In 2024, the Otter Creek Focus Strategy ETF (OCFS) was up 21.82% vs the Russell mid-cap index which appreciated 15.34%.1 Since its inception on May 17, 2024 through December 31, 2024, the Otter Creek Focus Strategy ETF (OCFS) market price was up 5.35% vs the Russell mid-cap index which appreciated 7.34%.

The Otter Creek Focus Strategy was originally created in May 2020 in a separately managed account format. In May 2024, a separately managed account was converted into an active ETF (“the fund”) – Otter Creek Focus Strategy ETF. The active ETF structure has numerous benefits including the potential for tax deferred compounding for taxable investors, including ourselves.

The members of Otter Creek have invested a significant portion of our investable assets in the strategy alongside our partners. Below we highlight the annual performance of the ETF since inception versus various indexes. Of note, the strategy has nearly matched the performance of the S&P 500 without owning the concentrated components of the index, commonly referred to as the Magnificent 7.

Table 1: Compounded Annual Growth Rates (CAGR)

Our Investment Philosophy & Strategy

The Otter Creek Focus Strategy is an opportunistic, diversified equity strategy with a small and mid-cap mandate. Our strategy is focused on identifying and investing in durable business models that have differentiated products or services.

We are business model focused and invest in the most attractive opportunity set we can find, independent of what style bucket investment opportunities fall into (Growth vs Value).

The strategy typically holds between 20-30 stocks and may experience tracking error versus the index due to our relatively high active share. However, we believe the ability to be adaptive and opportunistic could allow the strategy to generate strong returns over the medium to long term.

Our investments tend to favor:

1. Capital Compounders - defined as companies that compound value at an above average rate over a multi-year period leveraging strong secularly driven organic earnings growth and wise capital deployment.
2. Opportunistic Mispricing’s - defined as companies that are undergoing underappreciated change such as industry growth inflections, positive management changes, favorable capital allocation changes, business model changes, or companies grossly undervalued relative to the business quality and/or growth potential.

2024 Attribution & Commentary

Although we view the success of our investments over an extended period, we thought it would be informative to highlight a few of the holdings that had the largest impact on our performance in 2024. The largest contributors to performance were Coherent Corp, Vertiv Holdings, and Corning Inc. The largest detractors were Super Micro Computer, Nextera, and RH. Overall, the strategy benefited from long exposure to technology AI related infrastructure and industrial related equities during the year.

Given the strong price appreciation during 2024 combined with rising market volatility to start 2025, we have dynamically reallocated capital to a new set of ideas as risk-reward is constantly changing in the current market landscape as discussed below.

The Portfolio

Key Portfolio themes include:

• Energy Power Transition (10% of capital) – Over the last 15 years, U.S. power consumption has been relatively flat. Increased power needs have been offset by efficiency and low domestic manufacturing growth. Per the table 2, looking forward, US electrical consumption is expected to increase 20% by 2030, driven by the explosive growth in data centers and manufacturing reshoring. This also shows that currently data centers consume about 3% of power consumption in the U.S. In the next five years, data center power consumption could triple to nearly 9-10% of power consumption. The power demand inflection should create a sustained multi-year growth cycle for power-related companies. We have a favorable view on Quanta Services, a market leading engineering and construction company in the power industry, that we believe should grow earnings at a 15-20% rate over the medium term. Given severe regulation and infrastructure constraints in many parts of the U.S., we have a favorable view of utilities in locations with accommodative regulatory backdrops and available infrastructure to accommodate higher power consumption. Ameren (Midwest) and CenterPoint Energy (Texas) are well positioned to accelerate sales growth and potentially grow total shareholder return at a double-digit rate over time.

Table 2: US Power Demand Forecast by Sector Through 2040, ‘000s TWh

• Infrastructure Modernization (10% of capital)– A global industrial renaissance is taking place, in our view. Geopolitical and tariff uncertainty combined with companies looking to create durable supply chains is supportive of infrastructure capital spending in areas such as regionalization of manufacturing, upgrading global water infrastructure, and defense spending modernization initiatives. A McKinsey survey from 2024 found that over 40% of companies are in the process of nearshoring their production. Overall, we believe a broad-based infrastructure spending cycle will be underpinned by deregulation, depleted critical infrastructure, reshoring, and favorable US bipartisan government backing. We are long Veralto, an industry leading water treatment infrastructure; Parsons, a leading defense and infrastructure design and program management company tied to defense modernization; Clean Harbors, a leader in hazardous waste management benefiting from reshoring; and Canadian Pacific, North America’s only railroad company that is interconnected from Canada to Mexico.

