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*
1.21%

NAV*
$25.96

INCEPTION
August 3, 1992

MINIMUM INVESTMENT
$2,500

CUSIP
70472Q401

BENCHMARK
Russell 2000

NET EXPENSE RATIO(1)
1.53%

GROSS EXPENSE RATIO(2)
1.53%

 

*as of 2/27/2024

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 2/27/2024
Quarterly
As Of 12/31/2023
1 Year
As Of 12/31/2023
3 Years
As Of 12/31/2023
5 Years
As Of 12/31/2023
10 Years
As Of 12/31/2023
Since Inception As Of
12/31/2023
Total Gross Expense Ratio(1) Total Net Expense Ratio(2)
1.21% 11.00% 12.84% 9.98% 9.36% 5.11% 9.04% 1.53% 1.53%

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 December 31, 2023

Top Ten Holdings

Percentage Of Total Net Assets 27.70
OFG Bancorp 3.30%
South Plains Financial, Inc. 3.20%
Barrett Business Services, Inc. 3.20%
International Bancshares Corporation 2.70%
Graphic Packaging Holding Co. 2.70%
MKS Instruments, Inc. 2.60%
Cabot Corporation 2.50%
Ingredion Incorporated 2.50%
Hercules Capital, Inc. 2.50%
NOV Inc. 2.50%

Sector Weightings

Percentage Of Total Net Assets 100.00%
Industrials 32.60%
Financials 24.60%
Materials 11.30%
Energy 7.40%
Consumer Discretionary 6.90%
Information Technolgy 6.50%
Health Care 6.20%
Conumer Staples 2.50%
Real Estate 1.00%
CASH + other assets (net) 1.00%

Top Ten Country Allocations

Percentage Of Total Net Assets 100.00%
United States 90.30%
Puerto Rico 5.70%
Canada 3.00%
CASH + other assets (net) 1.00%

Portfolio Characteristics

Net Assets $83,928,968
Number Of Holdings 55
Percentage in Top 10 Holdings 27.7
Weighted Average Market Cap (Mil) $4,450.79
Annual Turnover 30.00%

Portfolio Allocation

Percentage of Portfolio 100.00%
Equity Securities 99
Cash and Other Assets (Net) 1

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 $0.2212 $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, 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.