PRINCIPAL ASSET MANAGEMENT

Principal AM is a diversified global asset management organization providing an expanded range of diverse investment capabilities through a network of specialized investment teams and affiliates. Capabilities encompass an extensive range of equity, fixed income, currency, alternative investments, and asset allocation services. Principal AM, is an indirect wholly owned subsidiary of Principal Financial Group, Inc. (NASDAQ: PFG.)

Principal AM’s Services

Principal AM provides investment advisory services to institutional investors and individuals on a discretionary or non-discretionary basis. Principal AM has divided its investment management operations into several distinct investment teams across equities, fixed income, real estate, listed infrastructure, alternative investments, and asset allocation services. Principal AM also serves as an investment adviser for Principal Funds, Inc., Principal Variable Contracts, Inc., Principal Exchange-Traded Funds and, for the Scholars Edge 529 plan, Principal AM serves as investment manager. Principal AM also provides fund administration services for Principal Funds, Inc. and Principal Variable Contracts, Inc. Principal AM may hire affiliated or non-affiliated investment advisers to provide discretionary investment advisory services in a sub-advisory capacity. For example, Principal AM serves as a manager of managers on behalf of certain Principal Funds. In its capacity as a manager of managers, Principal AM recommends the hiring and firing of sub-advisory firms and provides ongoing oversight of such sub-advisory firms in connection with the services provided to the Principal Funds.

Principal AM also provides additional investment services to clients as described more fully in the Investment Solutions section in Item 5 Fees and Compensation. Principal AM generally provides continuous investment advice based on the defined investment strategies, objectives, and policies of its clients. These arrangements are documented through an investment management agreement, investment policy statement, or investment guidelines, which incorporate investment management restrictions and guidelines developed in consultation with each client, as well as any additional services required by the client. These restrictions and guidelines customarily impose limitations on the types of securities that may be purchased and the percentage of account assets that may be invested in certain types of securities. Clients may also choose to restrict investment in specific securities or groups of securities for social, environmental, or other reasons. Principal AM also provides certain non-discretionary services to clients such as model portfolios.

Prospective clients or investors may also access our services indirectly by purchasing interests in Principal Funds or other commingled vehicles advised or sub-advised by Principal AM or an affiliate rather than establishing a direct relationship through an investment management agreement.

Commingled funds managed by Principal AM include collective investment trusts, exchange-traded funds (ETFs), open-end or closed-end investment companies (including Interval Funds), and privately offered funds (Private Funds) not registered under the Investment Company Act of 1940 as amended, (the 1940 Act). Clients or investors should consider the features of these options and their own specific needs and circumstances when determining the most suitable investment and should carefully review the offering documents of these investment vehicles to understand the investment objectives, strategies, and risks of each vehicle.

Prospective clients or investors may also purchase our services indirectly by purchasing investment management or discretionary trustee services from Principal Trust Company or Principal Bank, rather than establishing a direct relationship through an investment management agreement.

For our mutual funds and other commingled vehicles, investment advice is provided directly to the fund or commingled vehicle, subject to the discretion and control of the funds general partners (or analogous party), and not to the underlying investors in the fund based upon their individual needs. Fund investors may have conflicting investment, tax, and other interests with respect to their investments in the fund. As a consequence, conflicts of interest may arise in connection with decisions made by Principal AM that may be more beneficial for one investor than for another investor, especially with respect to investors individual tax situations. In selecting and structuring investments appropriate for a Private Fund, Principal AM and the Private Funds general partner (or analogous party) will consider the investment and tax objectives of the applicable Private Fund, not the investment, tax, or other objectives of any investor individually.

Principal AM will, from time to time, enter into side letter arrangements with certain investors in Private Funds. Side letters provide such investors with different or preferential rights or terms of the Private Fund. Such differences and preferences may include but are not limited to, different fund fee structures, and other preferential economic rights, information rights, waiver of certain confidentiality obligations, co-investment rights, redemption, certain rights or terms necessary in light of particular legal, regulatory or policy requirements of a particular investor, additional obligations and restrictions with respect to structuring particular investments in light of the legal and regulatory considerations applicable to a particular investor, or preferential liquidity or transfer rights to the extent other investors are not disadvantaged and these are allowable per regulation. Except as otherwise agreed with an investor or otherwise set out in the Private Funds organization documents, Principal AM and its affiliates are not required to disclose the terms of side letter arrangements with other investors in the same Private Fund.

