduced below 50 basis points or the Advisory Fee is reduced below 185 basis points without its consent.
• Ellington Global Asset Management may terminate the sub-advisory agreement if the Fund's offer to repurchase shares is set higher than 5% for any quarter without its consent.
• Ellington Global Asset Management may terminate the sub-advisory agreement if the Fund makes a fundamental change to its investment objective, investment policies, or target assets without its consent.

Future Outlook

The filing primarily addresses the continuity of existing investment advisory and sub-advisory arrangements. If the New Advisory Agreement is not approved, the Board and Princeton Fund Advisors will consider alternative options, including a new or modified request for shareholder approval. The sub-adviser, Ellington Global Asset Management, expressed continued confidence in its ability to navigate credit cycles.

Management Comments

• Princeton expressed continued confidence in the sub-adviser's ability to navigate credit cycles.
• Ellington attributed the underperformance in the one-year period to the impacts of duration in the third quarter of 2024.
• Ellington reported that the Fund had exhibited outperformance from the fourth quarter of 2024 onward, particularly during periods of tariff-related market volatility.
• The Board determined that the Fund's performance was satisfactory.
• The Board determined that the advisory fee was not unreasonable.
• The Board concluded that excessive profitability was not an issue for Princeton at this time.
• The Board concluded that excessive profitability was not an issue for Ellington at this time.
• The Board concluded that the advisory fee structure is reasonable and that approval of the Advisory Agreement is in the best interests of the shareholders of the Fund.
• The Board determined that the proposed New Sub-Advisory Agreement is in the best interests of the Fund and its shareholders.

Industry Context

This announcement reflects standard regulatory compliance within the U.S. investment management industry, particularly for registered investment companies like closed-end interval funds. The Investment Company Act of 1940 mandates shareholder approval for new investment advisory agreements following a 'change in control' of the adviser, even if the terms remain unchanged. This ensures transparency and investor protection during transitions in management structure. The fund's operation as an interval fund places it in a specific segment of the closed-end fund market, offering periodic liquidity to shareholders.

Comparison to Industry Standards

• The Fund outperformed its peer group over the one-year period.
• The Fund outperformed its benchmark over the five-year and since inception periods.
• The Fund underperformed its benchmark over the one-year period, though this was attributed to specific market conditions.
• The Fund's management fee of 1.85% was tied with the high of the peer group.
• The expense ratio was well below the average of the peer group, due to Princeton's agreement to limit expenses.

Management Changes

Corporate Governance

Legal Proceedings

• Princeton Fund Advisors reported no material litigation or administrative matters involving Princeton or any affiliate.
• Ellington Global Asset Management reported no material compliance issues in the past year.

Related Party Transactions

• Ellington Global Asset Management LLC is a subdivision of Ellington Management Group, LLC.
• The sub-advisory fee is 60% of the net advisory fee received by Princeton Fund Advisors.
• Princeton Fund Advisors will reimburse the Fund for estimated proxy solicitation expenses of approximately $10,000.

Stakeholder Impact

• **Shareholders**: Asked to approve agreements ensuring continuity of investment management without fee increases. Non-approval carries the risk of agreement termination and potential disruption.
• **Management (Princeton Fund Advisors)**: Seeks formal approval to continue its advisory role following a change in its management structure.
• **Sub-Adviser (Ellington Global Asset Management)**: Seeks formal approval to continue its sub-advisory role under the same terms.
• **Employees**: Continuity of operations for both Princeton Fund Advisors and Ellington Global Asset Management, including the integration of a new senior compliance officer at Princeton.

Next Steps

• Shareholders are to vote on the New Advisory Agreement and New Sub-Advisory Agreement at the Special Meeting on February 18, 2026.
• If the New Advisory Agreement is not approved, the Board and Princeton Fund Advisors will consider other options, including a new or modified request for shareholder approval.
• The Board will continue monitoring the Fund's asset levels and revisit the matter of economies of scale as the Fund grows.

Key Dates

Recommendation

The filing is primarily a procedural matter to ensure continuity of advisory and sub-advisory services following a technical change in control at Princeton Fund Advisors, with no proposed changes to fees or investment strategy. The Board's unanimous recommendation for approval, coupled with satisfactory fund performance over longer periods and the absence of excessive profitability for the advisers, suggests stability. While the management fee is high relative to peers and there was short-term underperformance, these are existing conditions and not new developments. Therefore, a 'hold' recommendation is appropriate as there are no new material factors presented that would warrant a change in investment stance.

Keywords

Ellington Income Opportunities Fund, Princeton Fund Advisors, Ellington Global Asset Management, Investment Advisory Agreement, Sub-Advisory Agreement, Proxy Statement, Shareholder Meeting, Closed-End Fund, Interval Fund, Investment Company Act of 1940, Corporate Governance, Asset Management, Fund Performance, Management Fees, AUM