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Pear Tree Polaris Foreign Value Small Cap and the mystery ETF in their portfolio

David_Snowball
edited February 2015 in Fund Discussions
Sorry that I didn't highlight this earlier. One of the questions you had for the guys is "why is there an ETF atop your portfolio?" The answer appears to be "it was an experiment that we don't intend to repeat." Here's their exact explanation:
Pear Tree does not hold the ETF anymore. Before year end, the Fund had +12% in cash and decided to pare it down to under 10% by using ETF to gain some market exposure. The Fund management team had built up cash while working on some buy ideas and did not want to put the cash to work and then sell again to buy the new companies. Henceforth if the Fund builds up +10% cash, we will not buy ETFs but try to put it to work in the most liquid companies until such time we have buy ideas.
So they had excess cash, wanted to put it somewhere but didn't want to create a short-term equity position that they'd just have to unwind so they tried using a sector ETF. Apparently didn't like the experience and don't plan to repeat it.

David

Comments

  • 00BY
    Thanks David, it seems like etf's are becoming more common among the top ten holdings, but I have never heard an explanation as candid as that.
  • [Deleted User]
    The user and all related content has been deleted.
  • David_Snowball
    Hi, Mo.

    No problem. As I say in the recap of our conversation with Bernie Horn, a lot comes down to how you weigh 2008 and how you assess their response to it. It's a strategy that's worked exceptionally well in 15 of 17 years and really poorly in two. How important those two are (is worrying about 2008 the equivalent of fighting the last war? are we building Maginot-like portfolios) and how intelligently you think they've handled it strike me as major drivers of whether the Polaris products make it in.

    In general, I'm agnostic on the first question and pretty pleased with the answers to the second but that's not necessarily definitive.

    As ever,

    David
  • BenWPBenWP
    I sold PVGFX not so much because Horn had a terrible 2008 (-4% vs. World Stock bogey), but because that loss came on top of an even worse relative performance in 2007 (-15% vs. the bogey). Horn did respond personally to my complaints, to his credit. Those with a stronger stomach than I did OK by hanging on.
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