The abbreviated performance summary below is a departure from our historical shareholder letters and has been prepared to align with the SEC’s Tailored Shareholder Report requirements. Please contact Champlain Funds with additional fund-specific questions.

The Champlain Small Company Fund (CIPSX) returned 0.14% for the 6-month period ending 06/30/2024, which trailed the 1.73% return for Russell 2000 and the 13.56% return for the Russell 3000. The Fund’s health care holdings underperformed due to an overweight of, and stock selection within the equipment & supplies industry. We believe the weakness in these holdings reflects investor concerns about exposures to a weakening consumer, flatter utilization levels (after pent-up demand from the pandemic), and GLP-1s possibly shrinking addressable markets. Stock selection in financials, particularly in insurance and banks, drove outperformance. Baldwin Insurance Group continues to reduce debt, has shown signs of margin expansion, and has paid a meaningful portion of the cash earnouts related to prior acquisition activity. Despite strong returns from Pure Storage, the Fund’s technology holdings underperformed. Stock selection in software was weak, with Freshworks being the most notable detractor. Freshworks’ first quarter guidance fell below expectations due to macroeconomic weakness in the small and medium-sized business market and the company announced a well-telegraphed CEO transition. In consumer, this Fund’s perennial overweight of staples and underweight of discretionary has been helpful. The consumer environment is dynamic, with diverging category trends and financial pressures beginning to spread from low-income to middle-income households. The need-to-have products sold by food, beverage, household, and personal care companies – which this Fund significantly over-indexes to – have historically held up well in these environments, especially those that continue to show secular volume growth, like Freshpet. Finally, in industrials, Enerpac Tool Group helped offset the headwind from not owning more cyclical industries. Enerpac has benefitted from increased sell-side coverage and favorable investor sentiment tied to domestic infrastructure spending tailwinds, all while the company continues to execute on its margin expansion goals.

Though our investment process has been out of favor relative to some benchmarks given the exceptional money supply growth, fiscal largesse, and immigration (additional stimulus to the economy), we are not remotely tempted to change our spots. Indeed, we have renewed our commitment to high quality while our faith in our investment process remains steadfast. We are encouraged by the y/y absolute and relative improvement in some key characteristics as well as a compelling weighted average discount for Fair Value for the Fund. Though we have no special insight into the timing, relative tailwinds for our process and its favorite industries seem inevitable at some point.

The abbreviated performance summary below is a departure from our historical shareholder letters and has been prepared to align with the SEC’s Tailored Shareholder Report requirements. Please contact Champlain Funds with additional fund-specific questions.

The Champlain Small Company Fund (CIPNX) returned 0.28% for the 6-month period ending 06/30/2024, which trailed the 1.73% return for Russell 2000 and the 13.56% return for the Russell 3000. The Fund’s health care holdings underperformed due to an overweight of, and stock selection within the equipment & supplies industry. We believe the weakness in these holdings reflects investor concerns about exposures to a weakening consumer, flatter utilization levels (after pent-up demand from the pandemic), and GLP-1s possibly shrinking addressable markets. Stock selection in financials, particularly in insurance and banks, drove outperformance. Baldwin Insurance Group continues to reduce debt, has shown signs of margin expansion, and has paid a meaningful portion of the cash earnouts related to prior acquisition activity. Despite strong returns from Pure Storage, the Fund’s technology holdings underperformed. Stock selection in software was weak, with Freshworks being the most notable detractor. Freshworks’ first quarter guidance fell below expectations due to macroeconomic weakness in the small and medium-sized business market and the company announced a well-telegraphed CEO transition. In consumer, this Fund’s perennial overweight of staples and underweight of discretionary has been helpful. The consumer environment is dynamic, with diverging category trends and financial pressures beginning to spread from low-income to middle-income households. The need-to-have products sold by food, beverage, household, and personal care companies – which this Fund significantly over-indexes to – have historically held up well in these environments, especially those that continue to show secular volume growth, like Freshpet. Finally, in industrials, Enerpac Tool Group helped offset the headwind from not owning more cyclical industries. Enerpac has benefitted from increased sell-side coverage and favorable investor sentiment tied to domestic infrastructure spending tailwinds, all while the company continues to execute on its margin expansion goals.

