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 in 2025, and what to look for in 2026. This was recorded on January 27, 2026.
Executive Summary
The Mairs & Power Balanced Fund (MAPOX) delivered a 6.61% return in 2025, underperforming both its benchmark and peer group. Despite recent relative headwinds, the Fund’s disciplined valuation philosophy remains intact and the Fund managers' believe it will continue to support competitive long‑term results.
2025 was again defined by narrow mega‑cap leadership, particularly among artificial intelligence‑related technology names, which had an outsized impact on broad market returns. This narrow leadership has presented a challenge for diversified, valuation‑sensitive portfolios like the Balanced Fund. Later in the year, there were tentative signs of market broadening, though the highest valuation names continued to dominate the S&P 500 returns.
Equities Sector Performance
Equity holdings were the primary source of relative underperformance, particularly due to underexposure to the handful of mega‑cap, AI‑oriented technology companies that once again drove index gains. The Fund was also impacted by challenges within Information Technology, Health Care, and Financials sectors. The Fund’s lack of exposure to Energy and Real Estate sectors helped performance.
From an asset allocation perspective, the Fund’s overweight to equities was a net positive, as stocks outperformed bonds.
Stock Performance
Despite asset allocation being a positive, equity stock selection detracted from relative performance in 2025. Fiserv (FI), UnitedHealth Group (UNH), and Hormel (HRL) were the largest relative detractors, while JPMorgan Chase (JPM), Roche (RHHBY), and Casey's General Stores (CASY) were positive contributors to relative performance.
On the positive side, the Fund initiated a position in Amazon (AMZN) during early-year volatility, which contributed favorably as the stock rebounded. The Fund also added 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, and re-intiated a position in Travelers (TRV) due to improved profitability and durable competitive advantages.
Fixed Income Performance
The fixed income portfolio outperformed its benchmark, aided by an overweight to corporate bonds and shorter maturities, both of which contributed to outperformance. Additionally, curve steepening (short-term rates falling, long-term rates flat) favored the Fund’s positioning. Over the second half of the year, the team selectively reduced risk and gradually increased credit quality where opportunities were limited.
Looking Ahead
Despite near‑term underperformance driven by concentrated market leadership, the Fund remains committed to its foundational approach: balancing capital growth, current income, and preservation of capital. The Fund managers are focused on identifying companies capable of driving long-term value, especially those positioned to benefit from technological trends (i.e., AI) over full market cycles, not simply during the build‑out phase.
Looking to 2026 and beyond, the Fund managers anticipate:
- Continued AI infrastructure investment, likely reshaping utilities, industrials, and data‑center‑related businesses
- A more favorable interest rate backdrop as cuts potentially continue into 2026
- Potential improvement in consumer confidence driven by small‑business hiring and earnings recovery
- A preference for U.S. equities and domestic fixed income, reflecting shifting geopolitical risk
- Maintaining slightly short duration to manage interest‑rate risk while selectively adding higher‑quality credit
The Fund remains committed to its long-term approach of balancing capital growth, current income, and capital preservation, and leveraging market volatility to invest at reasonable valuations.
Disclosures
Top 10 Fund Holdings (subject to change)
Click Here for standardized performance.
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.
Pete Slattery 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.