Pear Tree Polaris Foreign Value Small Cap Fund
The Pear Tree Polaris Foreign Value Small Cap Fund is subadvised by Polaris Capital Management and has been managed by Bernie Horn and Sumanta Biswas since inception in 2008. Polaris Capital Management, LLC is a Boston, Massachusetts money manager that specializes in the management of international, domestic and global equity portfolios.
Polaris employs an unconstrained pure value equity selection process that is characterized as an active, all-capitalization investment approach. The approach utilizes bottom-up research to uncover the most undervalued streams of free cash flow in the world. Identifying these streams of sustainable cash flow (e.g. companies) requires a “statistically patient” investment process. Polaris’ investment team believes normal market fluctuations will continue to produce undervalued companies.
The investment strategy strongly emphasizes valuation over growth. The process is designed to identify companies that generate strong sustainable free cash flow, often have conservative balance sheets and are capable of growing stronger in difficult economic times. In order to implement this philosophy, each company’s valuation model is based on current cash flow from operations and a highly conservative 0% to 2% terminal real growth rate.
The investment philosophy has been in place since 1984, with minor changes along the way to improve the process.
The Fund will generally own approximately 75 non-U.S. companies located in countries comprising the MSCI ACWI ex USA Small Cap Index. In addition, the Fund may also invest a portion of its assets in emerging markets. The Fund’s investment process generally leads the Fund to be invested in 15 or more foreign markets and 15 or more industries. The country and industry diversification helps reduce the likelihood that negative performance of a single country or industry will significantly impact the Fund’s return.
- Foreign Exposure. 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.