Insights

The Fund’s Portfolio Managers highlight the opportunity in mid-cap companies, explain how the Fund’s quality bias helped performance in 2025, and provide an example of a portfolio company’s capital discipline.

Why do you believe mid-cap equities represent an attractive investment opportunity heading into 2026?

We believe mid-cap companies look particularly attractive due to compelling relative valuations, supportive macroeconomic conditions, and the likelihood that investors will seek to increase diversification across asset classes. The Russell Midcap Index is trading near 20-year lows on a next-twelve-months EV/EBITDA basis and at a more than 20% discount to the S&P 500 on a P/E basis, despite similar earnings growth expectations. In contrast, valuation multiples on large-cap stocks have expanded significantly, driven by a handful of mega-cap growth stocks, which have increased concentration risk within the S&P 500.

The Cromwell Greenspring Mid Cap Fund focuses on high-quality, domestically oriented mid-cap companies with secular growth characteristics and company-specific catalysts. A potentially more favorable environment for merger and acquisition activity in 2026 may bode well for the Fund’s mid-cap companies, as they may create value as both strategic acquirers of smaller businesses or as attractive acquisition targets for larger firms.

From a bottom-up perspective, where did your quality bias help the most in 2025?

We believe our quality bias proved most valuable during periods of heightened market stress, particularly during the tariff-driven volatility in early spring. By maintaining our focus on well-capitalized, domestically oriented businesses with strong free cash flow generation and disciplined management teams, the Fund was better positioned to navigate periods of market turbulence. During the steep and rapid decline in the Russell Midcap Index from its February 18 peak to its April 8 low, the Fund declined significantly less, outperforming the Index by nearly 330 basis points.

A representative example of our quality bias is Republic Services, a market leader in the waste disposal industry and one of the Fund’s largest holdings. Nearly all its revenue is generated from services provided to U.S.-based customers, resulting in minimal direct exposure to tariffs. Supported by its robust balance sheet, Republic continued to execute strategic acquisitions during 2025, even during the period of tariff-induced uncertainty.

Republic generates substantial free cash flow and is led by a seasoned, highly capable management team with a long track record of disciplined and shareholder-oriented capital allocation. While the stock lagged in 2025 amid a shift in investor preference toward large-cap technology, Republic continued to execute as we expected, reinforcing our conviction in its position as a core long-term holding in the Fund

With an emphasis on durable free cash flow, where did you see meaningful improvements in capital discipline across your holdings in 2025?

Throughout the portfolio, our holdings continued to generate robust free cash flow and remained disciplined capital allocators in 2025, deploying capital thoughtfully to enhance long-term shareholder value.

A good example is EMCOR Group, a global leader in mechanical and electrical construction services and one of the Fund’s largest holdings. EMCOR continued to benefit from robust cash generation and a strong balance sheet, providing management with flexibility to pursue multiple value-creating initiatives simultaneously. During the year, the company opportunistically repurchased shares, increased its dividend, and completed the sizable acquisition of Miller Electric.

We believe EMCOR’s culture and reputation represent a meaningful competitive advantage in merger and acquisition transactions. In many cases, smaller or family-run businesses prefer to partner with EMCOR, recognizing the company’s long-term growth opportunities, respected management team, and favorable reputation among its workforce. This disciplined and reputation-driven approach to capital deployment reinforces our confidence in EMCOR as a high-quality, long-term holding within the Fund.