AAM Holdings, Inc. (“AAM Holdings”) is the parent company of Advisors Asset
Management, Inc. (“AAM”). Sun Life Financial, Inc holds an indirect majority interest in
AAM Holdings. Sun Life Financial, Inc. is a publicly traded company that is a leading
international financial services organization providing asset management, wealth,
insurance and health solutions to individual and institutional investors. The remaining
interest of AAM Holdings is owned by current and former employees or their families of
AAM. AAM is a registered broker dealer, member FINRA and SIPC, and SEC registered
investment adviser.
AAM provides portfolio supervisory and evaluation services to AAM-sponsored unit
investment trusts (“UITs”) registered under the Investment Company Act of 1940. The
terms and conditions of each UIT are set forth in their offering and governing documents.
UITs are not managed funds and their portfolios are designed to remain relatively fixed.
However, trusts may buy or sell securities under limited circumstances to pay expenses,
issue additional units or redeem units, in limited circumstances to protect the trust, to make
required distributions or avoid imposition of taxes on the trust or as otherwise permitted
by the trust agreement including in cases where significant credit issues arise or where
public tender offers are made with respect to portfolio securities. AAM’s portfolio
supervisory services with respect to AAM sponsored UITs consists of monitoring UIT
portfolios for such events and making determinations with respect to such portfolios in a
manner consistent with the investment objective of the UIT, governing documents of the
UIT and applicable law. Where AAM acts as evaluator to a UIT, its evaluation services
consist of the valuation of each security in the trust’s portfolio on a daily basis and
providing such valuations to the trustee to calculate the UIT’s daily net asset value. AAM
may use certain independent pricing services in the course of providing evaluation services
to the UITs.
AAM has been in business since 1979. AAM Holdings, Inc. is the firm's sole shareholder.
Investment Management Services to Separately Managed Accounts (hereinafter
referred to as “SMA” in the remainder of this document)
AAM provides continuous advice regarding investment of client funds based on the
individual needs of the account holder. Once the particular goals and objectives of an
account holder are established, the appropriate AAM SMA strategy is selected that most
closely aligns the client objectives with the strategy objectives. AAM then manages the
client portfolio to the objectives of the selected strategy and any personal account
restrictions that may exist. AAM will manage advisory accounts on a discretionary basis.
Account supervision is guided by account holder specific factors such as prior investment
experience, current investments, income needs, risk tolerance, income objectives, and other
relevant data as obtained directly from the client in our Primary Advised relationships and
from the Adviser on our Sub-Advised accounts. AAM may engage a subadvisor to provide
investment advice with respect to certain accounts and strategies.
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For our direct advised accounts, through personal discussions and a comprehensive
information gathering process, each client’s investment goals and objectives are
established. From this information, AAM will work with the client to determine which
portfolio is suitable to their particular circumstances. AAM may, if appropriate, suggest
modifications to the model or an allocation among two or more of the models to more
adequately address the client's individual needs. AAM provides clients the opportunity to
place reasonable restrictions on the types of investments to be held in the client's account.
However, AAM reserves the right to refuse or decline the request. Clients will retain
individual ownership of all portfolio securities. In addition to the client specific factors
mentioned in the preceding paragraph, account supervision is also guided by the stated
objectives of the client (i.e., maximum capital appreciation, growth, income, or growth and
income). AAM has opened participation in certain fixed income and equity portfolios to
employees. Employee accounts will be treated in the same manner in all respects as other
client accounts in those strategies, but will pay a reduced employee fee.
For our sub-advised accounts, AAM will work directly with the primary advisor. The
primary advisor shall be solely responsible for determining the suitability of Sub-Advisor’s
investment management services and the related investment strategy(ies) for each client
and each account.
AAM offers account management services through portfolios invested in a variety of fixed
income instruments, equity, and may offer unit investment trusts on a discretionary basis.
Periodically, AAM may recommend purchases and sales in the account based on shifts in
the market, fluctuations in interest rates, updates in customer suitability, goals, or financial
objectives, and other related changes.
AAM has several strategies, each with different objectives, to offer clients multiple
investment solutions to match their objectives and risk tolerances. These portfolios may
consist of the following, as appropriate: individual equities, mutual funds, warrants,
corporate debt securities, commercial paper, closed end funds, exchange traded funds
(ETFs), bonds, municipal debt securities, structured products, notes and/or other
investment products, excluding mutual funds and exchange-traded funds for which AAM
also acts in the capacity of Investment Advisor. AAM will allocate the client's assets among
various investments taking into consideration the objective of the strategy selected and any
personal account restrictions that may exist.
The mutual funds and ETFs will be selected on the basis of any or all of the following
criteria as they relate to the security or its underlying index: performance history; industry
sector; management style and philosophy; track record; investment objectives;
composition and focus, and fee structure and expenses. Weighting among funds and market
sectors is determined by the appropriate model.
In order to ensure that AAM's initial determination of an appropriate portfolio continues to
be suitable and that the client's account continues to be managed in a manner fitting the
client's financial circumstances, AAM will maintain client suitability information in the
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client's file as provided by the end-client in our primary advised relationships and by the
adviser in our sub-advised relationships. On a quarterly basis, AAM will notify Investment
Management Services clients in writing to request updated information regarding the
client's financial situation and investment objectives and whether the client wishes to
impose or modify existing investment restrictions. In addition, AAM will contact our
primary advised clients at least annually to determine whether there have been any changes
in the client's financial situation and whether the client wishes to impose investment
restrictions or modify existing restrictions.
While the underlying securities in Investment Management Services client accounts are
continuously monitored, each client’s account is reviewed at least annually and rebalanced
as needed. If AAM believes that a reallocation is necessary, for example, if a particular
investment is performing inadequately, or if AAM believes that a different investment is
more suitable for the portfolio's goal, then AAM will reallocate the client’s account in
accordance with the discretionary authority granted by the client.
AAM currently offers the investment portfolios described below as the primary investment
strategy offerings for its separately managed account program. However, AAM also
manages accounts utilizing other investment strategies and securities and AAM may, from
time-to-time, construct customized portfolios upon request and at its discretion. These
other investment strategies and/or securities may include, but are not limited to,
Convertible Debt, Structured Notes, Reverse Convertible, Derivative Debt, Inflation
Linked Securities, Variable Rate Securities and Mortgage Securities.
WRAP Fee Programs
AAM serves as an investment manager to SMA accounts that are placed with us through
various Wrap Fee Programs. AAM is not a WRAP Sponsor. AAM receives a portion of
the wrap fee for services provided to wrap fee programs.
Investment Portfolios
Below, please find information on AAM’s Core Strategies for SMA accounts:
Fixed Income Portfolios
AAM’s investment process revolves around our quarterly Investment Committee meeting.
The quarterly Investment Committee meeting is the primary platform for each committee
member to discuss prevailing economic conditions, express an outlook on the domestic and
global macroeconomic environment and discuss how these views/conditions impact the
direction of the strategy. The Investment Committee derives a macroeconomic consensus
and market outlook from the quarterly meeting which in turn is used to determine tactical
duration exposure, credit exposures, asset type and sector/revenue source exposures.
Where strategy mandates allow, we then implement appropriate exposures in compliance
with the quarterly investment committee consensus.
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AAM’s formal investment process can be generally described through a four-step
process:
• Selecting appropriate investments relative to their impact on duration
relative to AAM’s tactical duration targets
• Selecting appropriate investments relative to the value which the credit
exposure introduces in context AAM’s macroeconomic and related sector
outlooks
• Selecting appropriate investments on a relative value basis through spread
analysis, maturity, coupon, duration, and credit quality.
• Portfolio
construction techniques which aim to diversify maturity and
duration exposure while also diversifying across revenue source, capital
structure, geography, issue characteristics and position sizing.
