Insights

The Portfolio Managers break down the recent equity rally fueled by rate-cut optimism, AI enthusiasm, and strength in small caps, spotlighting the relative attractiveness of midcap valuations and showcasing two holdings that exemplify disciplined, long-term shareholder value creation.

What has been driving the equity rally, and how does the Fund compare?

Recent market strength has been fueled by enthusiasm around prospects for lower interest rates, sparking rallies in small-cap and lower-quality companies that rely heavily on access to inexpensive capital and favorable financing conditions. Concurrently, large-cap technology stocks advanced on continued investor enthusiasm about artificial intelligence.

The Cromwell Greenspring Mid Cap Fund focuses on well-managed, financially-sound mid-cap companies with strong balance sheets, durable business models, and steady free cash flow. These companies—built to perform well without depending on accommodative capital markets or rate movements—have offered resilience in a variety of environments.

Historically, this strategy has offered participation in strong markets and limited some downside during difficult markets, resulting in compelling long-term returns.

Over the five years ended September 30, 2025, the Fund’s equity investments achieved an annualized return of 16.47%, exceeding the Index’s 12.66% return with 10% less volatility.

By the end of the third quarter, how do mid-cap valuations look?

Mid-cap stocks appear very undervalued relative to both small- and large-cap peers. At the end of September 2025, on an EV/EBITDA basis, the Russell Midcap Index, which has historically traded at a premium to small-caps, was in line with the Russell 2000 Index of small-cap companies. This change occurred despite small-caps lacking the upward earnings revisions that would justify such a move.

At the same time, the mid-cap index is trading at a much wider discount to the S&P 500 than at any point in the past decade.

These disconnects suggest mid-caps are overlooked, creating an attractive opportunity given their strong fundamentals. Looking ahead, a healthy economy and lower interest rate environment should also support broader market participation.

Please provide examples of companies in the Fund that created long-term value for shareholders this quarter.

The Fund focuses on companies with strong management teams that have historically used their financial strength and free cash flow to build long-term shareholder value in a variety of ways.

During the third quarter, two holdings took notable strategic actions to enhance long-term value.

• Advanced Drainage Systems (WMS). its strong balance sheet and history of disciplined capital allocation positioned WMS—a leader in stormwater and onsite wastewater management—to opportunistically expand its business by announcing the acquisition of Norma Group SE’s water management business, known as National Diversified Sales (NDS). NDS, a U.S.-focused provider of stormwater and irrigation products, expands WMS’s product portfolio, strengthens its position in core markets, and improves customers service with a broader product suite.
• KBR announced plans to separate into two independent, pure-play companies: Mission Technology Solutions, its government services business, and Sustainable Technology Solutions, which serves the energy and infrastructure markets. This split is intended to simplify its capital structure and draw attention to businesses that, on a pro-forma basis, appear to be trading at significant discounts to peers.

Both companies hold leading positions in their industries and have employed disciplined growth strategies and thoughtful capital allocation —hallmarks of the type of holdings we seek as we strive to drive attractive long-term returns for Fund investors.