Pear Tree Polaris Small Cap Fund
The PEAR TREE POLARIS SMALL CAP FUND provides investors with the opportunity to participate in the growth potential of domestic small cap companies. A small cap company will generally be a company with a market capitalization from $250 million to $5 billion.
Investment Process
The Fund generally invests in domestic stocks with a market cap of up to $5 billion at the time of purchase. The investment process for the Fund combines both quantitative and fundamental techniques. The Fund's approach is primarily "bottom up," searching for individual stocks with strong, undervalued cash flows, regardless of industry.
Buy and Sell Discipline
The Fund uses proprietary models to rank publicly traded small cap companies on the basis of value and to narrow the universe down to 200 to 400 for further consideration. The Fund supplements the screening process by performing in-depth financial and fundamental analysis. Risk controls are also employed to prevent the Fund from concentrating its investments in any particular industry sector.
Portfolio Management
The Fund is managed by Polaris Capital Management, LLC, a Boston, Massachusetts money manager that specializes in the management of global, international, and domestic equity portfolios. Polaris brings over 35 years of investment experience to the Fund.
Fund Overview
YTD RETURN*
15.17%
NAV*
$29.54
INCEPTION
August 3, 1992
MINIMUM INVESTMENT
$2,500
CUSIP
70472Q401
BENCHMARK
Russell 2000
NET EXPENSE RATIO(1)
1.45%
GROSS EXPENSE RATIO(2)
1.45%
*as of 11/20/2024
Investment Professionals
Sign up for Quarterly updates and White Papers.
Sub-Advisor
Polaris Capital Management, LLC
Polaris is a leading global value equity manager, serving the investment needs of institutions and individuals since 1995. At Polaris Capital Management, we have a disciplined approach to investing in undervalued companies around the world, regardless of country, industry or market capitalization.
Portfolio Managers
Bernard R. Horn, Jr.
Sumanta Biswas, CFA
Bin Xiao, CFA
Jason Crawshaw
Performance
| YTD As Of 11/20/2024 |
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) |
|---|---|---|---|---|---|---|---|---|
| 15.17% | 9.17% | 23.68% | 7.92% | 9.23% | 7.64% | 9.19% | 1.45% | 1.45% |
Calendar Year
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|---|---|---|
| 12.84% | -5.10% | 24.23% | -4.78% | 23.50% | -10.88% | 6.42% | 20.88% | -1.48% | -6.81% | 40.21% |
Portfolio
as of September 30, 2024
Top Ten Holdings
| Percentage Of Total Net Assets | 25.80 |
|---|---|
| OFG Bancorp | 2.80% |
| Barrett Business Services, Inc. | 2.80% |
| South Plains Financial, Inc. | 2.80% |
| Graphic Packaging Holding Co. | 2.70% |
| Allison Transmission Holdings, Inc. | 2.60% |
| Curtiss-Wright Corporation | 2.50% |
| International Bancshares Corporation | 2.40% |
| Cabot Corporation | 2.40% |
| Eagle Materials Inc. | 2.40% |
| Ingredion Incorporated | 2.40% |
Sector Weightings
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| Industrials | 36.40% |
| Financials | 22.10% |
| Materials | 9.50% |
| Health Care | 6.00% |
| Energy | 5.70% |
| Information Technology | 5.20% |
| Consumer Discretionary | 4.90% |
| Consumer Staples | 4.30% |
| Real Estate | 3.90% |
| CASH + other assets (net) | 2.00% |
Top Ten Country Allocations
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| United States | 88.30% |
| Puerto Rico | 4.80% |
| Canada | 3.40% |
| Colombia | 1.50% |
| CASH + other assets (net) | 2.00% |
Portfolio Characteristics
| Net Assets | $102,088,508 |
|---|---|
| Number Of Holdings | 55 |
| Percentage in Top 10 Holdings | 25.8 |
| Weighted Average Market Cap (Mil) | $5,648.77 |
| Annual Turnover | 12.00% |
Portfolio Allocation
| Percentage of Portfolio | 100.00% |
|---|---|
| Equity Securities | 98 |
| Cash and Other Assets (Net) | 2 |
Commentary
For the Quarter ended September 30, 2024
The Pear Tree Polaris Small Cap Fund’s Ordinary Shares (the “Fund”) underperformed its benchmark, the Russell 2000 Total Return Index (the “Index”). The Fund had a return of 9.17% at net asset value compared to 9.27% for the Index.
Market Conditions and Investment Strategies
U.S. small cap stocks rallied in the third quarter on expectations for lower headline inflation and the ensuing interest rate cut, with markets pricing in a “soft landing” scenario at least in the near term. That expectation led to reality, when in mid- September, the U.S. Federal Reserve slashed its benchmark interest rate by half a percentage point, the first and the biggest cut since March 2020 when COVID-19 was crushing the economy. With a more benign rate environment this quarter, we saw rotation out of tech companies and into tried-and-true cyclicals, where the Fund is more heavily weighted. Top contributions came from Industrials, Financials and Materials; Energy was a notable detractor.
Among Financials, OFG Bancorp capitalized on Puerto Rico’s resilient economy, citing solid growth in loan origination and commercial deposits, while focusing on digital innovation. South Plains Financial effectively managed interest rate sensitivity and achieved loan portfolio growth through strategic customer relationships.
Eagle Materials recovered from second quarter lows, offering upbeat guidance on demand for wallboard in weather-sensitive U.S. markets. Cabot Industries has become a leading supplier of carbon black, used in tire, treads and industrial rubber products, as its Russian competition has been sidelined by sanctions.
More than half of the Fund’s Industrial holdings gained in excess of 10% for the quarter. Heavy-duty truck transmission supplier Allison Transmission Holding reported record quarterly net sales, driven by all-time highs in the North American on-highway end market. Curtiss-Wright Corp. cited strong demand for electronic defense services due to international conflicts. At the other end of the spectrum, Janus International reported underwhelming earnings on weak demand in the self-storage space. Wabash National posted good margins on strong pricing and mix, but missed top-line growth on cyclically slower trailer sales/volumes.
Oil prices softened during the third quarter, as did investor enthusiasm for oil production and service companies; NOV Inc. and Diamondback Energy Inc. were negatively impacted by this industry trend. Demand metrics point to steady business, just not the strong growth of the past.
In information Technology, Kimball Electronics and MKS Instruments Inc. both declined; the former on weaker industrial/auto division sales, while the latter was in sympathy with softer semiconductor capital equipment stocks.
Portfolio Changes
During the quarter, the Fund purchased Ingles Markets Inc., Tecnoglass, Essential Properties Realty and Northeast Bank, the latter three of which may play into a recovering real estate/building market. We sold Hercules Capital at a healthy profit, proactively exiting before competition heats up in a lower rate environment. Pacira Biosciences was sold on fundamental concerns.
Outlook
Over the past two years, the cost of funding for smaller companies rose in lockstep with the rise in interest rates; in essence, the financing structure presented big hurdles for small caps. Investors shied away. Now, as the terminal rate trends lower, small caps return to a competitive playing field vs. large-cap stocks. Small cap companies may see profitability improve meaningfully, especially in Real Estate, Energy and Consumer sectors, while new opportunities may present in under-represented Fund sectors like Communication Services and Utilities.
Distributions
| Dividend | Short-Term Capital Gain | Long-Term Capital Gain | |
|---|---|---|---|
| 2023 | $0.2212 | $0.0000 | $0.0000 |
| 2022 | $0.1044 | $0.0000 | $2.2043 |
| 2021 | $0.1543 | $0.6423 | $1.4143 |
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.
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.