AAM’s investment philosophy starts with arriving at an understanding of the dynamic risks
that both interest rates and credit exposure pose to fixed income portfolios and how to best
manage those risks in the context of defined investment mandates. AAM believes that
managing credit risk includes both proactively avoiding unacceptable levels of relative
credit risk, but also seeking opportunities to uncover relative value appropriate within the
context of the strategy mandates. AAM has long been an advocate for tactically managing
duration exposure in an incremental and intelligent manner based upon our capital markets
outlook, business and interest rate cycle outlook. Our philosophy is rooted in the fact that
time in the market and cashflows are the largest contributors to long-term returns.
Asset Classes – The primary asset classes are Treasury, U.S. Agencies, Municipal
securities, Mortgage and Asset Backed and Corporate Obligations. Other asset classes are
privately issued (144) securities, equities, closed-end funds, exchange traded funds,
structured notes, reverse convertible notes, foreign/emerging market U.S. dollar
denominated debt, Loan Participation and Assignments, Variable and Floating Rate
Securities, Event-Linked Bonds, Convertible and Equity securities, Repurchase
Agreements, When-Issued Securities and Derivatives. The account may also include other
types of securities and use a variety of investment techniques and strategies, which are not
described above.
In the case of tax-exempt investments, the account will invest primarily in obligations of
state and local municipalities, their agencies and U.S. Territories and other tax-exempt
investments which may include privately issued (144) securities, closed-end funds, auction
rate paper, variable and floating rate securities, notes and municipal futures. The account
may invest in "private activity" bonds whose interest is a tax-preference item for purposes
of the federal alternative minimum tax (“AMT”).
Equity Portfolios
AAM offers a number of equity strategies that use separate criteria for investment. In
general, our portfolios should be considered to be concentrated as to the number of
positions held in any particular strategy. Our quantitative strategies are designed to offer a
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strict buy and sell discipline based on factors that have historically been attractive to future
investors. Each of these strategies is constrained to common stock investment and is always
fully invested. While our dividend focused strategies are broadly diversified by industry
sector, other quantitative strategies may not be. AAM’s technical strategy will seek
attractive stocks in a limited selection of sectors deemed to be superior by management.
Cash may be used to limit overall portfolio volatility in this strategy.
Mutual Funds
AAM provides investment advisory services pursuant to an investment advisory agreement
to the AAM/Bahl & Gaynor Income Growth Fund, the AAM/Insight Select Income Fund,
the AAM/HIMCO Short Duration Fund, and the AAM/Phocas Real Estate Fund (the
"Funds"), all series of Investment Managers Series Trust, a Delaware statutory trust and
open-end registered investment company. AAM's investment advisory services to the Fund
include (i) the selection, oversight, termination and replacement of sub-advisors, (ii)
ensuring quality control of the sub-advisor's investment process; and (iii) monitoring and
measuring the Fund's risk and return against appropriate benchmarks and peers. Day-to-
day management of the individual Fund's portfolio, selection of the Fund's portfolio
investments and supervision of its portfolio transactions (subject to the general oversight
of the Fund's Board and AAM) have been delegated as outlined in the below Sub-Advisor
table.
Fund Name Sub-Advisor
AAM/Bahl & Gaynor Income Growth Fund
1 Bahl & Gaynor, Inc.
AAM/HIMCO Short Duration Fund Hartford Investment Management
Company (HIMCO), the asset
management arm of The Hartford
Financial Services Group, Inc.
AAM/Insight Select Income Fund Insight North America LLC
AAM/Phocas Real Estate Fund
2 Phocas Financial Corporation
The investment advisory services provided by AAM to the Fund are governed by the terms
of the Fund’s statutory prospectus, Statement of Additional Information (SAI), AAM's
advisory agreement with the Fund, and AAM's sub-advisory agreement with the respective
Fund’s sub-advisors.
Exchange Traded Funds
AAM provides investment advisory services pursuant to an investment advisory agreement
to the following ETFs:
1 AAM will cease to act as investment adviser of the AAM/Bahl & Gaynor Income Growth Fund effective
on about April 1, 2024, and AAM will have no relation to the Fund thereafter.
