PRINCIPAL FUNDS, INC.
 SUB-ADVISORY AGREEMENT


AGREEMENT executed as of the 24th date of October, 2011, by and between
PRINCIPAL MANAGEMENT CORPORATION, an Iowa corporation (hereinafter called
"the Manager"), and AQR CAPITAL MANAGEMENT, LLC , a Delaware Limited
Liability Company ("AQR") and CNH PARTNERS, LLC, a Delaware Limited
Liability Company ( "CNH", and together  with AQR, the "Sub-Advisor").

W I T N E S S E T H:

WHEREAS, the Manager is the manager and investment adviser to each Fund of
the Principal  Funds, Inc., (the "Fund"), an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and

WHEREAS, the Manager desires to retain the Sub-Advisor to furnish it with
portfolio selection and related research and statistical services in
connection with the investment advisory services for each series
identified in Appendix A ( hereinafter called the "Series"), which the
Manager has agreed to provide to the Fund, and the Sub-Advisor desires to
furnish such services; and

WHEREAS, The Manager has furnished the Sub-Advisor with copies properly
certified or authenticated of each of the following and will promptly
provide the Sub-Advisor with copies properly certified or authenticated of
any amendment or supplement thereto:

 	(a)	Management Agreement (the "Management Agreement") with the Fund;

 	(b)	The Fund's registration statement and financial statements as
filed with the Securities and Exchange Commission;

 	(c)	The Fund's Articles of Incorporation and By-laws;

(d)	Policies, procedures or instructions adopted or approved by the
Board of Directors of the Fund relating to obligations and services
provided by the Sub-Advisor.

NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, the parties agree as follows:

1.	Appointment of Sub-Advisor

In accordance with and subject to the Management Agreement, the
Manager hereby appoints the Sub-Advisor to perform the services
described in Section 2 below for investment and reinvestment of the
securities and other assets of the Series, subject to the control
and direction of the Manager and the Fund's Board of Directors, for
the period and on the terms hereinafter set forth.


The Sub-Advisor accepts such appointment and agrees to furnish the
services hereinafter set forth for the compensation herein provided.
The Sub-Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or
the Manager in any way or otherwise be deemed an agent of the Fund
or the Manager.

2.	Obligations of and Services to be Provided by the Sub-Advisor

		The Sub-Advisor is authorized to and will:

(a)	Provide investment advisory services, including but not limited
to research, advice and supervision for the Series.

(b)	Furnish to the Board of Directors of the Fund for approval (or
any appropriate committee of such Board), and revise from time
to time as economic conditions require, a recommended investment
program for the Fund consistent with the Series' investment
objective and policies.

(c)	Implement the approved investment program by placing orders for
the purchase and sale of securities without prior consultation
with the Manager and without regard to the length of time the
securities have been held, the resulting rate of portfolio
turnover or any tax considerations, subject always to the
provisions of the Fund's Articles of Incorporation and Bylaws,
the requirements of the 1940 Act, as each of the same shall be
from time to time in effect.

(d)	Advise and assist the officers of the Fund, as requested by the
officers, in taking such steps as are reasonably necessary or
appropriate to carry out the decisions of its Board of
Directors, and any appropriate committees of such Board,
regarding the general conduct of the investment business of the
Series.

(e)	Maintain, in connection with the Sub-Advisor's investment
advisory services provided to the Series, its compliance with
the 1940 Act and the regulations adopted by the Securities and
Exchange Commission thereunder and the Series' investment
strategies and restrictions as stated in the Fund's prospectus
and statement of additional information, subject to receipt of
such additional information as may be required from the Manager
and provided in accordance with Section 11(d) of this Agreement.
The Sub-Advisor has no responsibility for the maintenance of
Fund records except insofar as is directly related to the
services it provides to the Series.

(f)	Report to the Board of Directors of the Fund at such times and
in such detail as the Board of Directors may reasonably deem
appropriate in order to enable it to determine that the
investment policies, procedures and approved investment program
of the Series are being observed.

