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*
3.53%
NAV*
$33.46
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 4/24/2024
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 4/24/2024 |
Quarterly As Of 3/31/2024 |
1 Year As Of 3/31/2024 |
3 Years As Of 3/31/2024 |
5 Years As Of 3/31/2024 |
10 Years As Of 3/31/2024 |
Since Inception As Of 3/31/2024 |
Total Gross Expense Ratio(1) | Total Net Expense Ratio(2) |
|---|---|---|---|---|---|---|---|---|
| 3.53% | 7.15% | 21.53% | 6.77% | 8.85% | 6.51% | 8.89% | 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 December 31, 2023
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 11.00% at net asset value compared to 14.03% for the Index.
Market Conditions and Investment Strategies
November saw a strong rally that followed on in December, as investors anticipated a “soft landing” for the economy backed by 2024 rate cuts on cooling inflation. Cyclicals performed best in this environment, led by Financials, Consumer Discretionary, Industrials and Materials. Defensives, like Energy and Real Estate, lagged in comparison.
Financials turned a corner as the Fed shifted its narrative for 2024; 10 of 12 Financials in the portfolio had double-digit gains, including SLM Corp., International Bancshares and Colony Bankcorp. Puerto Rican bank, OFG Bancorp, announced strong third quarter earnings, backed by loan growth, stable core deposits and digital transaction activity in a strong regional economy. Barrett Business Services was the top overall portfolio contributor, as the business outsourcing provider achieved customer growth and improved profitability metrics. Other Industrials sector double-digit gainers included Wabash National, Science
Applications International, Kforce Inc., Applied Industrial Tech and a half dozen other names. Continued strength in building material demand, especially cement, boosted Eagle Materials. Cabot Corp., the specialty chemicals and performance materials company, reported its strongest quarter of its fiscal year 2023, citing record reinforcement materials earnings combined with cost controls. Despite slower consumer spending, The Buckle Inc. continued to generate strong profits and cash flow, so much so that it paid out a special shareholder dividend.
In Health Care, Computer Programs and Systems retrenched as it focused on an organic investment cycle, moving away from legacy to cloud-based software for its community hospital clients. Harmony Biosciences reported a failed phase 3 INTUNE study of its idiopathic hypersomnia drug. Weaker energy prices weighed on industry sentiment, as did supply chain constraints in the offshore rig market. However, capital equipment demand looks promising, which should benefit both Dril-Quip Inc. and NOV Inc. in coming quarters. Aerospace and defense company V2X Inc. reported stable earnings, leveraging a spate of business wins earlier in the year; however, management guided for a slower pace of award activity in 2024.
Portfolio Changes
During the quarter, the Fund did not sell any of its portfolio companies. After extensive research in the Real Estate sector, Global Medical REIT Inc. was purchased; the company maintains a premium book of assets in high quality medical office buildings and outpatient clinics that differentiate from competitors. Capital equipment demand (as referenced above) was inspiration for the purchase of NOW Inc., which distributes downstream energy and industrial products for petroleum refining, chemical processing,
LNG terminals and power generation utilities.
Outlook
Our portfolio is weighted toward high-quality defensive names that have generally performed well in downtrodden markets, but may lag in whipsaw rallies like the fourth quarter of 2023. We continue to diversify our portfolio, adding certain cyclicals and increasing our exposure in sectors like Real Estate. We believe the risk/return profile of the portfolio is well positioned for a potentially volatile 2024, which will be largely dictated by the timing of Fed rate cuts. Herein lies the opportunity, as lower rates should benefit small caps.
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.