Though our investment process has been out of favor relative to some benchmarks given the exceptional money supply growth, fiscal largesse, and immigration (additional stimulus to the economy), we are not remotely tempted to change our spots. Indeed, we have renewed our commitment to high quality while our faith in our investment process remains steadfast. We are encouraged by the y/y absolute and relative improvement in some key characteristics as well as a compelling weighted average discount for Fair Value for the Fund. Though we have no special insight into the timing, relative tailwinds for our process and its favorite industries seem inevitable at some point. 

The abbreviated performance summary below is a departure from our historical shareholder letters and has been prepared to align with the SEC’s Tailored Shareholder Report requirements. Please contact Champlain Funds with additional fund-specific questions.

The Champlain Mid Cap Fund (CIPMX) returned 1.21% for the 6-month period ending 06/30/2024, which trailed the 4.96% return for Russell Midcap and the 13.56% return for the Russell 3000. This Fund’s health care holdings underperformed as the overweight of this sector exacerbated weak stock selection. We believe the ongoing weakness in the Fund’s equipment and supplies holdings reflects investor concerns about exposures to a weakening consumer, flatter utilization levels (after pent-up demand from the pandemic), and GLP-1s possibly shrinking addressable markets. Exact Sciences was the Fund’s largest detractor as investors fear competitive pressures for Exact’s flagship product. In industrials, allocation explains roughly half of the Fund’s underperformance, as the Fund has no direct exposure to the most cyclical industries in the sector. Additionally, stock selection in machinery has not helped, where Nordson Corporation was a notable detractor. In financials, Toast, Inc. drove outperformance. In the first quarter, Toast reported improvement in profitability and guided to strong margins going forward, in addition to announcing a $250 million share repurchase program and committing to lower stock compensation expenses. In technology, Pure Storage continues to deliver strong returns. Pure’s Evergreen subscription business and growing product portfolio continue to deepen customer relationships and improve Pure’s competitive advantage. This Fund’s overweight of consumer staples was a notable headwind. The consumer environment is dynamic, with diverging category trends and financial pressures beginning to spread from low-income to middle-income households. The need-to-have products sold by food, beverage, household, and personal care companies – which this Fund significantly over-indexes to – have historically held up well in these environments. However, many companies, including Brown-Forman, have not shown the resilience we would have expected as they deal with post-COVID distortions and idiosyncratic issues, like the sluggish whiskey market.

Though our investment process has been out of favor relative to some benchmarks given the exceptional money supply growth, fiscal largesse, and immigration (additional stimulus to the economy), we are not remotely tempted to change our spots. Indeed, we have renewed our commitment to high quality while our faith in our investment process remains steadfast. We are encouraged by the y/y absolute and relative improvement in some key characteristics as well as a compelling weighted average discount for Fair Value for the Fund. Though we have no special insight into the timing, relative tailwinds for our process and its favorite industries seem inevitable at some point. 

The abbreviated performance summary below is a departure from our historical shareholder letters and has been prepared to align with the SEC’s Tailored Shareholder Report requirements. Please contact Champlain Funds with additional fund-specific questions. 

