Pear Tree Essex Environmental Opportunities Fund

The PEAR TREE ESSEX ENVIRONMENTAL OPPORTUNITIES FUND operates at the nexus of environment and finance, investing in companies that enable greater natural resource and energy efficiency.

Investment Process

The Fund invests in companies the management team believes solve environmental and related social challenges, seeking to provide attractive financial and social impact returns. The Fund is fossil fuel free, investing in public equities will full alignment to the U.N. Sustainable Development Goals. Investments are made across nine environmental themes, providing clean technology diversification in companies with revenue and earnings growth greater than the broad equity market, in companies exhibiting effective capital allocation and strong profitability.

Buy and Sell Discipline

The Fund is concentrated, typically owning 35-45 equity holdings, in growth companies which provide solutions to the world's environmental challenges. Stock selection is based on rigorous fundamental company analysis and a valuation process that is informed by the portfolio management team’s thematic industry assessment. The Fund is generally lower turnover, with half from existing positions. Position sizes average 2-3%, and are diversified across themes, geographies and industries. Risk management and assessment is integral to portfolio construction, with position sizes determined by industry maturity, liquidity, individual security volatility and the management of price and profit expectations.

Portfolio Management

The Fund is managed by William Page and Robert Uek of Essex Investment Management, LLC. Essex is an independent, employee-owned firm with over a 40 year history of growth equity investing. Page and Uek have almost 60 years of combined institutional investment experience. The portfolio management team has been managing clean technology portfolios for over 16 years, with the first listed impact strategy in North America.

Fund Overview

YTD RETURN*
11.43%

NAV*
$14.62

INCEPTION
September 1, 2021

MINIMUM INVESTMENT
$1,000,000

CUSIP
70472Q716

BENCHMARK
MSCI WORLD

NET EXPENSE RATIO(1)
0.99%

GROSS EXPENSE RATIO(2)
1.25%

 

*as of 12/2/2024

Investment Professionals

Sign up for Quarterly updates and White Papers.

Sub-Advisor

Essex Investment Management Co., LLC

Essex Investment Management Company, LLC. follows an investment philosophy based on the early identification of growth, wherever growth exists.

Portfolio Managers

Robert Uek, CFA
William Page

Performance

YTD
As Of 12/2/2024
Quarterly
As Of 9/30/2024
1 Year
As Of 9/30/2024
3 Years
As Of 9/30/2024
5 Years
As Of 9/30/2024
10 Years
As Of 9/30/2024
Since Inception As Of
9/30/2024
Total Gross Expense Ratio(1) Total Net Expense Ratio(2)
11.43% 7.38% 18.89% -7.05% 8.28% N/A 6.47% 1.25% 0.99%

Calendar Year

2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
-1.28% -27.69% 11.15% 63.14% 25.83% -15.60% N/A N/A N/A N/A N/A

Portfolio

as of September 30, 2024

Top Ten Holdings

Percentage Of Total Net Assets 37.30%
NextEra Energy, Inc. 5.00%
Badger Meter, Inc. 4.50%
Primoris Services Corporation 4.10%
GE Vernova Inc. 4.00%
Hubbell Incorporated 3.60%
Kingspan Group plc 3.50%
Keyence Corporation 3.30%
Valmont Industries, Inc. 3.20%
Xylem Inc. 3.10%
Cadeler AS 3.00%

Sector Weightings

Percentage Of Total Net Assets 100.00%
Industrials 48.70%
Information Technology 20.80%
Materials 6.80%
Utilities 5.00%
Financials 2.70%
Consumer Discretionary 0.70%
Cash and Other Assets (Net) 15.30%

Top Ten Country Allocations

Percentage Of Total Net Assets 100.00%
United States 61.90%
Japan 5.60%
Germany 4.90%
Denmark 4.70%
Switzerland 4.10%
Ireland 3.50%
Cash and Other Assets (Net) 15.30%

Portfolio Characteristics

Net Assets $52,337,822
Number Of Holdings 33
Percentage in Top 10 Holdings 37.30%
Weighted Average Market Cap (Mil) $26,573.00
Annual Turnover 47.00%

Portfolio Allocation

Percentage of Portfolio 100.00%
Equity Securities 84.70%
Cash and Other Assets (Net) 15.30%

