DEF 14A: Liberty All-Star Funds Seek Shareholder Approval for New Portfolio Management Agreement and Trustee Elections

Liberty All-Star Equity Fund and Liberty All-Star Growth Fund are seeking shareholder approval for a new portfolio management agreement with Westfield Capital Management Company and the election of trustees and directors at their joint annual meeting on August 28, 2024.

Summary

• Liberty All-Star Equity Fund and Liberty All-Star Growth Fund are holding a joint annual meeting of shareholders on August 28, 2024.
• Shareholders will vote on three proposals: approving a new Portfolio Management Agreement for the Growth Fund with ALPS Advisors, Inc. and Westfield Capital Management Company, L.P., electing two Directors of the Growth Fund, and electing two Trustees of the Equity Fund.
• The Boards of Trustees/Directors unanimously recommend voting FOR all three proposals.
• The record date for determining shareholders eligible to vote is June 11, 2024.
• The Growth Fund is seeking approval for a new Portfolio Management Agreement with Westfield Capital Management Company, L.P. to manage the large cap growth portion of the Growth Fund's portfolio, replacing Sustainable Growth Advisers, LP.
• The terms of the New Agreement are materially the same as the terms of the Old Agreement and there will be no reduction or modification of the nature or level of advisory services.
• The portfolio management fee rate to be paid to Westfield under the New Agreement is the same as the fee rate for those services paid to Sustainable under the Old Agreement.
• For the fiscal year ended December 31, 2023, the Growth Fund paid advisory fees of $2,505,758 to AAI and AAI paid advisory fees of $436,653 to Sustainable, $430,788 to Congress Asset Management Company, LLP and $383,017 to Weatherbie Capital, LLC.
• The Growth Fund will incur additional costs of approximately $145,000 for proxy solicitations related to the new Portfolio Management Agreement.
• The Boards of the Equity Fund and Growth Fund are divided into three classes, each of which serves for three years.
• The term of office of one of the classes expires at the final adjournment of the Annual Meetings of Shareholders each year or such later date as his or her successor shall have been elected and shall have qualified.

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a slightly positive sentiment due to the expectation of improved investment performance from the new portfolio manager.

Positives

• The proposed change in portfolio manager for the Growth Fund aims to improve investment performance by diversifying investment styles.
• The fee structure under the new agreement with Westfield is the same as the previous agreement with Sustainable, ensuring no increase in costs.
• The Boards of Trustees/Directors unanimously recommend voting FOR the proposals, indicating strong support for the changes.
• The Board considered that the fee under the New Agreement would be paid to Westfield by AAI, not the Fund, and noted the arms-length nature of the relationship between AAI and Westfield with respect to the negotiation of the fee rate on behalf of the Growth Fund.

Negatives

• The Growth Fund will incur additional costs of approximately $145,000 for proxy solicitations related to the new Portfolio Management Agreement.
• Portfolio Manager changes, as well as rebalancing of the Growth Funds assets among the Portfolio Managers, may result in portfolio turnover in excess of what would otherwise be the case.
• Increased portfolio turnover results in increased brokerage commission and transaction costs, and may result in the recognition of additional capital gains.

Risks

• Failure to approve the new Portfolio Management Agreement would result in AAI continuing with the portfolio assets under management by Sustainable.
• There is some uncertainty whether a registered investment company such as the Fund may rely on the Maryland Business Control Share Acquisition Act.
• The Boards oversight role does not make the Boards a guarantor of the Funds investments or activities.

Future Outlook

The document outlines the process for approving a new portfolio management agreement and electing trustees/directors, which will shape the future investment strategy and governance of the funds.

Management Comments

• The Funds Boards of Trustees/Directors unanimously recommend that you vote FOR Proposals 1, 2 and 3.
• AAI believes that Westfields growth at a reasonable price investment style that invests in companies with underappreciated earnings growth will better complement the philosophies of the Growth Funds other Portfolio Managers.
• AAI also believes that Westfields experienced investment team and favorable performance record will benefit the Growth Fund.

Industry Context

The document reflects the ongoing process of fund management companies evaluating and adjusting their investment strategies and service providers to optimize performance and shareholder value.

Comparison to Industry Standards

• The document mentions that Westfield also provides advisory and sub-advisory services to other investment companies.
• One comparable fund, a Subadvised Multi-Managed U.S. Mutual Fund with $1.5 billion in assets, has a contractual fee rate of 0.50% on the first $50M, 0.40% on the next $450M, and 0.35% above $500M.
• The proposed fee structure for Westfield is comparable to industry standards for sub-advisory services.

Stakeholder Impact

• Shareholders will be impacted by the potential changes in investment strategy and fund governance.
• The new Portfolio Management Agreement could affect the performance of the Growth Fund and, consequently, shareholder returns.
• The election of Trustees and Directors will influence the oversight and management of the funds.

Next Steps

• Shareholders will vote on the proposals at the Joint Annual Meeting on August 28, 2024.
• If approved, the new Portfolio Management Agreement with Westfield will become effective.
• The elected Trustees and Directors will serve until the final adjournment of the Annual Meeting of Shareholders for the year set forth in the document.

Key Dates

Keywords

Portfolio Management Agreement, Shareholder Meeting, Trustee Election, Director Election, Westfield Capital Management, Liberty All-Star Funds, Proxy Statement, Growth Fund, Equity Fund, ALPS Advisors