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*
9.17%
NAV*
$6.55
INCEPTION
September 1, 2021
MINIMUM INVESTMENT
$100,000
CUSIP
70472Q690
BENCHMARK
MSCI WORLD
NET EXPENSE RATIO(1)
0.93%
GROSS EXPENSE RATIO(2)
1.18%
*as of 7/15/2024
Investment Professionals
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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 7/15/2024 |
Quarterly As Of 6/30/2024 |
1 Year As Of 6/30/2024 |
3 Years As Of 6/30/2024 |
5 Years As Of 6/30/2024 |
10 Years As Of 6/30/2024 |
Since Inception As Of 6/30/2024 |
Total Gross Expense Ratio(1) | Total Net Expense Ratio(2) |
|---|---|---|---|---|---|---|---|---|
| 9.17% | 3.72% | -9.04% | N/A | N/A | N/A | -11.87% | 1.18% | 0.93% |
Calendar Year
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.15% | -27.73% | -4.29% | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
Portfolio
as of March 31, 2024
Top Ten Holdings
| Percentage Of Total Net Assets | 43.90% |
|---|---|
| NextEra Energy, Inc. | 6.30% |
| Primoris Services Corporation | 4.50% |
| Badger Meter, Inc. | 4.40% |
| Hubbell Incorporated | 4.40% |
| Kion Group AG (a) | 4.30% |
| Mueller Water Products, Inc. | 4.20% |
| Landis+Gyr Group AG | 4.10% |
| Kingspan Group plc | 4.00% |
| Valmont Industries, Inc. | 4.00% |
| Keyence Corporation | 3.70% |
Sector Weightings
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| Industrials | 56.20% |
| Information Technology | 24.60% |
| Materials | 8.20% |
| Utilities | 6.20% |
| Financials | 2.60% |
| Consumer Discretionary | 0.80% |
| Cash and Other Assets (Net) | 1.40% |
Top Ten Country Allocations
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| United States | 67.60% |
| Germany | 7.80% |
| Japan | 6.30% |
| Switzerland | 6.10% |
| Denmark | 5.60% |
| Ireland | 4.00% |
| Sweden | 1.20% |
| Cash and Other Assets (Net) | 1.40% |
Portfolio Characteristics
| Net Assets | $45,461,128 |
|---|---|
| Number Of Holdings | 33 |
| Percentage in Top 10 Holdings | 43.90% |
| Weighted Average Market Cap (Mil) | $18,333.00 |
| Annual Turnover | 31.00% |
Portfolio Allocation
| Percentage of Portfolio | 100.00% |
|---|---|
| Equity Securities | 98.60% |
| Cash and Other Assets (Net) | 1.40% |
Commentary
For the Quarter ended March 31, 2024
The Pear Tree Essex Environmental Opportunities Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, MSCI World Index (the “Index”). The Fund achieved a return of (1.47%) at net asset value compared to 9.01% for the Index.¹
Market Conditions and Investment Strategies
Fund performance was hindered early in the quarter as market sentiment continued to favor large market capitalization stocks, primarily the Information Technology sector. Investors remained risk averse in our opinion and this will continue until investors observe the Federal Reserve initiating lower interest rates. Fund performance improved during the remainder of the quarter, relative to the Index, driven by a generally favorable fourth quarter earnings season for the Fund’s holdings.
Portfolio Changes
Fund positions were sold where declining fundamentals were anticipated, such as Aptiv, designer of electric vehicle systems, and Bloom Energy, whose profitability we believe is at risk. Trimble was purchased, which delivers technology used in agriculture, construction and surveying, with the precision agriculture business the fastest growing segment, enhancing farmer returns on investment and reducing inputs as well as harmful nutrient runoff using precise fertilizer applications. Watts Water Technologies was sold based on a high valuation, and Xylem was purchased, the diversified water solutions company, based on what we believe
will be higher sales to commercial and municipal channels. Later in the quarter we initiated a small position of the electric vehicle manufacturer Rivian. While the electric vehicle industry is experiencing some growth challenges currently, we believe the trend is intact longer term and Rivian has the potential to be differentiated with strong product offerings. MYR Group was purchased, given our high conviction for increased spending to shore up and modernize the electrical grid. MYR Group is well positioned, we believe,
as a market leader in electrical construction services.
Outlook
One of the Fund’s themes in which we have high conviction is companies enabling a more efficient electrical grid in the Fund’s power technology theme. The companies enabling electricity delivery and grid modernization have done well over the past several years, but there is a step change happening now. The demand drivers such as onshoring industry, and the rise of solar power are rapidly increasing the need for an enhanced grid, and this trend we expect will accelerate. The Fund has extensive exposure to our
power technology theme, and while these companies drove performance for the first quarter of 2024, we believe we are still in early innings. There are two primary drivers in place that are leading to the step change in spending of our electrical grid, and we believe they are multi-faceted. While data center electricity needs have increased marginal demand the past few years, artificial intelligence will compound it by over 60% in the next several years. Boston Consulting Group estimates that data centers will soon use as much power as 40 million homes – more than residential demand in California. The second driver is onshoring: the new mantra, echoing from shore to shore in bipartisan fashion is build it here in America. According to Fund power technology holding Primoris Services, almost 70% of US manufacturers surveyed have begun reshoring efforts in the past year. This trend has been catalyzed by the Inflation Reduction (IRA) and Chips Acts, which incentivize US-based manufacturing with state and local tax incentives. While AI is an exciting technology that will transform our economy, it is not feasible without electricity, and is just one of the many catalysts in the power technology theme.
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.
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, 2024 for all funds except Pear Tree Polaris International Opportunities Fund whose net expense ratio will expire on September 30, 2024.
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.