The Champlain Mid Cap Fund (CIPIX) returned 1.28% for the 6-month period ending 06/30/2024, which trailed the 4.96% return for Russell Midcap and the 13.56% return for the Russell 3000. This Fund’s health care holdings underperformed as the overweight of this sector exacerbated weak stock selection. We believe the ongoing weakness in the Fund’s equipment and supplies holdings reflects investor concerns about exposures to a weakening consumer, flatter utilization levels (after pent-up demand from the pandemic), and GLP-1s possibly shrinking addressable markets. Exact Sciences was the Fund’s largest detractor as investors fear competitive pressures for Exact’s flagship product. In industrials, allocation explains roughly half of the Fund’s underperformance, as the Fund has no direct exposure to the most cyclical industries in the sector. Additionally, stock selection in machinery has not helped, where Nordson Corporation was a notable detractor. In financials, Toast, Inc. drove outperformance. In the first quarter, Toast reported improvement in profitability and guided to strong margins going forward, in addition to announcing a $250 million share repurchase program and committing to lower stock compensation expenses. In technology, Pure Storage continues to deliver strong returns. Pure’s Evergreen subscription business and growing product portfolio continue to deepen customer relationships and improve Pure’s competitive advantage. This Fund’s overweight of consumer staples was a notable headwind. The consumer environment is dynamic, with diverging category trends and financial pressures beginning to spread from low-income to middle-income households. The need-to-have products sold by food, beverage, household, and personal care companies – which this Fund significantly over-indexes to – have historically held up well in these environments. However, many companies, including Brown-Forman, have not shown the resilience we would have expected as they deal with post-COVID distortions and idiosyncratic issues, like the sluggish whiskey market.

Though our investment process has been out of favor relative to some benchmarks given the exceptional money supply growth, fiscal largesse, and immigration (additional stimulus to the economy), we are not remotely tempted to change our spots. Indeed, we have renewed our commitment to high quality while our faith in our investment process remains steadfast. We are encouraged by the y/y absolute and relative improvement in some key characteristics as well as a compelling weighted average discount for Fair Value for the Fund. Though we have no special insight into the timing, relative tailwinds for our process and its favorite industries seem inevitable at some point.

The Champlain Strategic Focus Fund (CIPTX) returned 2.73% for the 6-month period ending 06/30/2024, which trailed the 5.98% return for Russell Midcap Growth and the 13.56% return for the Russell 3000. Rockwell Automation was the largest detractor in industrials, and despite the uninspiring near-term results and guidance, our 3- 5-year outlook remains positive. In June, Rockwell announced that it is expanding its collaboration with Nvidia to accelerate the development of safer/smarter industrial AI mobile robots in manufacturing. This Fund’s information technology holdings outperformed during the period as Pure Storage reported strong results driven by continued outperformance in Evergreen, the subscription component of the business. In health care, this Fund’s holdings trailed those of the benchmark. Waters Corp. and Bio-Techne were detractors due to near-term biopharma spending uncertainty and macro challenges in China. We expect the demand outlook for these companies to benefit from an improving biotechnology funding environment which should drive demand for their “picks and shovels” life science-related products over the next year and beyond. In consumer, Tractor Supply contributed nicely to relative returns. While we continue to view Tractor as a unique specialty retailer with need-to-have products and limited competition, we also know the company is not immune to a broader slowdown in the consumer environment, thus we moderated the position size. Conversely, Ulta Beauty has seen pressures recently due to share losses in the prestige part of the market. Management believes the slowdown is mostly attributable to the unprecedented number of competitive store openings over the last 24 months, mostly a reflection of the rollout of Sephora at more than nine hundred Kohl’s locations. In financials, Ryan Specialty Holdings drove absolute and relative performance. Ryan’s business connects a highly fragmented network of specialty (Excess & Surplus) insurance carriers with retail brokers to address unique and increasingly complex client needs. While wholesale insurance brokerage will never be a winner-takes-all market, we are confident in Ryan’s competitive positioning and its unique ability to consolidate the long tail of small/niche wholesale brokers.

Though our investment process has been out of favor relative to some benchmarks given the exceptional money supply growth, fiscal largesse, and immigration (provided additional economic stimulus), we are not remotely tempted to change our spots. Indeed, we have renewed our commitment to high quality while our faith in our investment process and all of this Fund’s holdings remains steadfast largely due to the y/y absolute and relative improvement in some key characteristics, as well as a compelling weighted average discount to Fair Value for this Fund. Though we have no special insight into the timing, relative tailwinds for our process and its favorite industries seem inevitable at some point.