Pear Tree Polaris Small Cap Fund

(USBNX / QBNAX)

Portfolio Management
The Fund is subadvised by Polaris Capital Management.  Polaris Capital Management, LLC is a Boston, Massachusetts money manager.

Investment Philosophy
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.

Portfolio Construction
The Fund generally invests in stocks found within the Russell 2000 index.  The Fund utilizes a proprietary quantitative model for data collection and verification, sector/industry study, and company catalyst identification. The Fund’s rigorous stock selection process also includes bottom-up fundamental analysis as well as a top down perspective to ensure diversified industry exposure. Risk controls are also employed to help prevent the Fund from concentrating investments in any particular industry or sector.

 

Disclosure
- Foreign Exposure. Foreign 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.
- 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.
- Real Estate Industry. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry