Commentary - March 2026Long Short Fund
The Portfolio Managers discuss the benefits of a long/short approach in a volatile market, recent changes to net exposure, and where they are identifying potential opportunities across the Fund’s long and short book.
How can a long/short strategy help navigate periods of heightened market volatility?
Equity markets experienced heightened volatility during the first quarter, driven by ongoing geopolitical uncertainty and changing interest rate expectations because of lingering inflation concerns. We believe the recent market reinforced the value of our long/short approach that seeks to provide exposure to the overall U.S. equity market with lower volatility.
To that end, as shown below, over the past year ended March 31, 2026, the Fund captured nearly 90% of the Russell 1000 Index’s return with 15% lower risk.
Fund Performance As of 3/31/26 (%) |
||||||
|---|---|---|---|---|---|---|
| AVERAGE ANNUAL RETURNS | STANDARD DEVIATION | |||||
| Class | YTD | 1 Yr | 5 Yr | 10 Yr | 1 Yr | |
| Institutional Class | -3.10 | 15.52 | 5.15 | 6.88 | 8.75 | |
| Russell 1000 Index | -4.18 | 17.74 | 11.34 | 13.97 | 10.23 | |
Expense Ratios (gross/net): Institutional 2.09%/1.91%.
The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. For performance information through the most recent month end please call 855.625.7333.
Cromwell Investment Advisors has agreed to waive its management fees and/or reimburse Fund expenses through at least 4/30/26. Performance would have been lower without fee waivers/limits/reimbursements in effect. Please refer to the prospectus for detailed information.
How did the Fund’s net equity exposure change over the quarter?
Over the quarter, we have made changes to the portfolio construction that reflect a more cautious stance as the macro backdrop has become uncertain. While the long book allocation has remained relatively stable over the period, we have increased the number of holdings in the short book, thereby increasing the allocation. As of the end of 2025, the short book was just under 15% and as of the end of the first quarter, it was 17%. Net equity exposure as of March 31, 2026 was about 82%.
To help manage portfolio risk, we emphasize diversification on the short side, with a preference for adding new positions rather than increasing concentration in a few names.
Given the ongoing volatility, would you please discuss where you are finding opportunities?
Beneath the market’s calm surface, a gap is widening between companies that can sustainably grow free cash flow per share and those that can’t. Our long/short approach is built to exploit that divide.
On the long side, Industrial positions are being driven by a range of tailwinds including the onshoring of U.S. manufacturing capacity, the broadening of AI into physical automation and robotics, and stock-specific opportunities where company-level execution is being discounted by the broader industrial narrative. As a few examples:
- Caterpillar is emerging as a secular growth compounder, driven by surging AI infrastructure power demand, an unprecedented order backlog providing multi-year revenue visibility, and a growing recurring services revenue stream underpinned by autonomous mining technology and an expanding software stack.
- EMCOR Group is a critical infrastructure enabler of the AI buildout, uniquely positioned as the leading provider of electrical and mechanical construction services for hyperscale data centers, with a record, rapidly growing project backlog that provides strong multi-year revenue visibility.
- Parker Hannifin is a motion and control company with a structurally expanding aerospace franchise driven by record backlogs, surging aftermarket demand, and defense spending tailwinds, with industrial growth drivers of electrification and global automation investment.
On the short side, we have identified Consumer Discretionary and Staples companies losing share simultaneously to the value and premium tiers, which are secular in nature. In Financials, cyclical pressures have presented opportunities to short companies as personal lines insurance pricing has rolled over as competition re-enters, private credit has shown credit quality deterioration in peak-cycle vintages, and crypto-adjacent business models have faced standard reversion as retail participation contracts.
We believe much of the S&P 500 continues to trade at attractive valuations. AI’s growth is increasingly constrained by physical infrastructure including power generation, cooling, and grid capacity. The companies solving these challenges do not appear to be valued as highly as AI beneficiaries. This gap between market perception and reality is where we see compelling opportunities.
