INTERNATIONAL SMALL CAP

We mine for gems in the lesser-known international small cap universe, offering investors an approximate 60 to 80 stock portfolio of some of the world’s best smaller companies.

The Polaris investment philosophy holds true for the international small cap portfolio, as we seek undervalued companies with strong fundamentals — only diverging due to market cap. However, this is far from a limitation as there is an ever increasing number of small cap companies entering global stock markets.

INTERNATIONAL SMALL CAP PORTFOLIO CONSTRUCTION

When investing in a new security for an international small cap portfolio, we seek to purchase companies with a market cap greater than $50 million and less than $5 billion. After the initial purchase of a security, its market capitalization may fall below $50 million or appreciate to greater than $2 billion. There is no formal guideline for minimum or maximum market cap of any one security in the portfolio.

The 60 to 80 stock portfolio is composed of non-U.S. companies located in Europe, Australia and the Far East (otherwise considered the countries comprising the MSCI ACWI ex USA Small Cap Index). We are mindful of emerging market exposure, looking to limit investment in these markets to no more than 35% of the small cap portfolio. The investment process generally leads the portfolio to be well diversified – with investments in 15 or more foreign markets and 15 or more industries. The country and industry diversification helps reduce the likelihood that negative performance of a single country or industry will significantly impact the portfolio’s return.

The industry/sector/country exposure changes gradually over time as a function of which small cap stocks are the most undervalued in the world at a given period. Our bottom-up research seeks to identify individual stocks with strong, undervalued cash flows, regardless of location or industry. Learn more about sustainable free cash flow relative to Polaris’ Global Cost of Equity.

The investment process for the portfolio combines both quantitative and fundamental techniques to find these undervalued streams of cash flow. The Fund uses proprietary computer models to rank countries and industries on the basis of value and to narrow a universe of over 30,000 companies down to 400 to 600 deserving of further consideration. The Fund supplements the screening process by performing in-depth financial and fundamental analysis.

Visit the Pear Tree Funds website to obtain the latest reporting and fact sheets on the Pear Tree Polaris Foreign Value Small Cap Fund.

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