So it really invests in 4 sectors, not 5.

I bought DSENX earlier this year, and I and remember nothing about swaps and derivatives. Maybe I misunderstood objectives but basically the fund is a value fund investing in sector indexes that are at the time the 5 cheapest s&p500 sectors to invest in. It throws out the sector with the poorest momentum.
Fom the double Line website:
Strategy
The Shiller Enhanced CAPE® strategy offers exposure to the “cheapest sectors” of the large cap equity markets using an “Index Overlay” technique while the remaining assets are invested in a fixed income portfolio. Both segments of the portfolio offer a value play in their respective markets. The Barclays Shiller CAPE® US Sector Index strives to outperform the S&P 500 Index, while the fixed income side strives to outperform cash, thus offering one diversified value product with two unique source of possible value.
Philosophy
The Barclays Shiller CAPE® US Sector Index shifts the exposure to the “cheapest” sectors of the large cap equity market by using Dr. Robert Shiller’s CAPE® Ratio which seeks to assess longer term equity valuations by using an inflation adjusted earnings horizon that is 10 times longer than the traditional Price Earnings or P/E measure. The Relative CAPE® Ratio subdivides the S&P 500 into 10 sectors, eliminating the 5 with the highest relative CAPE® ratios, leaving what we believe are the 5 better value proposition sectors. Index methodology eliminates the one sector with the worst one-year momentum, to try and avoid the value trap.
Index Overlay Process
Using a total return index swap to gain the exposure to the Barclays Shiller CAPE® US Sector Index, the remaining assets are then invested into, what we believe to be, a lower-risk bond portfolio with the goal of trying to outperform cash. This provides a double-value proposition, where we believe we can add value to both sides of the portfolio.

This is in a sense a followup to the MFO post: M*: Will You Sacrifice Returns For Income?
http://www.mutualfundobserver.com/discuss/discussion/29065/m-will-you-sacrifice-returns-for-income
M*'s thesis is that objective-based funds do tend to achieve their objectives, but you achieve the same objectives and better returns with the right mix and management of traditional funds.
Quoting from the full M* paper (cited in both columns):
"Income-oriented funds generally have little trouble producing above-average income. However, investors in the average income-oriented fund could have achieved similar returns with lower volatility and with more control over the timing of income using a total-return approach that sold fund shares as needed."
"As a group, funds that aim for tempered volatility or target returns accomplish their objectives, though that's largely because the objectives are so generic or nebulous. ... A blended equity and fixed-income index delivers a similar pattern of returns [to tempered volatility funds], though with markedly better downside protection, which results in better risk-adjusted results."
"Most target-return funds produce positive returns over long-enough measurement periods and also are less volatile than the S&P 500. But so does a simple blended index, which has even better returns and lower volatility than most target-return funds."

Yes, and furthermore, the fund owns Cardinal Financial, which is in talks with U.S. Bancorp to be acquired. CFNL up 5% as of 1010 EDT.

FYI: Fund managers are begging for someone — anyone — to increase investment spending.
That's the primary takeaway from Bank of America Merrill Lynch's monthly survey of money managers.
A net 48 percent of investors surveyed thought fiscal policy was too tight around the world (that's a record proportion who espouse that view), while 56 percent said they wanted companies to boost capital spending — a rise of 10 percentage points over the past four months.
A net 69 percent of those surveyed say that businesses aren't investing enough, which is close to the record level for this survey.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-08-16/fund-managers-are-crying-out-for-governments-and-businesses-to-invest

I think the increase in market volatility makes active management increasingly difficult. When a company misses earnings by a penny the stock sells off by 15% or when you buy the right stock at the right price and it does not behave as it should (even if you analyze the equity correctly) because the price is more influenced by the number of ETF's it is held in rather than the quality of the reported earnings.

That's okay. I hear next month they're launching a Phonetic Integrated Alpha fund with a ER waiver that brings the fee down to .53, which is a rock-bottom STEAL. Of course there's a 6.25% 12(b)-1 fee but who's looking? The more complex the name, the more retail sheeple will flock to it, thinking they're part of the 'smart' money.
In this case, Phonetic version is 3x-leveraged. The Numeric version is unlevered. ;)

My point is, if he is correct, then we should just put everything into VTSAX and leave it at that. So are we investing in all of these other funds because we actually think he is incorrect? Or do we realize that he is right and we just do the illogical because we enjoy it?

