Quarterly Commentary

2Q 2021


  • In 2Q21, the Russell 2000 returned 4.29%. Value stocks narrowly outperformed relative to growth, as the long end of the yield curve reversed its rapid and significant ascent in February and early March.

  • We believe accommodative Central Bank policies will continue. However, discussions began on tapering bond purchases. The balance between economic growth, inflation, and tapering will be an ongoing discussion and will create headline volatility.
  • As world economies continue to reopen, we expect supply chains to remain volatile and challenging. Lowered predictability and disruptions of supply chains will have an impact on production levels to meet demand. We expect this to remain a risk for at least the next 12 months.
  • Inflation risk remains, but the big question is whether inflation is short-term or more long-lasting. Currently, we believe near-term inflationary pressures will continue but that inflation will ultimately be transitory.


  • In 2Q21, Institutional (NESIX) and Retail classes (NESGX) returned 11.68% and 11.51%, respectively, compared to the Russell 2000’s 4.29%%. After a volatile Q1, the Fund experienced a resurgence in many of its holdings.
  • The Fund’s top 2Q21 contributors included Aspen Aerogels (ASPN), Fluidigm (FLDM), ViewRay (VRAY), EMCORE Corp. (EMKR), and Cornerstone OnDemand, Inc. (CSOD).
  • The technology sector continues to perform well and major secular trends remain in place to support its continued growth. Our investment focus remains on industries such as semiconductor manufacturing equipment, communications infrastructure, artificial intelligence, cloud computing, 5G devices, and wireless connectivity, software, and security.
  • The Fund continued to benefit from its exposure to Materials manufacturers:
    • The Fund’s third-largest holding, Aspen Aerogels (ASPN), manufactures aerogel-based insulation. In October, Aspen announced a contract to supply its Pyrothin thermal barriers to a major North American automobile manufacturer to prevent thermal runaway in Lithium-ion batteries for Electric Vehicles (EVs).
    • Long-time portfolio holding II-VI, Inc. (IIVI) is a leader in engineered materials for multiple end markets. II-VI is in process of acquiring Coherent, Inc. (COHR), a leading manufacturer of lasers, sensors, and optics. The acquisition will expand II-VI’s capabilities in the industrial laser market.
    • Another long-term holding, AXT Industries (AXTI), develops substrate wafers from leading-edge materials for end markets such as 5G infrastructure, data center connectivity, LED lighting, lasers, sensors, power amplifiers for wireless devices and satellite solar cells. In April, AXT announced the shipment of its first 8” gallium arsenide substrates to a major customer and is predicting a broad scaling of demand for these wafers.


  • The semiconductor industry continues to face supply shortages that impact a variety of end markets, and the demand for additional manufacturing capacity lends a significant tailwind to our portfolio. As of June 30, investments in semiconductor and semiconductor capital equipment companies were approximately one-fourth of the Fund’s net assets.
  • High-yield bonds are a key market indicator with similar characteristics to small-cap investing. Currently, these markets are calm and reassuring to our bullish investment outlook.
  • Labor cost pressures, logistical transportation disruptions, and low supply chain inventory have been negative factors and are limiting the ability to fulfill orders, which in turn can impact a company’s forward-looking revenue, margin, and earnings guidance. These supply constraints and wage pressures will lead to higher near-term inflation.
  • We expect capital investment to increase over the next 12 months, which should help alleviate supply constraints; however, in the meantime inflationary pressures and execution risks are substantial. Semiconductor capital equipment makers will benefit
    from this increased demand for semiconductor manufacturing.
  • We expect M&A to continue in 2021 as larger companies seek to purchase higher-growth opportunities combined with the threat of higher capital gains tax rate.