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*
11.36%
NAV*
$35.99
INCEPTION
January 6, 1993
MINIMUM INVESTMENT
$1,000,000
CUSIP
70472Q302
BENCHMARK
Russell 2000
NET EXPENSE RATIO(1)
1.16%
GROSS EXPENSE RATIO(2)
1.28%
*as of 7/26/2024
Investment Professionals
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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 7/26/2024 |
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) |
|---|---|---|---|---|---|---|---|---|
| 11.36% | -4.56% | 13.58% | 4.40% | 7.50% | 6.21% | 8.65% | 1.28% | 1.16% |
Calendar Year
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|---|---|---|
| 13.23% | -4.75% | 24.67% | -4.37% | 23.89% | -10.52% | 6.78% | 21.20% | -1.25% | -6.59% | 40.61% |
Portfolio
as of March 31, 2024
Top Ten Holdings
| Percentage Of Total Net Assets | 28.00 |
|---|---|
| Barrett Business Services, Inc. | 3.30% |
| OFG Bancorp | 3.10% |
| Graphic Packaging Holding Co. | 3.00% |
| South Plains Financial, Inc. | 2.80% |
| Cabot Corporation | 2.70% |
| International Bancshares Corporation | 2.70% |
| Hercules Capital, Inc. | 2.60% |
| Ingredion Incorporated | 2.60% |
| MKS Instruments, Inc. | 2.60% |
| Eagle Materials Inc. | 2.60% |
Sector Weightings
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| Industrials | 35.60% |
| Financials | 22.50% |
| Materials | 10.50% |
| Energy | 7.60% |
| Information Technolgy | 5.90% |
| Consumer Discretionary | 5.60% |
| Health Care | 5.30% |
| Consumer Staples | 2.60% |
| Real Estate | 1.30% |
| CASH + other assets (net) | 3.10% |
Top Ten Country Allocations
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| United States | 88.50% |
| Puerto Rico | 5.30% |
| Canada | 3.10% |
| CASH + other assets (net) | 3.10% |
Portfolio Characteristics
| Net Assets | $88,131,787 |
|---|---|
| Number Of Holdings | 53 |
| Percentage in Top 10 Holdings | 28 |
| Weighted Average Market Cap (Mil) | $5,445.79 |
| Annual Turnover | 30.00% |
Portfolio Allocation
| Percentage of Portfolio | 100.00% |
|---|---|
| Equity Securities | 96.9 |
| Cash and Other Assets (Net) | 3.1 |
Commentary
For the Quarter ended June 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 (4.66%) at net asset value compared to (3.28%) for the Index.
Market Conditions and Investment Strategies
In the first half of 2024, global markets performed well on the back of large cap assets; investors geared toward this asset class and the AI frenzy, while seemingly ignoring realistically priced and fundamentally strong companies further down the asset class chain, as evidenced by middling results in the Russell 2000. However, there were a number of highlights in the small-cap space, with strong contributions from Real Estate and Financials offset by losses in capital-intensive Cyclicals.
The Fund’s Financial holdings outperformed the benchmark, led by Hercules Capital. The specialty financing provider announced robust quarterly results, with record debt/equity commitments and gross fundings. Hercules reported strong net investment income and a healthy balance sheet, ready to be deployed for future growth. At the other end of the spectrum, Puerto Rico fintech company, Evertec, declined as its late 2023 acquisition of Brazilian financial service software company, Sinqia, resulted in integration-related expenses and lower margins.
Perdoceo Education Corporation beat Wall Street estimates, as the academy continued to execute well with strong retention and engagement within its student population. As the economy started to tighten, people went back to school to upscale their careers, bucking market expectations.
Copper prices have been on an upward trajectory since the end of 2023, increasing over 20% from mid-February to late May. The contributory cause: tight supply and high demand from energy transition applications such as electric vehicles, as well as AI and automation. Lundin Mining was a direct beneficiary of this trend.
Decent gains from Ennis Inc., Barrett Business Services and Curtiss-Wright Corp. couldn’t offset losses elsewhere in the Industrial sector. Ennis was up on notable earnings, as strong pricing power led to organic revenue growth. Ennis also announced the acquisition of Printing Technologies, Inc. As the service market grows, Barrett has become a leading player in the asset-light business. It remains an underserved and under penetrated market upon which Barrett can capitalize.
Conversely, Wabash National Corp. dropped on industry news, as two trucking companies went bankrupt after the boom-bust cycle wrought from the pandemic. Wabash noted a few delays in order pickups, but expect those to come through in the latter half of the year. Regal Rexnord released softer earnings, as its power efficiency solutions and HVAC businesses weakened.
Portfolio Changes
During the quarter, the Fund sold out of Standard Motors, as the company struggled to grow earnings after losing a top customer, Advance Auto Parts. Cash was used to purchase H&E Equipment, which is the fourth largest equipment rental company in the U.S. The business model is attractive, as many large construction companies are turning to rental equipment versus expensive outright purchase.
Outlook
All eyes are focused on the CPI numbers, which dictate the Federal Reserve Board’s decision on interest rate cuts. We expect capital-intensive industries will be under pressure until rate cuts come to fruition, while “derivative” companies that focus in the AI space will continue to do well. Once the Fed makes its first cut, we expect a more stable environment for small cap companies. We are already seeing signs of this trend: after decelerating CPI numbers for June, small cap value surged ahead in the first weeks of July.
Distributions
| Dividend | Short-Term Capital Gain | Long-Term Capital Gain | |
|---|---|---|---|
| 2023 | $0.3087 | $0.0000 | $0.0000 |
| 2022 | $0.1941 | $0.0000 | $2.2043 |
| 2021 | $0.2598 | $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, 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.