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*
-5.03%
NAV*
$27.37
INCEPTION
January 6, 1993
MINIMUM INVESTMENT
$1,000,000
CUSIP
70472Q302
BENCHMARK
Russell 2000
NET EXPENSE RATIO(1)
1.13%
GROSS EXPENSE RATIO(2)
1.25%
*as of 5/31/2023
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 5/31/2023 |
Quarterly As Of 3/31/2023 |
1 Year As Of 3/31/2023 |
3 Years As Of 3/31/2023 |
5 Years As Of 3/31/2023 |
10 Years As Of 3/31/2023 |
Since Inception As Of 3/31/2023 |
Total Gross Expense Ratio(1) | Total Net Expense Ratio(2) |
|---|---|---|---|---|---|---|---|---|
| -5.03% | -0.17% | -3.02% | 21.58% | 5.17% | 6.65% | 8.49% | 1.25% | 1.13% |
Calendar Year
| 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.75% | 24.67% | -4.37% | 23.89% | -10.52% | 6.78% | 21.20% | -1.25% | -6.59% | 40.61% | 13.64% |
Portfolio
as of March 31, 2023
Top Ten Holdings
| Percentage Of Total Net Assets | 26.20 |
|---|---|
| Eagle Materials Inc. | 3.00% |
| Graphic Packaging Holding Co. | 3.00% |
| Barrett Business Services, Inc. | 3.00% |
| South Plains Financial, Inc. | 2.60% |
| Ingredion Incorporated | 2.60% |
| Cabot Corporation | 2.50% |
| NOV Inc. | 2.40% |
| OFG Bancorp | 2.40% |
| Kforce, Inc. | 2.40% |
| Wabash National Corporation | 2.30% |
Sector Weightings
| Percentage Of Total Net Assets | 100.0% |
|---|---|
| Industrials | 31 |
| Financials | 19.5 |
| Materials | 12.4 |
| Health Care | 9.1 |
| Energy | 8.3 |
| Information Technology | 7.3 |
| Consumer Discretionary | 6.1 |
| Consumer Staples | 2.6 |
| Communication Services | 80.00% |
| CASH + other assets (net) | 2.9 |
Top Ten Country Allocations
| Percentage Of Total Net Assets | 100.00% |
|---|---|
| United States | 89.60% |
| Puerto Rico | 4.60% |
| Canada | 2.90% |
| CASH + other assets (net) | 2.90% |
Portfolio Characteristics
| Net Assets | $78,179,304 |
|---|---|
| Number Of Holdings | 54 |
| Percentage in Top 10 Holdings | 26.2 |
| Weighted Average Market Cap (Mil) | $3,807.22 |
| Annual Turnover | 23.00% |
Portfolio Allocation
| Percentage of Portfolio | 100.0% |
|---|---|
| Equity Securities | 97.1 |
| Cash and Other Assets (Net) | 2.9 |
Commentary
For the Quarter ended March 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 (0.26%) at net asset value compared to 2.74% for the Index.
Market Conditions and Investment Strategies
After a strong 2022, Fund returns underwhelmed this quarter as value lagged growth and investors’ risk appetite returned. Our
leading sectors were Materials, Industrials, Information Technology and Consumer Discretionary.
In Materials, Graphic Packaging announced strong 2022 net sales and income, while building capacity with a new recycled
paperboard mill. Cabot Corp. noted solid sales of its carbon black for tires, with additive business in the EV battery market. Firm
pricing and high demand for cement helped Eagle Materials. Lundin Mining will buy a majority stake in the Caserones mine in
Chile; this may be an advantageous acquisition as copper supply and demand (stemming largely from the EV market) favors the
few industry suppliers.
In Industrials, Wabash National Corp. raised prices in excess of raw material costs; demand for truck trailers kept pace even
at higher prices. IT staffing company, Kforce, dominated in a post-pandemic job market; investors were skeptical of a repeat
performance in 2023. However, Kforce showed that even in a slowing environment, demand remained healthy; the stock posted
double-digit results.
In Health Care, Exelixis Inc. posted decent annual results on the back of its cabozantinib commercial franchise, and subsequently
announced the FDA clearance of a pipeline drug application for advanced solid tumors. Conversely, Harmony Biosciences was the
single worst portfolio performer, declining on an unsubstantiated short report from Scorpion Capital claiming side effects from
Harmony’s narcolepsy drug. Harmony management sought to dispel these unvalidated rumors, pointing to additional cardiac
trials run and FDA data; however, the damage was done to the stock price.
Financials detracted most with small regional banks, such as South Plains Financial, Cambridge Bancorp, BOK Financial and
Brookline Bancorp, posting lackluster results. Much, if not all, of the decline stemmed directly from the SVB/Signature failures
and concerns about a broader banking crisis, which hasn’t come to pass to date. Most U.S. banks are on solid footing, having
shored up balance sheets and capital ratios after the Great Financial Crisis of 2008; SVB and Signature were outliers, heavily
dependent on tech and cryptocurrency clients and overextended with longer-term maturity bonds.
Portfolio Changes
During the quarter, the Fund exited Oshkosh Corp. after the company lost a key U.S. Army contract for vehicle builds. Fishing/
boating company, Johnson Outdoors, was sold in anticipation of a consumer spending slowdown. Capital was used to purchase
Carlisle Companies, a construction materials/roofing company for large industrial complexes. Another new buy was Janus
International, the dominant market player in roll-up doors and security technology for self-storage businesses.
Outlook
2023 may prove a balancing act between a slowing economy dampening corporate earnings and a moderating interest rate
cycle. Added to this equation is the recent U.S. banking crisis, which will manifest in worsening credit conditions for banks and
tighter liquidity for consumers and corporates. In either scenario, the Fund is well positioned given the valuation and quality of
portfolio holdings, which we expect to weather any downturn and offer substantial upside in an economic recovery.
Distributions
| Dividend | Short-Term Capital Gain | Long-Term Capital Gain | |
|---|---|---|---|
| 2022 | $0.1941 | $0.0000 | $2.2043 |
| 2021 | $0.2598 | $0.6423 | $1.4143 |
| 2020 | $0.2401 | $0.0000 | $0.0000 |
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 (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, 2023.
2. 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.
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.