Table 3: Global Industrial Renaissance

Source: Apollo Global

• Digital Infrastructure (10% of capital) - The demand for data continues to grow at double-digit rates driven by the ongoing shift to cloud, proliferation of mobile apps, and the acceleration in internet of things (IoT) devices. It is estimated that trillions of dollars in global technology infrastructure architecture will need to be ripped out and replaced to accommodate changes in global compute from CPU to GPU architecture, to more edge data centers, and ultimately the potential for rapid growth in mobile data traffic. The high growth in data demand, and potential acceleration with artificial intelligence should support further data center and technology infrastructure development for many years in the future. We are long SBA Communications, a leading tower company in the U.S, and own F5, a leading technology infrastructure that should benefit from multi-year technology infrastructure capex cycles.

Table 4: Connected Devices are Expected to Grow Significantly in the U.S. through at least 2029

Source: American Tower

• Digitization of the Enterprise (15% of capital) - In our view, there is a blurring of the lines between traditional equipment manufacturing and software technology. We think technology proliferation is set to accelerate in areas such as healthcare, financials and industrials. We believe the opportunity set of companies beginning to enable the benefits of artificial intelligence is vast and growing. The benefit of artificial intelligence should evolve in multiple ways including the ability to significantly streamline cost structures and opportunities to monetize proprietary and unique data sets. We believe Nasdaq, Intercontinental Exchange, PTC Technology, and SS&C are very well positioned to benefit from the proliferation of software technology and utilize artificial intelligence in new and exciting ways.

Opportunistic Mispricing includes (but not limited to):

• 3M, a world leading industrial company with a new and improved management team that is executing on an initiative to improve operating margins by 400-500bps over the medium term.
• GE Healthcare, a world leader in medical equipment imaging technology that has an opportunity to improve its business mix by adding high margin services/software offerings via AI while having a clear path to improve operating margins from 16% to 20%.
• Brookfield Corporation, a leading alternative asset manager that is well positioned to grow profits at a mid-teens growth rate, yet trading at 13x earnings, a significant discount to peers.
• Revvity, a leader in healthcare diagnostics and life science equipment that has 80% recurring sales, 6%+ organic growth potential, and company specific initiatives that could support margins rising from 28% to the 30% range.

In closing, the market volatility and rise in global macro uncertainty is creating a favorable backdrop for long-term investors to invest in strong business with favorable future earnings prospects over the medium and long-term at attractive valuations. We look forward to capitalizing on potential future market volatility and create a durable portfolio that can potentially continue to compound capital at attractive rates of return.

The members of Otter Creek appreciate the trust you have placed with us and encourage you to call with any questions.

Top 10 Holdings and Sectors Exposure:

Standardized Performance:

*ITD: Inception To Date: May 28, 2020
**Annualized Returns as of: December 31, 2024
***Market Price is as of launch of ETF; May 17, 2024

Otter Creek is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended. Otter Creek Advisors, LLC is the Advisor to the Otter Creek Focus Strategy ETF which is distributed by Quasar Distributors, LLC.

Otter Creek's proforma annual asset-based investment advisory fee schedule is 0.85%.

The Russell Midcap Index (RMC) measures the performance of the mid-capitalization growth sector of the U.S. equity market. It is a subset of the Russell Midcap Index. The index is market-value weighted. Index figures reflect the reinvestment of dividends and capital gains. Index figures do not reflect deductions for any fees, expenses, or taxes. The Russell MidCap (TR) Index is an unmanaged stock market index that measures the performance of its respective component companies. Investors cannot invest directly in an index. Index performance does not reflect trading commissions and costs. Due to these differences, comparison to an index should not be relied upon as an accurate measure of comparison. The Otter Creek portfolios are more concentrated and are therefore not as diversified as the Russell Mid-Cap (TR) Index. All returns include the reinvestment of dividends, interest income, and capital gains. Valuations are computed and performance is reported in U.S. dollars. Due to the differences between the Strategy and the composition of the market indices included above, the Russell Mid-Cap (TR) Index published returns are not directly comparable to the returns generated by the Strategy.