(g)	Upon request, provide assistance in the determination of the
fair value of certain securities when reliable market quotations
are not readily available for purposes of calculating net asset
value in accordance with procedures and methods established by
the Fund's Board of Directors.

(h)	Furnish, at its own expense, (i) all necessary investment and
management facilities, including salaries of clerical and other
personnel required for it to execute its duties faithfully, and
(ii) administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
its duties under this Agreement.

(i)	Execute and enter into brokerage contracts, futures account
agreements , derivatives agreements, risk disclosure and other
agreements on behalf of the Series with brokers, dealers,
futures commission merchants, banks or other agents or
counterparties (each, a "broker-dealer") and perform such
functions as it considers reasonable, necessary or convenient in
order to carry out the purposes of this Agreement. The Fund
understands it will be bound by the terms of agreements executed
by the Sub-Advisor on the Series' behalf to the same extent as
if the Fund had executed such agreement directly.  Under most
such agreements, subject to applicable rules, regulations,
orders and rulings (including Securities and Exchange Commission
"No-Action" Letters),  a broker-dealer is generally granted a
lien on, and a right to set off against, any of the Series'
assets managed by the Sub-Advisor held at an exchange or at the
custodian of the Series, in order to satisfy any indebtedness
arising out of the trading activity, and the broker-dealer has
the right to liquidate such account in the event of a default.
The Fund will remain liable for any amounts owed to broker-
dealer including any debit balances, losses or other amounts due
as a result of the Sub-Advisor's trading on the Series' behalf,
including commissions.  Notwithstanding anything to the contrary
in this Agreement, except as otherwise specified by notice from
the Fund to the Sub-Advisor, the Sub-Advisor may establish
accounts in the name of the Series and place orders for the
execution of transactions in accordance with the investment
guidelines hereunder with or through any broker-dealer that the
Sub-Advisor may select in its own discretion and without notice
to the Fund.  Such broker-dealers are authorized to act on
instructions from the Sub-Advisor, including, but not limited to
instructions with respect to transferring money, securities or
other property between accounts held by such broker-dealer or
elsewhere on behalf of the Series and to instruct the receipt or
delivery of securities or property on behalf of the Series.
Broker-dealers may rely on instructions from the Sub-Advisor
until they have received written notice of Fund's revocation,
provided, however, that such revocation shall not be effective
with respect to open positions or outstanding orders submitted
by the Sub-Advisor but not yet executed.

(j)	Place all necessary orders with broker-dealers or issuers
(including affiliated broker-dealers), and negotiate
commissions, if applicable.  To the extent consistent with
applicable law, purchase or sell orders for the Series may be
aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Advisor. In such event allocation of
securities so sold or purchased, as well as the expenses
incurred in the transaction, will be made by the Sub-Advisor in
the manner the Sub-Advisor considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and to
other clients.  The Manager recognizes that, in some cases, this
procedure may limit the size of the position that may be
acquired or sold for the Series.  The Sub-Advisor will report on
such allocations at the request of the Manager, the Fund or the
Fund's Board of Directors providing such information as the
number of aggregated trades to which the Series was a party, the
broker-dealers to whom such trades were directed and the basis
for the allocation for the aggregated trades.  The Sub-Advisor
shall use its best efforts to obtain execution of transactions
for the Series at prices which are advantageous to the Series
and at commission rates that are reasonable in relation to the
benefits received. However, the Sub-Advisor may select brokers
or dealers on the basis that they provide brokerage, research or
other services or products to the Sub-Advisor. To the extent
consistent with applicable law, the Sub-Advisor may pay a broker
or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer
spread another broker or dealer would have charged for effecting
that transaction if the Sub-Advisor determines in good faith
that such amount of commission is reasonable in relation to the
value of the brokerage and research products and/or services
provided by such broker or dealer. This determination, with
respect to brokerage and research products and/or services, may
be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Advisor and its
affiliates have with respect to the Series as well as to
accounts over which they exercise investment discretion. Not all
such services or products need be used by the Sub-Advisor in
managing the Series. In addition, joint repurchase or other
accounts may not be utilized by the Series except to the extent
permitted under any exemptive order obtained by the Sub-Advisor
provided that all conditions of such order are complied with.