2 The AAM/Phocas Real Estate Fund’s Board has approved a Plan of Liquidation for the Fund that authorizes
the termination, liquidation and dissolution of the Fund. The Fund is closed to all new investment. The Fund
will be liquidated on or about April 26, 2024.
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Exchange Traded Funds: Ticker
AAM S&P 500 High Dividend Value ETF SPDV
AAM S&P Developed Markets High Dividend Value ETF DMDV
AAM S&P Emerging Markets High Dividend Value ETF EEMD
AAM Low Duration Preferred and Income Securities ETF PFLD
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF
3 SMIG
AAM Transformers ETF TRFM
The AAM ETFs are series of the ETF Series Solutions Trust, a Delaware statutory trust
and open-end registered investment company. AAM's investment advisory services to the
Fund include (i) the selection, oversight, termination and replacement of sub-advisors, (ii)
ensuring quality control of the sub-advisor's investment process; and (iii) monitoring and
measuring the Fund's risk and return against appropriate benchmarks and peers. Day-to-
day management of the individual Fund's portfolio, selection of the Fund's portfolio
investments and supervision of its portfolio transactions (subject to the general oversight
of the Fund's Board and AAM) have been delegated pursuant to a sub-advisory agreement
between AAM and the Sub-Advisor the following sub-advisor for each fund:
Exchange Traded Funds: Sub-Advisor
AAM S&P 500 High Dividend Value ETF Vident Advisory, LLC
AAM S&P Developed Markets High Dividend Value ETF Vident Advisory, LLC
AAM S&P Emerging Markets High Dividend Value ETF Vident Advisory, LLC
AAM Low Duration Preferred and Income Securities ETF Vident Advisory, LLC
AAM Bahl & Gaynor Small/Mid Cap Income Growth ETF
4 Bahl & Gaynor, Inc
AAM Transformers ETF Vident Advisory, LLC
The investment advisory services provided by AAM to the Fund are governed by the terms
of the prospectus, AAM's advisory agreement with the Fund, and AAM's sub-advisory
agreement with the Sub-Advisor.
Assets Under Management
As of December 31, 2022 we were actively managing $3,734,957,784 of clients’ assets on
a discretionary basis and $5,227,953 on a non-discretionary basis (investment model
provider).
3 AAM will cease to act as investment adviser of the AAM/Bahl & Gaynor Small/Mid Cap Income Growth
ETF effective on about April 8, 2024, and AAM will have no relation to the Fund thereafter.
4 AAM will cease to act as investment adviser of the AAM/Bahl & Gaynor Small/Mid Cap Income Growth
ETF effective on about April 8, 2024, and AAM will have no relation to the Fund thereafter.
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Business Continuity
AAM has developed and maintained a comprehensive Business Continuity Plan (BCP).
The BCP is an internal document that is not available to the public. AAM has summarized
the BCP and created a separate document, the Business Continuity Plan Summary, which
is available on AAM’s public website and is intended to provide our customers and other
interested parties with information regarding our BCP.
Cybersecurity
Advisors Asset Management, Inc. (AAM) is critically dependent on both information and
information systems. Ensuring that all employees have access to the information they need
when they need it and that the information they depend on is accurate and remains
confidential is paramount to the continued success of AAM. These three attributes—
confidentiality, integrity and availability—are the three critical components of information
security.
The mission of the Information Security Team (InfoSec) is to act as a central point for
information security within the organization and to establish and maintain enterprise wide
information security policies, standards, and procedures. Strong policies and internal
controls are only effective when employees understand both the value of AAM information
and their role in securing that asset. The security of AAM information and information
systems is ultimately and critically dependent on the actions of each and every employee
of AAM. A key part of the AAM information security strategy is to provide ongoing
Security Awareness and Cybersecurity training with the central theme that information
security is everyone’s responsibility.
InfoSec strives to continuously evaluate, recommend, and help implement changes to
manage risk and to improve the overall security stance of the AAM network environment.
This cycle of continuous improvement helps to enable all employees to work within a high-
availability and secure environment, and also helps to gain and maintain the trust that our
customers and business partners place in our control environment.