The organizational documents of a Private Fund establish complex arrangements among the funds, Principal AM, investors, and other relevant parties. From time to time, questions may arise regarding certain parties rights and obligations in certain situations, some of which may not have been contemplated upon the negotiation and execution of such documents. In some instances, the operative provisions of the organizational documents, if any, may be broad, silent on relevant provisions, conflicting, ambiguous, and vague and may allow for multiple reasonable interpretations.

While Principal AM will construe the relevant provisions in good faith and in a manner consistent with its fiduciary duty to the fund and legal obligations, the interpretations used may not be the most favorable to the Private Fund investors.

Services required by Principal AMs Private Funds may, for certain reasons including efficiency and economic considerations, be outsourced in whole or in part to third parties, in each case at the discretion of Principal AM or their general partners (or analogous parties). Principal AM and its affiliates have an incentive to outsource such services at the expense of the Private Funds to, among other things, leverage the use of Principal AMs personnel. 

Such services may include, without limitation, investor reporting, Private Fund administration and accounting, custodial, valuation, and legal. Outsourcing may not occur universally for all Private Funds and accordingly, certain costs may be incurred by one Private Fund for a third-party service provider that is not incurred for comparable services by other Private Funds.

Separately Managed Accounts (“SMA”)/Wrap Programs

Principal AM provides investment advisory services to a variety of managed account programs, including separately managed accounts or wrap fee programs, unified managed account programs, and model portfolio programs (collectively, Managed Accounts).

There are several different types of Managed Account programs offered by third-party broker-dealers, banks, or other investment advisers affiliated with broker-dealers (Program Sponsors). In discretionary Managed Account programs, Principal AM is responsible for implementing its investment recommendations. Principal AM may handle the placement of trades for certain accounts with brokers other than the Program Sponsor or its affiliate(s) (e.g., through step outs), but typically the majority of trades will be directed to the Program Sponsor or its affiliate(s) for execution. In Model-Delivery Managed Account programs, Principal AM is retained by the Program Sponsor to provide non-discretionary research and portfolio recommendations that are not tailored to any program participant. The Program Sponsor has discretion to accept, modify, or reject Principal AMs recommendations and assumes the responsibility to implement transactions for Managed Accounts. Principal AM generally does not have information regarding participants in Model-Delivery Managed Accounts.

Generally, for Managed Accounts comprised of ERISA plan clients, Principal AMs services are ordinarily described in the ERISA plan clients contract with the Program Sponsor and/or in the Program Sponsors program brochure.

Asset Allocation Service

Principal AM provides asset allocation advice and other investment advisory services to qualified retirement plans funded with annuity contracts purchased from Principal Life Insurance Company (Principal Life). These specific clients are contract holders of group variable annuity contracts issued by Principal Life. The clients, as annuity contract holders, have an option to invest in various separate accounts established by Principal Life. Principal AM acts as sub-adviser to Principal Trust Company and Principal Bank, providing asset allocation advice and other investment advisory services to institutional investors.

Services Provided to Non-U.S. Clients

Principal AM may also act as an investment adviser and may conduct marketing activity with respect to clients and prospective clients domiciled in foreign jurisdictions. In some instances, Principal AM may do so without maintaining regulatory licenses or registrations in those jurisdictions, to the extent permitted by applicable law. Clients and prospective clients in such jurisdictions should consider whether the regulatory framework of their own jurisdiction imposes restrictions upon them regarding hiring an investment adviser that does not hold local regulatory licenses or registrations. Clients and prospective clients should also consider whether the regulatory framework to which Principal AM is subject provides sufficient protections given that Principal AM may not be subject to the regulatory framework with which they are familiar in their own jurisdiction.

Global Asset Management

Principal AM may utilize services from, and provide services to, our United States (U.S.) affiliates and non-U.S. affiliates. These services may include investment advisory services, client relations, investment monitoring, accounting administration, investment research, and trading. To facilitate this collaboration, Principal AM has entered into sub-advisory agreements, intercompany agreements, and participating affiliate arrangements with certain non-U.S. affiliates. Each U.S. affiliate is registered with the U.S. Securities and Exchange Commission (SEC) and each non-U.S. affiliate is registered with the appropriate respective regulators in their home jurisdictions. Under participating affiliate arrangements, certain employees of Principal AMs non-U.S. affiliates serve as associated persons of Principal AM when providing certain of these services, including placing orders for clients, and in this capacity are subject to Principal AMs oversight and supervision.

Assets Under Management

Principal AM managed $355,595,361,506 in discretionary assets and $8,439,998,395 in non-discretionary assets as of December 31, 2024.