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*
20.96%

NAV*
$34.05

INCEPTION
January 6, 1993

MINIMUM INVESTMENT
$1,000,000

CUSIP
70472Q302

BENCHMARK
Russell 2000

NET EXPENSE RATIO(1)
1.26%

GROSS EXPENSE RATIO(2)
1.38%

 

*as of 11/29/2021

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 11/29/2021
Quarterly
As Of 09/30/2021
1 Year
As Of 09/30/2021
3 Years
As Of 09/30/2021
5 Years
As Of 09/30/2021
10 Years
As Of 09/30/2021
Since Inception As Of
09/30/2021
Total Gross Expense Ratio(1) Total Net Expense Ratio(2)
20.96% -2.15% 52.79% 4.57% 8.31% 10.48% 8.94% 1.38% 1.26%

Calendar Year

2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010
-4.37% 23.89% -10.52% 6.78% 21.20% -1.25% -6.59% 40.61% 13.64% -4.27% 27.29%

Portfolio

as of September 30, 2021

Top Ten Holdings

Percentage Of Total Net Assets 25.70%
South Plains Financial, Inc. 3.10%
Colony Bankcorp, Inc. 2.90%
Diamondback Energy, Inc. 2.70%
Cinemark Holdings, Inc. 2.70%
EVERTEC Inc. 2.50%
Barrett Business Services, Inc. 2.50%
Graphic Packaging Holding Co. 2.40%
OFG Bancorp 2.40%
Exco Technologies Limited 2.30%
Kforce, Inc. 2.20%

Sector Weightings

Percentage Of Total Net Assets 100.0%
Financials 24.00%
Industrials 21.10%
Information Technology 16.00%
Consumer Discretionary 10.40%
Materials 7.40%
Energy 6.40%
Consumer Staples 5.10%
Health Care 4.60%
Communication Services 2.70%
Utilities 1.80%
CASH + other assets (net) 0.50%

Top Ten Country Allocations

Percentage Of Total Net Assets 100.00%
United States 91.20%
Puerto Rico 4.90%
Canada 3.40%
CASH + other assets (net) 0.50%

Portfolio Characteristics

Net Assets $93,118,532
Number Of Holdings 59
Percentage in Top 10 Holdings 25.70%
Weighted Average Market Cap (Mil) $3,232.10
Annual Turnover 33.00%

Portfolio Allocation

Percentage of Portfolio 100.0%
Equity Securities 99.50%
Cash and Other Assets (Net) 0.50%

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

For the quarter ended September 30, 2021, the Pear Tree Polaris Small Cap Fund’s Ordinary Shares (the “Fund”) outperformed its benchmark, the Russell 2000 Total Return Index (the “Index”). The Fund had a return of (2.22%) at net asset value compared to (4.36%) for the Index.

Market Conditions and Investment Strategies

Outperformance in the quarter was due to the Fund’s Health Care and Consumer Discretionary holdings; Information Technology (IT), Energy and Industrials were laggards. In Health Care, Harmony Biosciences was the top contributor, posting outsized gains on news that its narcolepsy drug continued to see strong commercial sales, and has potential off-label uses for central nervous system disorders. Sales were boosted on a pickup in prescriptions, as patients returned to doctors’ offices post pandemic.

In the Consumer Discretionary sector, Crocs Inc. and Asbury Automotive had double-digit gains. Crocs recorded revenues that beat the highest estimates and raised its full year forecast despite supply disruptions. Asbury Automotive, a leading retailer of both new and used cars, noted extremely high margins as demand outstripped supply. At quarter end, Asbury announced the acquisition of the Larry H. Miller Dealerships, effectively expanding its footprint coast to coast.

Barbell-shaped returns defined the Financials sector, with OFG Bancorp, South Plains Financial and Cambridge Bancorp among the top 10 fund contributors, while FedNat Holding and United Insurance Holdings scraped the bottom of the portfolio. OFG Bancorp had strong quarterly results on the back of new loan originations, specifically for commercial and auto lending, a decrease in credit loss provisions, and a continued push to leverage their digital offerings. Cambridge Bancorp and South Plains Financial had similarly strong quarterly earnings, pointing to higher net income, loan growth and fewer loan loss provisions. By contrast, two Florida insurers, FedNat and United Insurance, declined after increasing catastrophe claims from Hurricane Ida while still dealing with the aftermath of the 2021 Texas Winter Storm Uri. However, both insurers have extensive reinsurance programs in place, which have capped their liability to manageable levels, while they wait for premium prices to filter through.

The Fund’s IT sector holdings detracted most, with Methode Electronics and MKS Instruments each declining more than 14%. Methode performed fairly well through the first half of 2021, but offered guarded guidance due to supply chain disruptions. MKS’ business has been strong year-to-date, but the chip-equipment supplier projected a slowdown as chip makers like Samsung and Intel face supply chain pressures. Dril-Quip declined as big oil companies curtailed drilling plans and budgets during COVID; we expect this trend to reverse course as oil demand remains high.

Portfolio Changes

During the quarter, the Fund sold out of Southeast regional bank, Ameris Bancorp, and LCI Industries, which makes components for recreational vehicles. The Fund already has exposure to the RV space with Winnebago, and felt that near-term supply chain pressures could impact LCI; the company was exited at a healthy profit. There were no new buys during the quarter.

Outlook

Volatility is expected to persist in the small cap market, with meaningful risks and headwinds in certain sectors. We believe the characteristics of our portfolio companies are supportive in periods of higher volatility, as would be expected of a traditional value portfolio. This past quarter was no exception; we outperformed on the back of a well-positioned, resilient portfolio of companies with quality cash flows and attractive valuations. We will continue to selectively purchase new companies as the opportunities arise.

Distributions

Dividend Short-Term Capital Gain Long-Term Capital Gain
2020 $0.3544 $0.0000 $0.0000
2019 $0.2522 $0.0000 $0.0000
2018 $0.1094 $0.0000 $0.0780

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.

Axiom International Investors began subadvising the Pear Tree Axiom Emerging Markets World Equity Fund December 8, 2018.

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, 2022 for all funds and share classes except Pear Tree Essex Environmental Opportunities Fund. Fee waivers and/or expense reimbursement for Pear Tree Essex Environmental Opportunities Fund and its share classes are in effect through August 31, 2022.

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 Axiom Emerging Markets World Equity
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.