DEF 14A: Principal Real Asset Fund Seeks Shareholder Approval for New Trustees, Amended Sub-Advisory Agreement

Principal Real Asset Fund is holding a special meeting to elect new trustees and approve an amended sub-advisory agreement with Principal Real Estate Investors, LLC.

Summary

• Principal Real Asset Fund is holding a special meeting of shareholders on July 31, 2024, to vote on two key proposals.
• The first proposal involves electing a new Board of Trustees consisting of Danielle E. Davis, Shane C. Goodwin, James E. Stueve, and Barbara Wenig.
• The second proposal seeks approval for an amended and restated sub-advisory agreement with Principal Real Estate Investors, LLC.
• The existing Board of Trustees recommends that shareholders vote in favor of both proposals.
• Shareholders of record as of June 24, 2024, are eligible to vote.
• The fund has retained Broadridge Financial Solutions, Inc. to assist in soliciting proxies, with an estimated cost of $5,000.
• PGI, the fund's investment advisor, will pay the expenses of the meeting.

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a slightly positive sentiment due to the board's recommendation to approve the proposals and the expectation of benefits from the changes.

Positives

• The existing Board of Trustees unanimously recommends voting 'For' both proposals, suggesting they believe the changes are beneficial for the fund.
• The proposed sub-advisory agreement with Principal-REI is expected to reduce performance volatility compared to the current sub-advisor for listed infrastructure equities.
• Approval of the amended and restated sub-advisory agreement with Principal-REI will not result in an increase in the management fees that the Fund pays to PGI as investment advisor.
• The proposed sub-advisory fee schedule includes a breakpoint and provides for a lower effective sub-advisory fee rate at current asset levels than the sub-advisory fee schedule of the current sub-advisor to the global listed infrastructure equities sleeve of the Fund.

Negatives

• The appointment of Principal-REI to manage the Sleeve is expected to benefit PGI by increasing, with respect to the assets of the Fund, the amount of the management fees that are retained by PGI and its affiliates rather than being paid to an unaffiliated sub-advisor.
• The fund is incurring costs for proxy solicitation, estimated at $5,000, although PGI will pay the expenses of the meeting.

Risks

• If one or more Nominee(s) for Trustee are not elected, the Board will determine what action, if any, should be taken.
• The fund's investment performance is subject to market risks and the expertise of its sub-advisors.
• The potential conflict of interest arising from PGI allocating assets to an affiliated sub-advisor (Principal-REI) instead of an unaffiliated one.

Future Outlook

The fund anticipates that the new Board of Trustees will adopt the same leadership structure as the Board of Trustees of Principal Private Credit Fund I. The fund expects that the nature, quality and extent of the services to be provided by Principal-REI to the Fund under the amended and restated sub-advisory agreement are expected to be satisfactory.

Management Comments

• The Fund's existing Board of Trustees has approved the proposals and recommends that you vote For the proposals.
• PGI believes that the Fund's shareholders will benefit by replacing ClearBridge with Principal-REI as sub-advisor to the Funds listed infrastructure equities sleeve.

Industry Context

The document reflects a trend in the investment management industry of consolidating oversight of similar funds under a single board, as evidenced by PGI's recommendation to consolidate the oversight of its registered closed-end interval funds that have meaningful exposure to private assets to one Board.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• However, the discussion of fees and services suggests that the fund is operating within typical industry practices.
• The document mentions Principal-REI currently acts as investment advisor to the Global Sustainable Listed Infrastructure Fund, which has a similar investment objective as that of the Funds Sleeve, which will be managed by Principal-REI.
• The Global Sustainable Listed Infrastructure Fund has a size of $16,613,000 and an annual fee rate of 0.34%.

Management Changes

Corporate Governance

Related Party Transactions

• The document discloses payments made to affiliates of the investment advisor, including management fees, distribution fees, and underwriting fees.
• The document discloses that PGI paid Principal-REI sub-advisory fees of approximately $81,777 for the fiscal year ended March 31, 2024 with respect to the Fund.

Stakeholder Impact

• Shareholders will be impacted by the election of new trustees and the potential changes to the sub-advisory agreement.
• The changes are expected to benefit shareholders through reduced performance volatility and potentially lower fees.
• The fund's performance will impact shareholders' investment returns.
• The fund's investment in real assets and real asset companies will impact those industries.

Next Steps

• Shareholders need to vote on the proposals before the July 31, 2024 meeting.
• If approved, the new Board of Trustees will be elected, and the amended sub-advisory agreement will take effect around August 1, 2024.
• The new Board will undertake to perform the oversight responsibilities that these current Committees perform.
• The New Board may determine to create additional committees as it deems appropriate to fulfill its oversight responsibilities.

Key Dates

Keywords

Principal Real Asset Fund, Board of Trustees, Sub-Advisory Agreement, Principal Real Estate Investors, Proxy Statement, Shareholder Meeting, Investment Company, Real Assets, Investment Advisor, PGI