Pear Tree PanAgora Emerging Markets Fund


Portfolio Management
The Fund is subadvised by PanAgora Asset Management, Inc., a Boston-based firm that manages assets for pension plans, endowments, foundations, unions and financial service providers around the globe.  The firm also manages partnerships in Europe and Asia. PanAgora was founded in 1989.

Investment Strategy
To manage the Fund’s assets, PanAgora employs its proprietary, multi-factor risk parity strategy.  A risk-parity strategy is an investment strategy that generally attempts to balance risks across specifically identified factors rather than rely on the securities’ market weights reflected in a benchmark.  The risk parity strategy employed to manage Emerging Markets Fund’s assets follows a disciplined and systematic investment approach based on the philosophy of risk diversification. The strategy targets factors with proven long-term payoffs, such as value, quality, and momentum, using a proprietary portfolio construction methodology that seeks to avoid all unintended risk concentrations.  The sub-adviser believes that the benefits of this strategy to Emerging Markets Fund come from two distinct sources: efficient capture of the factor premia, and portfolio downside protection.  Efficient capture of the factor premia is a result of persistent intended factor exposure and avoidance of unintended factor exposure.  Downside protection is the result of diversification across important risk dimensions.

The Emerging Markets Fund hopes to reduce the risk that market momentum would cause to a particular group of securities from becoming a disproportionately large percentage of Emerging Markets Fund’s portfolio, thus causing the risks associated with that group of securities from becoming disproportionately significant when compared to Emerging Markets Fund’s other risks. Concentrated risk exposure typically would increase Emerging Markets Fund’s susceptibility to a significant drop in its net asset value if the risk is realized. The risk-parity strategy attempts to balance risks from exposures to various countries, sectors, and issuers while targeting factors, such as measures of a security’s quality, value, and market momentum.

Portfolio Construction

Under normal market conditions, Emerging Markets Fund invests at least 80 percent of its net assets (plus borrowings for investment purposes) in equity securities, including depository receipts, warrants and rights, of emerging markets issuers, that is, an issuer having a country classification assigned by MSCI, Inc. from a country included in the MSCI Emerging Markets Index (“MSCI EM”). Emerging Markets Fund generally invests in at least eight countries and three or more broad geographic regions, such as Latin America, Asia or Europe. Emerging Markets Fund may invest more than 25 percent of its assets in a particular region. Emerging Markets Fund may invest in companies of any capitalization.

- 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.