(k)	Maintain all accounts, books and records with respect to the
Series as are required of an investment advisor of a registered
investment company pursuant to the 1940 Act and Investment
Advisers Act of 1940 (the "Investment Advisers Act"), and the
rules thereunder, and furnish the Fund and the Manager with such
periodic and special reports as the Fund or Manager may
reasonably request.  In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Advisor hereby agrees that all
records that it maintains for the Series are the property of the
Fund, agrees to preserve for the periods described by Rule 31a-2
under the 1940 Act any records that it maintains for the Fund
and that are required to be maintained by Rule 31a-1 under the
1940 Act, and further agrees to surrender promptly to the Fund
any records that it maintains for the Series upon request by the
Fund or the Manager.

(l)	Observe and comply with Rule 17j-1 under the 1940 Act and the
Sub-Advisor's Code of Ethics adopted pursuant to that Rule as
the same may be amended from time to time.  The Manager
acknowledges receipt of a copy of Sub-Advisor's current Code of
Ethics.  Sub-Advisor shall promptly forward to the Manager a
copy of any material amendment to the Sub-Advisor's Code of
Ethics.

(m)	From time to time as the Manager or the Fund may request,
furnish the requesting party reports on portfolio transactions
and reports on investments held by the Series, all in such
detail as the Manager or the Fund may reasonably request.  The
Sub-Advisor will make available its officers and employees to
meet with the Fund's Board of Directors at the Fund's principal
place of business on due notice to review the investments of the
Series.

(n)	Provide such information as is customarily provided by a sub-
advisor and may be required for the Fund or the Manager to
comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of
1986, as amended (the "Code"), the 1940 Act, the Investment
Advisers Act, the Securities Act of 1933, as amended (the
"Securities Act"), and any state securities laws, and any rule
or regulation thereunder.  Sub-Advisor will advise Manager of
any changes in Sub-Advisor's Senior Management (i.e. Chief
Investment Officer and Chief Executive Officer) within a
reasonable time after any such change.  Manager acknowledges
receipt of Sub-Advisor's Form ADV more than 48 hours prior to
the execution of this Agreement.

(o)		Have the responsibility and authority to vote proxies solicited
by, or with respect to, the issuers of securities held in the
Series.  The Manager shall cause to be forwarded to Sub-Advisor
all proxy solicitation materials that it receives and shall
assist Sub-Advisor in its efforts to conduct the proxy voting
process.

    3.	Prohibited Conduct

In providing the services described in this agreement, the Sub-
Advisor will not consult with any other investment advisory firm
that provides investment advisory services to any investment company
sponsored by Principal Life Insurance Company regarding transactions
for the Fund in securities or other assets.

    4.	Compensation

As full compensation for all services rendered and obligations
assumed by the Sub-Advisor hereunder with respect to the Fund, the
Manager shall pay the compensation specified in Appendix A to this
Agreement. AQR acknowledges that if it receives the entire amount
payable under this Agreement, that AQR (and not the Manager) will be
responsible for paying any and all compensation to CNH for CNH's
performance of services under this Agreement.


    5.	Liability of Sub-Advisor

Neither the Sub-Advisor nor any of its directors, officers,
employees, agents or affiliates shall be liable to the Manager, the
Fund or its shareholders for any loss suffered by the Manager or the
Fund resulting from any error of judgment made in the good faith
exercise of the Sub-Advisor's duties under this Agreement or as a
result of the failure by the Manager or any of its affiliates to
comply with the terms of this Agreement except for losses resulting
from willful misfeasance, bad faith or gross negligence of, or from
reckless disregard of, the duties of the Sub-Advisor or any of its
directors, officers, employees, agents (excluding any broker-dealer
selected by the Sub-Advisor), or affiliates. Notwithstanding any
limitations on liability contemplated hereunder, each of  AQR and
CNH shall have joint and several responsibility and liability to the
Manager for all advisory services furnished to the Fund pursuant to
this agreement.