++++++
Regarding, "if he is correct, then we should just put everything into VTSAX".
He actually suggested putting 50% of stocks into a foreign stock market index fund, such as the Total International Stock Market Index fund.
So just for example, half in VTSAX and half in VTIAX.
Also, he said, 'if you feel you want more smaller companies in your portfolio, you could add an index fund devoted to small caps'

Yes, it's closing to new investors on 30 Sept. ... Anyone else catch this, though? PrivateBank Corp. is the largest holding in MSCFX (3.55% of assets), and it's being bought by Canada's CIBC. (Ticker CM in both Toronto and NY.) I like to follow the big Canadian banks.
http://investor.theprivatebank.com/Cache/1500088182.PDF?O=PDF&T=&Y=&D=&FID=1500088182&iid=1023170

Net fund opg expenses on the 'Investor' class share, AFTER fee waiver: 6.46% of net assets...
And I've heard of 'Investor', 'Institutional' and even 'Y' class shares before. But if you buy their "Ultra" class shares (minimum of $350 MM) your exenses are only 5.98% of assets per year.
Man, I am in the WRONG business!

https://www.sec.gov/Archives/edgar/data/809593/000113322816011586/e446873_485apos.htm
(Very expensive...)

Hi Guys,
Heavy weight fund managers do exist, but they do not persist. Yesterday's winners are likely to be tomorrow's losers. That's a fair summary of the historical record that is repeated time and time again.
“So if you can get a couple of decent years together and a decent story and then slide quietly into mediocrity, it’s a recipe for success for your fund company, and a recipe for disappointment for investors.” Thea's not me talking. That's a quote from Professor Snowball.
Fund managers do a terrific job at stock selection that would generate a positive Alpha without integrating research and trading costs into the equation. Most managers can not consistently overcome that frictional drag.
With a very few rare exceptions who can not be identified ahead of time, heavy weight fund managers are a myth. That's a major factor in the increasingly popular passive Index investment strategy. Actively managed mutual funds are becoming an ever decreasing fraction of my portfolio. I tend to apply lessons learned slowly.
EDIT: Sorry, I neglected to include a reference to the article that I extracted the David Snowball quote from. Here it is:
http://www.marketwatch.com/story/90-of-fund-managers-beat-the-market-but-their-shareholders-dont-2015-01-21
Best Wishes.

@expatsp: Apparently the attractiveness of low volatility portfolios has been known since the 1960s-1970s per AQR, but has only recently become indexed and become popular. But the effect is real and works for domestic and foreign equities.
AQR Paper
MSCI Risk Premia
JPMorgan Paper
Disclosure: we currently own VMVFX.
Kevin

FYI: Almost five years ago, when Bill Miller left the Legg Mason Value Trust — the mutual fund he once led to an astounding 15 straight calendar years of beating the S&P 500 — the question was whether the lasting memory of his career would be one of legendary success or epic failure.
Last week, when it was announced that Miller would formally break ties with Legg Mason after more than three decades, the answer was clear: the pains speak louder than the achievements.
Regards,
Ted
http://www.marketwatch.com/story/whatever-happened-to-the-heavyweight-mutual-fund-managers-2016-08-16/print

Well, yup is the answer.....somewhat.
From the article: "Powering the bond rally is an enormous thirst for yield, fueled by negative interest rates in nearly a quarter of the world. About $8 trillion of government bonds worldwide offered yields below zero, according to Bloomberg, affecting some 500 million people. Even though the bellwether 10-year Treasury note yields just 1.54%, that yield is far more appealing than a guaranteed loss."
Also from the article: "Investors worldwide have poured $202 billion into bond funds this year, according to J.P. Morgan Chase". Unknown is who "investors" are per the article.
>>>One shouldn't leave out the "twitchy" factor = perceived safety.
Total return = yield + price performance, eh?
I see the trend as much to the price performance as yield. Those continuing to suspect that yields will remain low for an extended period of time are banking on price performance, although perhaps at a slower pace than previous.
Similar trends exist in broad and various sector equity area, eh? Equity growth and value have their swings and trends, too. Hot money still looking for the best bang for the buck.
Are "investors" per the article, include sovereign funds, pension funds and related, as well as individual investors? Most of the "large monies" group of investors are scratching their investing heads as much as anyone at this discussion board. So, don't feel overly confused by the ongoing perversions of the market place; at least relative to your intellect. You have company for such a status, PhD's or not.

In this space, I would consider and actually prefer XSLV:
CHART
Backtested Performance
Kevin

Also initiated a position in DSENX after listening to Mr Gundlach's July Webcast. In his words,for those.. (looking to) the stock market.. ,DSENX has an emphasis on risk management and risk adjusted returns. Recap here in Q and A.Two and 1/2 pages of quick hit commentary.
http://www.doublelinefunds.com/wp-content/uploads/7-12-16_AssetAllocationWebcast_Recap.pdf
Also opened small position in DRRAX today.Managed out of London.World view?
Trimmed Gold/Precious Metal positions over past 60 days.Now just under 5 % of investment total,mostly in TGLDX. Proceeds into PTIAX,now my largest bond holding.