For the Quarter ended September 30, 2024

The Pear Tree Essex Environmental Opportunities Fund’s Ordinary Shares (the “Fund”) outperformed its benchmark, the MSCI World Index (the “Index”). The Fund achieved a return of7.28% at net asset value compared to 6.46% for the Index.¹

Market Conditions and Investment Strategies

With the US Presidential election approaching, it seems everything has been politicized today, including most facets of the energy transition. Yet we believe any political risk for the clean tech sector is overly discounted at present, expediting attractive valuations and growth prospects. Beyond this exaggerated political overhang, we believe many of the significant headwinds buffeting the clean tech sector are dissipating. This has been reflected in the positive returns for our Strategy this quarter. Clean tech company fundamentals have improved, valuations are attractive and the economic backdrop remains healthy.

The Wilderhill Clean Energy Index² (ticker: ECO), posted (0.20%) for the third quarter, versus the Fund’s 7.28% return. We believe the clean tech sector is highly inefficient. GEOS outperformance versus the Wilderhill is due to our consistent investment process and execution, investing in commercially-viable companies offering true solutions to environmental problems. We expect strategy outperformance versus the primary Index to continue as market and fundamental catalysts continue to unfold.

Attribution (Third Quarter 2024)

Top contributors:

Performance for the third quarter was led by GE Vernova (GEV), the diversified power technology company focused on ten markets, from steam heat to wind, grid solutions and nuclear. The electrification business which includes Grid Solutions is the fastest growing segment currently as measured by bookings and billings. MP Materials (MP) was a top performer, as the market finally recognizes the huge differentiation of this domestic producer of critical rare earth materials. China controls most of the global rare earth content, and MP is the leader for US rare earth mining, separation and refining. MP’s resource in Mountain Pass California
is one of the lowest cost resources in the world, and the company is expanding downstream into high-powered magnet production at a new plant in Texas with an initial offtake arrangement with GM. Long-standing water holding Energy Recovery (ERII) posted strong returns, as the leading energy efficiency provider for desalination plants announced new orders in the Middle East, along with improving margins given pricing discipline under the tutelage of new CEO David Moon.

Underperformers:

Underperformance for the quarter was led by advanced driver assistance systems (ADAS) company Mobileye (MBLY), which suffered from a buildup of field inventory. The position was sold in August given our concerns over market share loss to cheaper technologies. Battery technology company Enovix (ENVX) was a laggard as the silicon anode firm scaled its manufacturing plant in Malaysia. Array Technologies (ARRY) continued to underperform, given pushouts in large scale solar projects due to permitting delays and in some cases lack of inventory for critical inputs such as transformers.

Portfolio Changes

We added a new position in the GEOS water theme, Advanced Drainage Systems (WMS), which is primarily positioned to benefit from climate change adaptation efforts. WMS is focused on water management solutions including water quality, drainage, basin management and stormwater management. WMS offers services to improve flood security, recharge aquifers and mitigate the risk of water scarcity. The source of funds for this new position was the sale of Zurn Elkay Water Solutions as it hit our valuation target.

Outlook

As we stated at the outset, we see a recovery for clean technology stocks unfolding, based on improving fundamentals within the sector as well as the economy. Management teams generally have more favorable outlooks on their businesses. Some industries which experienced excessive inventory levels are seeing these inventories return to norm, such as Generac Holdings, whose dealer network double-ordered after Covid to ensure they had generators on hand, limiting sales growth for the past 16 months. Generac now has better channel and shipping visibility, leading to improved growth and guidance. The high-interest rate environment and tight labor market that has been causing large infrastructure project pushouts is also abating. Energy Recovery is seeing an improvement in desalination mega-projects in the Middle East, leading to improved earnings visibility for the back half of this year. Aspen Aerogels is held in the GEOS efficient transport theme, because the company offers an economically viable fire-suppression technology for EV batteries. Despite alarmist headlines, the global EV transition is not only intact, but growing, leading to Aspen beating second quarter estimates on earnings, revenues and profits. Aspen has an offtake agreement with GM who just announced at this writing reconfiguration of its EV technology to allow more product development nimbleness to compete with EV global dominator China.