    6.	Indemnification

The Manager agrees to indemnify and hold harmless the Sub-Advisor
from and against any and all claims, losses, liabilities or damages
(including reasonable attorneys' fees and other related expenses),
("Losses") howsoever arising, from or in connection with this
Agreement or the performance by the Sub-Advisor of its duties
hereunder, so long as the Sub-Advisor shall, after receipt of notice
of any claim or commencement of any action, promptly notify the
Manager in writing of the claim or commencement of such action.  The
Manager shall not be liable for any settlement of any claim or
action effected without its written consent.  Nothing contained
herein shall require the Manager to indemnify the Sub-Advisor for
Losses resulting from the Sub-Advisor's willful misfeasance, bad
faith or gross negligence in the performance of its duties or from
its reckless disregard of its obligations and duties under this
Agreement.

    7.	Supplemental Arrangements

The Sub-Advisor may enter into arrangements with other persons
affiliated with the Sub-Advisor or with unaffiliated third parties
to better enable the Sub-Advisor to fulfill its obligations under
this Agreement for the provision of certain personnel and facilities
to the Sub- Advisor, subject to written notification to and approval
of the Manager and, where required by applicable law, the Board of
Directors of the Fund.

    8.	Regulation

The Sub-Advisor shall submit to all regulatory and administrative
bodies having jurisdiction over the services provided pursuant to
this Agreement any information, reports or other material which any
such body may request or require pursuant to applicable laws and
regulations.

    9.	Duration and Termination of This Agreement

This Agreement shall become effective as of the date of its
execution and, unless otherwise terminated, shall continue in effect
for a period of two years and thereafter from year to year provided
that the continuance is specifically approved at least annually
either by the Board of Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Series and in
either event by a vote of a majority of the Board of Directors of
the Fund who are not interested persons of the Manager, Principal
Life Insurance Company, the Sub-Advisor or the Fund cast in person
at a meeting called for the purpose of voting on such approval.

If the shareholders of a Series fail to approve the Agreement or any
continuance of the Agreement in accordance with the requirements of
the 1940 Act, the Sub-Advisor will continue to act as Sub-Advisor
with respect to the Series pending the required approval of the
Agreement or its continuance or of any contract with the Sub-Advisor
or a different manager or Sub-Advisor or other definitive action;
provided, that the compensation received by the Sub-Advisor in
respect to the Series during such period is in compliance with Rule
15a-4 under the 1940 Act.

This Agreement may be terminated at any time without the payment of
any penalty by the Board of Directors of the Fund or by the Sub-
Advisor, the Manager or by vote of a majority of the outstanding
voting securities of the Series on sixty days written notice. This
Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Section 9, the
definitions contained in Section 2(a) of the 1940 Act (particularly
the definitions of "interested person," "assignment" and "voting
security") shall be applied.

Upon termination of this Agreement for any reason, the Manager shall
within 30 days (i) cease and cause the Fund to cease all use of the
name and mark "AQR.", and (ii) take all necessary action to cause
the Fund's Registration Statement and any other relevant
documentation to be amended to accomplish a change of name and to
reflect that the Sub-Advisor no longer serves as sub-advisor to the
Series.


    10.	Amendment of this Agreement

No material amendment of this Agreement shall be effective until
approved, if required by the 1940 Act or the rules, regulations,
interpretations or orders issued thereunder, by vote of the holders
of a majority of the outstanding voting securities of the Series and
by vote of a majority of the Board of Directors of the Fund who are
not interested persons of the Manager, the Sub-Advisor, Principal
Life Insurance Company or the Fund cast in person at a meeting
called for the purpose of voting on such approval, and such
amendment is signed by both parties.