FYI: Intermediate-term bonds took in $15 billion last month — the largest inflow of any Morningstar category.
Regards,
Ted
http://www.investmentnews.com/article/20160815/FREE/160819958?template=printart

@MFO: Members From the Mairs & Power Website:
Regards,
Ted
Mairs & Power's Small Cap Fund Closes to New Investors
Announcement - August 15, 2016
After careful deliberation, Mairs & Power has decided to close the Small Cap Fund (MSCFX/ the "Fund") to new investors effective as of the close of business on September 30, 2016 (the "Closing Date"). The Fund will remain open to investment by existing shareholders, existing Mairs & Power private clients, retirement plans with an existing agreement and new or existing clients of an individual financial adviser representative with pre-existing investments in the Fund.
Mairs & Power Growth Fund (MPGFX) and Mairs & Power Balanced Fund (MAPOX) remain open to new investors.
"With our disciplined, low turnover and long-term investment approach, we hold relatively concentrated positions in a carefully selected portfolio of companies. This strategy means that we manage our asset base carefully," said Mark Henneman, Chief Investment Officer of Mairs & Power, Inc. (the "Adviser"). "We manage capacity for each of our Funds individually, taking a conservative approach that considers, among other factors, total assets under management, the rate of asset growth and the availability of securities that meet the Funds' investment objectives."
"We beleive this decision is in the best long-term interest of the Small Cap Fund's existing shareholders, as it allows us to maintain stable and balanced growth with the Fund. We remain confident in our ability to continue to find attrative investment opportunites within the small cap universe and we reamin committed to protecting the interests of our Fund's shareholders. This soft close demonstrates that commitment," said Andrew Adams, lead portfolio manager of the Mairs & Power Small Cap Fund.
Launched in 2011, the Small Cap Fund has experienced significant, but manageable, asset flows. The Fund's performance success over one-, three-, and five-year periods led to strong asset growth from both existing and new investors. While this growth has not impacted the Adviser's ability to implement the Fund's stated investment strategy, the decision to close the Fund at this time followed careful deliberation and discussion on how best to serve the interests of existing shareholders by managing asset growth.

https://www.sec.gov/Archives/edgar/data/1521353/000089418916011080/mpft_497e.htm
497 1 mpft_497e.htm SUPPLEMENTARY MATERIALS
Filed pursuant to Rule 497(e)
Registration No. 333-174574
MAIRS & POWER FUNDS TRUST
(the “Trust”)
Mairs & Power Small Cap Fund
(the “Fund”)
Supplement dated August 15, 2016
to the Prospectus, the Summary Prospectus and the Statement of Additional Information
dated April 30, 2016
Effective as of the close of business on September 30, 2016 (the “Closing Date”), the Fund will be closed to most new investors. Mairs & Power, Inc., the investment adviser to the Fund (the “Adviser”) believes that limiting investment in the Fund will help ensure that the Fund can be effectively managed in accordance with its stated investment objective. The closing is intended to promote long-term investments in the Fund, thereby contributing to a more stable asset base and the continued efficient management of the Fund. This decision was made after considering the current size of the Fund (approximately $274 million as of July 31, 2016) and the availability of common stocks of small cap companies that meet the Fund’s investment criteria.
Only investors of the Fund as of the Closing Date, whether owning shares directly through the Fund’s transfer agent or through a bank, broker-dealer, financial adviser or recordkeeper (“Financial Intermediary”), are eligible to purchase shares of the Fund. The Fund will continue to permit the following types of investments in the Fund:
· Investments by new or existing clients of an individual financial adviser representative who already had client assets invested in the Fund on the Closing Date;
· Additional share purchases or reinvestment of dividends or capital gains by existing Fund shareholders;
· Investments made through qualified retirement plans (such as 401(a), 401(k) and other defined contribution plans and defined benefit plans) for which the Fund is an eligible investment alternative and whose records are maintained by a Financial Intermediary having an agreement with the Fund in effect on or before the Closing Date;
· Investments by a Trustee or officer of the Trust, an employee of the Adviser, a member of the immediate family of any of those persons, or clients of the Adviser; and
· An investment that officers of the Trust determine, in their sole discretion, would not adversely affect the Adviser’s ability to manage the Fund effectively.
The Fund may ask you to verify that you meet one of the guidelines above prior to permitting you to open a new account in the Fund. The Fund reserves the right to prohibit a transaction otherwise permitted if the Fund believes doing so to be in the Fund’s best interest. In addition, the Fund reserves the right, at any time, in its sole discretion, to further modify or amend the extent to which the future sales of shares are limited.
For additional information regarding restrictions on new purchases of shares of the Fund, please contact the Fund at 1-800-304-7404 (toll free).
Investors should retain this supplement for future reference.