In this Fund update, Kevin Earley, lead manager of the Mairs & Power Balanced Fund, and Brent Miller, co-manager, discuss the Fund’s returns, drivers of performance so far in 2025, and what to look for during the rest of the year. This was recorded on July 24, 2025.
Executive Summary
The Mairs & Power Balanced Fund (MAPOX) has delivered a year-to-date return of 2.66% through June 30, 2025, trailing both its composite benchmark (60% S&P 500 Total Return Index and 40% Bloomberg U.S. Government/ Credit Bond Index), which has returned 5.43%, and the Morningstar Moderate Allocation peer group at 5.67%. Underperformance came from the equities portion of the portfolio while the fixed income holdings of the Fund outperformance its asset class benchmark. While relative performance lagged in the first half of the year, the Fund’s long-term track record remains competitive, supported by its disciplined, valuation-driven investment approach.
The first half of 2025 was shaped by macroeconomic volatility. Markets were rattled by tariff uncertainty, with equities initially declining before rebounding as trade policies were softened. Inflation metrics showed signs of improvement, though concerns remain about the potential inflationary impact of tariffs. The Federal Reserve has held interest rates steady, awaiting further clarity before making any policy shifts.
Equities Sector Performance
Equity markets continued to be led by a narrow group of mega-cap stocks, which now comprise over 30% of the S&P 500 Index. This concentration has posed challenges for diversified portfolios like the Balanced Fund. However, signs of market broadening emerged, with eight of 11 sectors posting positive returns year-to-date.
From an asset allocation perspective, the Fund’s overweight to equities was a net positive, as stocks outperformed bonds.
Stock Performance
However, equity selection detracted from relative performance, particularly in the Health Care, Industrials, and Communication Services sectors. UnitedHealth Group (UNH) was the largest detractor, impacted by earnings guidance cuts, regulatory scrutiny, and management turnover. Bio-Techne (TECH) also underperformed due to uncertainty in pharmaceutical research funding.
In the Industrials sector, Toro Company (TTC) faced headwinds from a rainy spring causing demand slowdown and declining consumer confidence, while Fastenal (FAST) delivered positive results despite a sluggish backdrop. The Fund’s lack of exposure to high-performing Communication Services names further weighed on returns.
On the positive side, the Fund initiated a position in Amazon (AMZN) during early-year volatility, which contributed favorably as the stock rebounded. Other top contributors included JPMorgan & Chase (JPM), which benefited from a steepening yield curve and resilient credit conditions; Casey’s General Stores (CASY), supported by merchandising and store growth; and Abbott Laboratories (ABT), driven by demand for its glucose monitoring and cardiovascular products.
Fixed Income Performance
The fixed income portfolio outperformed its benchmark, aided by credit selection and a shorter duration profile. The investment managers maintained an overweight to credit and benefited from a steepening yield curve, with short-term rates falling and long-term rates staying higher.
Outlook for the rest of the year
The Fund continues to seek companies with durable competitive advantages and attractive valuations. Recent additions include Amazon and Wisconsin-based utility WEC Energy (WEC), which operates in a balanced regulatory environment and is positioned to benefit from rising electricity demand driven by AI infrastructure growth.
Looking toward the rest of the year, the Fund’s investment philosophy remains unchanged: a long-term, valuation-conscious approach that balances capital growth, income, and capital preservation. The team will continue its disciplined equity selection process and bottom-up credit analysis, while maintaining a slightly short duration to mitigate interest rate sensitivity.
Disclosures
Top 10 Fund Holdings (subject to change)
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Expense ratio: 0.71%
The Composite Index reflects an unmanaged portfolio of 60% of the S&P 500 TR Index and 40% of the Bloomberg Barclays U.S. Government/Credit Bond Index. It is not possible to invest directly in an index.
Morningstar US Fund Allocation-50% to 70% Equity Category is designed to benchmark target-date and target-risk investment products. Index isbased on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company. Index has 60% global equity exposure and 40% global bond exposure. It is not possible to invest directly in an index.
The S&P 500 TR (Total Return) Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. It is not possible to invest directly in an index.
The Bloomberg U.S. Government/Credit Bond Index is a broad-based flagship benchmark that measures the non-securitized component of the U.S. Aggregate Index. It includes investment-grade, U.S. dollar-denominated, fixed-rate treasuries, government related and corporate securities. One cannot invest in an index.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates.
All investments have risks and loss of principal is possible. The Balanced Fund is designedfor long-term investors.
Equity investments are subject to market fluctuations and the Fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings.
Investments in small and midcap companies generally are more volatile. International investing risks include among others political, social or economic instability, difficulty in predicting international trade patterns, taxation and foreign trading practices, and greater fluctuations in price than U.S. corporations.
The Balanced Fund is subject to yield and share price variances with changes in interest rates and market conditions. Investors should note that if interest rates rise significantly from current levels, bond total returns will decline and may even turn negative in the short-term. There is also a chance that some of the Balanced Fund’s holdings may have their credit rating downgraded or may default.
The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus and summary prospectuses contain this and other important information about the Funds, andmay be obtained by calling Shareholder Services at (800) 304-7404, or by visiting www.mairsandpower.com. Read the prospectus and summary prospectuses carefully before investing.
Foreside Fund Services, LLC. is the Distributor for the Mairs & Power Funds
The statements and opinions expressed are those of the speakers and are as of the date of this call. All information is historical and not indicative of future results and subject to change.
Scott Howard is a registered representative of Foreside Fund Services, LLC.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance as of the most recent month end is available by calling 800-304-7404.
The mention of specific securities is not intended as a recommendation or an offer of a particular security, nor is it intended to be a solicitation for the purchase or sale of any security.