    11.	General Provisions

(a)	Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the
purposes hereof. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Iowa.
The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.

(b)	Any notice under this Agreement shall be in writing, addressed
and delivered or mailed postage pre-paid to the other party at
such address as such other party may designate for the receipt
of such notices. Until further notice to the other party, it is
agreed that the address of the Manager for this purpose shall be
Principal Financial Group, Des Moines, Iowa 50392-0200, and the
address of the Sub-Advisor shall be 2 Greenwich Plaza, 3rd Floor,
Greenwich, CT 06830 ATTN: Bradley D. Asness.

(c)	The Sub-Advisor will promptly notify the Manager in writing of
the occurrence of any of the following events:

(1)	the Sub-Advisor fails to be registered as an investment
adviser under the Investment Advisers Act or under the laws of
any jurisdiction in which the Sub-Advisor is required to be
registered as an investment advisor in order to perform its
obligations under this Agreement.

(2)	the Sub-Advisor is served or otherwise receives notice
of any action, suit, proceeding, non-routine inquiry or
investigation, at law or in equity, before or by any court,
public board or body, involving the affairs of the Fund.

	(d)	The Manager will promptly notify the Sub-Advisor if the
manager is served or otherwise receives notice of any action,
suit, proceeding, non-routine inquiry or investigation, at law or
in equity, before or by any court, tribunal, governmental body or
agency or official or arbitrator, involving the affairs of the
Manager or the Fund.

(e)	The Manager shall provide (or cause the Series custodian to
provide) timely information to the Sub-Advisor regarding such
matters as the composition of the assets of the Series, cash
requirements and cash available for investment in the Series, and
all other reasonable information as may be necessary for the Sub-
Advisor to perform its duties and responsibilities hereunder.

(f)  The Sub-Advisor represents that it will not enter into any
agreement, oral or written, or other understanding under which
the Fund directs or is expected to direct portfolio securities
transactions, or any remuneration, to a broker or dealer in
consideration for the promotion or sale of Fund shares or
shares issued by any other registered investment company. Sub-
advisor further represents that it is contrary to the Sub-
advisor's policies to permit those who select brokers or
dealers for execution of fund portfolio securities transactions
to take into account the broker or dealer's promotion or sale
of Fund shares or shares issued by any other registered
investment company.

(g)  The Sub-Advisor agrees that neither it nor any of its
affiliates will in any way refer directly or indirectly to its
relationship with the Fund, the Series, or the Manager or any
of their respective affiliates in offering, marketing or other
promotional materials without the express written consent of
the Manager.

(h)	This Agreement contains the entire understanding and
agreement of the parties.

    IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.

PRINCIPAL MANAGEMENT CORPORATION

By	/s/ Michael J. Beer
   Michael J. Beer, Executive Vice
President and Chief Operating
  Officer





AQR Capital Management, LLC


By




CNH Partners, LLC


By


APPENDIX A


AQR CAPITAL MANAGEMENT, LLC and CNH PARTNERS, LLC (collectively the "Sub-
advisor") shall serve as an investment sub-advisor for the Series
identified below. The Manager will pay the Sub-advisor, as full
compensation for all services provided under this Agreement, a fee,
computed and paid monthly, at an annual rate as shown below of the Series'
net assets as the first day of each month allocated to Sub-advisor's
management.

In calculating the fee for a series included in the table, assets of any
unregistered separate account of Principal Life Insurance Company and any
investment company sponsored by Principal Life Insurance Company to which
Sub-advisor provides investment advisory services and which have the same
investment mandate as the series for which the fee is calculated, will be
combined with the assets of the series to arrive at net assets.

If this Agreement becomes effective or terminates before the end of any
month, the fee (if any) for the period from the effective date to the end
of such month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.


Global Multi-Strategy Fund
Sub-Advisor's Fee as a Percentage of Average Daily Net
Assets
First $250 million			1.00%
Assets over $250 million
	.......................................	0.95%











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