Port Street files to convert its benchmark-lagging quality fund, and its cash, into an ETF

Managed Portfolio Series, the trust that houses the Port Street Quality Growth Fund, filed on Tuesday to convert the mutual fund into an exchange-traded fund, the Port Street Quality ETF. The filing comes after the mutual fund lagged its benchmark by nearly 10 percentage points in the year to March 31, 2026, due in part to a large cash holding. Under the proposed ETF's new criteria, cash qualifies as a quality asset.

The preliminary prospectus is dated Nov. 9 and marked subject to completion. Port Street Investments would remain the adviser.

Institutional Class shares of the mutual fund, which carry the ticker PSQGX, would convert on a date the prospectus leaves blank. The ETF would take the fund's assets and liabilities and adopt its accounting and performance history.

"Sizable" cash position likely to stay

For the year ended March 31, 2026, the mutual fund returned 7.83%, against 17.80% for the S&P 500. Net assets were $164.5 million, its annual report said.

On the gap, the annual report said:

"During the same period, the Fund's sizable cash position, and limited exposure to certain areas of the market, including artificial intelligence related companies, contributed to performance lag relative to the benchmark."

The prospectus says the fund may hold, and "has currently held for an extended period of time," a significant position in cash, when Port Street and its sub-adviser determine that not enough quality companies are trading at valuations that meet the fund's criteria. It warns that in a rising market, cash will make the fund lag its benchmark.

The mutual fund's July 29 prospectus says only that the fund invests primarily in equities. It already says the fund may hold significant cash for an extended period.

Under the ETF filing, at least 80% of net assets would, in normal circumstances, go into what it calls quality investments. Cash counts toward that 80%, along with the stocks. The July prospectus states no such test.

The portfolio would stay at 25 to 45 companies. Saratoga Research & Investment Management, the sub-adviser, looks for companies it believes can grow profits faster than the market and that are priced at a discount to their intrinsic values.

Kevin Tanner is chairman, chief executive and chief investment officer of Saratoga. Graham Pierce is chief executive of Port Street. They have run the fund since it opened on March 31, 2014, and they would stay. The fund would still seek total return.

ETF drops shareholder servicing fee

Annual expenses are listed at 1.00% before a 0.13% waiver, and at 0.87% after it. The 1.00% is a 0.85% management fee and an estimated 0.15% in other expenses.

The mutual fund's net fee is 0.97% in its July 29 prospectus. The ETF would not charge that fund's 0.10% shareholder-servicing fee. The two net fees differ by that amount.

The summary says the waiver cannot be ended until at least a year after the reorganization. A later section says it runs through a blank date in 2028. On the mutual fund, the waiver holds expenses to 0.97% through July 29, 2027.

Port Street could recover waived fees for 36 months after the month they were waived. The filing says that recovery cannot push annual expenses above 0.87%.