As we have stated before, energy enables everything – from economic growth to social wellbeing. The clean tech transition enables electrons derived from distributed sources to replace fossil fuel molecules, most of which is wasted. According to a recent report from the Lawrence Livermore National Labs, over 2/3 of all energy produced in the US is waste heat, such as the warm exhaust that is released from furnaces or cars. This ancient heating method is wasteful, and not scalable. Corporations are increasingly aware of this and are turning to renewable energy to power operations while lessening risk, from commodity to operational.

The clean tech revolution is ever expanding and we believe will play an even more important role if the trend to more onshoring of our industrial economy is to take place, which will be complicated by increased data center development. Each of the nine GEOS themes enables doing more with less, with the power technology theme we have been emphasizing for several years paramount. We strongly recommend going beyond headlines and looking at the trends at hand – long-term growth trends enabled by commercially viable clean technologies that enable economic growth including job creation across our country – in all districts. We
believe the companies offering these technologies and services will have growth and profitability that will be reflected in their share prices as the clean technology recovery continues to unfold.

 

¹The Fund is the successor to the investment performance of the Essex Environmental Opportunities Fund (“Predecessor Fund”) as a result of the reorganization of the Predecessor Fund into the Environmental Opportunities Fund on September 1, 2021. Performance information shown prior to the close of business on August 31, 2021 is that of the Predecessor Fund. 

²The Wilderhill Clean Energy Index (ticker: ECO) is a modified equal dollar weighted index comprised of publicly traded companies whose businesses stand to benefit from societal transition toward the use of cleaner energy and conservation.

Disclosures:

This commentary is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. The opinions and analyses expressed in this commentary are based on Essex Investment Management LLC’s (“Essex”) research and professional experience and are expressed as of the date of its release. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future periods.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.

Distributions

Dividend Short-Term Capital Gain Long-Term Capital Gain
2023 $0.0000 $0.0000 $0.0000
2022 $0.0000 $0.0007 $0.0000
2021 $0.0000 $0.2301 $0.9761

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than performance data quoted. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than original cost.

Before investing, carefully consider the Fund's investment objectives, risks, charges and expenses. For this and other information obtain the Fund's prospectus or, if available, the Fund's summary prospectus by calling (800) 326-2151 or by clicking the Literature and Forms section of this website to view or download a prospectus or, if available, a summary prospectus. Please read the prospectus carefully before you invest or send money.

1, 3, 5, and 10Yr performance numbers quoted are average annual total returns. Performance numbers quoted under one year are cumulative.

Polaris Capital began subadvising the Pear Tree Small Cap Fund on January 1, 2015.

The Pear Tree Essex Environment Opportunities Fund (the “Fund”) is the successor to the investment performance of the Essex Environmental Opportunities Fund (“Predecessor Fund”) as a result of the reorganization of the Predecessor Fund into the Environmental Opportunities Fund on September 1, 2021. Performance information shown prior to the close of business on August 31, 2021 is that of the Predecessor Fund’s for the Fund’s Ordinary Shares and Institutional Shares.

Expense Ratios Disclosure

1. Expense Ratio (Gross)
The gross expense ratio is the total operating expense from the class of shares of the fund stated as a percent of the fund's total net assets as disclosed in the fund’s most recent prospectus before waivers or reimbursements.

2. Expense Ratio (Net)
Net Expense Ratio is the total annual operating expense from the class of shares of the funds stated as a percent of the fund's total net assets as disclosed in the fund’s most recent prospectus after any fee waiver and/or expense reimbursements that will reduce any fund operating expenses until July 31, 2025 for all funds except, Polaris International Opportunities Institutional and R6, Polaris Small Cap Institutional and R6 and Quality R6. For these fund classes the fee waiver and/or expense reimbursements that will reduce any fund operating expenses will be in effect until October 31, 2025.

Risk Disclosure

Pear Tree Polaris Foreign Value
Pear Tree Polaris Foreign Value Small Cap
Pear Tree Polaris International Opportunities
Pear Tree Polaris Small Cap
Pear Tree Essex Environmental Opportunities

Foreign and Emerging Market Risk. Foreign markets, particularly emerging markets, can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Emerging markets can be subject to greater social, economic, regulatory, and political uncertainties and can be extremely volatile.

Small Cap Investing. The value of securities of smaller, less well-known issuers can perform differently from the market as a whole and other types of stocks and can be more volatile than that of larger issuers.