Insights

The Portfolio Managers discuss how the Fund’s holdings are less exposed to tariff-related disruptions, the advantage of active management in a volatile market, and the Fund’s favorable risk/return compared to the Russell Midcap Index.

Given the market’s concern around how tariffs will affect businesses, how are the Fund’s holdings less exposed to these disruptions?

As market volatility ramped up with the U.S. presidential administration’s tariff discussions, we evaluated potential tariff impacts on individual company fundamentals. Many of the Fund’s holdings should be less exposed to both direct and indirect tariff-related disruptions compared to the broader market for the following reasons:

1. The Fund’s holdings are primarily domestically oriented. Our portfolio of primarily domestic companies should help buffer the Fund from many of the challenges faced by more globally oriented businesses. For example, several of our largest holdings—including companies in the waste management, wireless services, beverage, and insurance industries—have little direct exposure to tariffs.
2. We focus on financially strong and well-managed companies. We invest in market-leading companies with strong balance sheets and consistent free cash flow generation. During times of market stress, many of these companies are well-positioned to successfully navigate uncertainty and enhance long-term shareholder value by repurchasing their own stock at temporarily discounted valuations, growing market share, and/or opportunistically acquiring weakened competitors.

During periods of economic uncertainty, we believe investors can benefit from a core principle of the Fund—investing in reasonably priced, financially strong mid-cap companies.

How are active managers in a position of strength during increased market volatility?

In our view, active investors have the flexibility to take advantage of market volatility by strategically adjusting portfolios—trimming certain holdings during times of market strength and using periods of weakness to add to existing positions or invest in new opportunities that may offer greater appreciation potential over the long term.

The portfolio management team at Corbyn Investment Management has decades of experience navigating many market cycles and prior periods of uncertainty. We believe our experience and long-term investment focus helps distinguish between short-term headline noise and the underlying fundamentals of the companies we own.

Would you please discuss the importance of lower volatility?

We intentionally construct the Fund’s portfolio in a manner we believe will reduce volatility, especially during difficult market environments. We believe this approach helps investors stay the course through periods of market stress, rather than emotionally abandoning long-term investment plans.

While the Fund’s performance trailed the Russell Midcap Index during the strong start to the year, it demonstrated its defensive characteristics during the subsequent market sell-off. From the Index’s year-to-date high on February 18 to its low on April 9, the Fund outperformed the Index by nearly 330 basis points.

Looking at a longer time horizon, over the five-year period ending March 31, 2025, the Fund’s equity holdings outperformed the Russell Midcap Index by 270 basis points on an annualized basis—and did so with 11% less risk.

We believe this performance underscores the strength of our investment approach – focusing on financially resilient companies that generate significant free cash flow and are led by capable management teams who can navigate challenging times and execute strategies designed to create long-term shareholder value.