The Standard and Poor's 500 Index (S&P 500) is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Magnificent Seven (Mag 7) stocks represent a cohort of high-performing companies that have garnered significant attention in the investment world for their market dominance, technological advances, and growth potential. The Mag 7 players are Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), Apple (AAPL), and Microsoft (MSFT). Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. The Russell 2000 Index is an index with 2000 of the smallest companies in the Russell 3000 index. The index is designed to measure the performance of the small-capitalization sector of the US equity market. The Russell 3000 Index is an index with 3,000 large U.S. companies as determined by market capitalization. This represents 98% of the investible U.S. equity market.

The S&P 500 Equal Weight index is the equal-weight version of the S&P 500 index. It includes the same securities as the S&P 500 but each company is allocated a fixed weight of the index at each quarterly rebalance. Tracking Error is the difference between the returns of the fund and the index. Active Share is a measure of the percentage of stock holdings in a manager's portfolio that differs from the benchmark index. Earnings growth is the annual rate of growth of earnings from investments. Earnings Growth is not a measure of future performance. Capital expenditure (CapEx) are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. A basis point (BPS) is 1/100 of a percentage point. The Shiller P/E ratio is computed by taking the current price and dividing it by the average inflation-adjusted earnings from the previous 10 years.

Prior to May 17th 2024, Otter Creek Advisors, LLC managed a separately managed account (“SMA”) with investment objectives and policies that, in all material respects, were equivalent to the Fund. The performance of the Fund includes the performance of the SMA for periods before that date. The SMA’s performance was adjusted to reflect the Fund’s estimate of its expense ratio for the first year of operations as an exchange traded fund (“ETF”), including any applicable sales load. The SMA was not registered under the Investment Company Act of 1940 Act nor subject to certain investment limitations, diversification requirements and other restrictions imposed by the Act and the Internal Revenue Code, which, if applicable, may have adversely affected the performance result. Since May 17th, 2024 the performance presented is based on the Otter Creek Focused Strategy ETF (the “Fund”), as of the date listed above the table. Prior to the end of May, the performance history was maintained by Otter Creek Operations and has not been reviewed by any third party. Future investments will be made under different economic conditions and in different securities. The performance discussed herein reflects investment of limited funds for a limited period of time and does not reflect the ETF’s performance in all different economic cycles. It should not be assumed that the ETF will experience similar returns in the future, if any, comparable to those published in this or other materials prepared by Otter Creek.

Fund investing involves risk. Principal loss is possible. The securities of small and mid-capitalization companies may be more vulnerable to adverse issuer, market, political, or economic developments than securities of large-capitalization companies. Foreign securities involve increased risks due to political, social and economic developments abroad, as well as due to differences between U.S. and foreign regulatory practices. To the extent the Fund invests in shares of other investment companies, you will indirectly bear fees and expenses charged by those investment companies and will be subject to the risks that those investment companies are subject to. Investing a significant portion of the Fund’s assets in one sector of the market exposes the Fund to greater market risk and potential monetary losses than if those assets were spread among various sectors.

Shares may be bought and sold in the secondary market at market prices. Brokerage commissions may reduce returns.

The performance data quoted represents past performance and is no guarantee of future results. Investment return and 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. Current performance may be lower or higher than the performance data quoted. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the fund, please visit our website at www.otterfs.com or call 1-855-681-5261. Please read the prospectus carefully before investing.

¹Prior to May 17th 2024, Otter Creek Advisors, LLC managed a separately managed account (“SMA”) with investment objectives and policies that, in all material respects, were equivalent to the Fund. Please see the important information section for more details including standardized performance.
The performance data quoted represents past performance and is no guarantee of future results. Investment return and 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. Current performance may be lower or higher than the performance data quoted. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the fund, please visit our website at www.otterfs.com or call 1-855-681-5261. Please read the prospectus carefully before investing.