Quarterly Commentary

4Q 2020


  • In 4Q20, the S&P 500 returned 12.15%; Russell 2000 returned 31.37%. For the year ending December 31, 2020, the S&P 500 returned 18.40%; Russell 2000 returned 19.96%. 
  • During 4Q20, low-quality and value factors outperformed, while high-quality, momentum and low-volatility underperformed.[1] [2]  Top-performing industries were energy, materials, financials and consumer discretionary as COVID-19 vaccines were approved and the market anticipated recovery from the pandemic recession.  These industries’ outperformance indicates a broadening of market participation in anticipation of a new economic cycle.
  • The digitization of the global economy has been accelerated, with tremendous results for technology companies.  Many companies in our investment universe have experienced decreased expenses and increased productivity as a byproduct of the physical distancing requirements that made telework mandatory. Many of these changes to business operations will remain permanent as employees have exhibited increased productivity under this new paradigm.


  • In 4Q20, Institutional (NESIX) and Retail classes (NESGX) returned 36.55% and 36.32%, respectively. YTD at December 31, NESIX returned 72.51% and NESGX 71.35%, considerably outperforming the S&P 500’s 18.40% and Russell 2000’s 19.96% YTD results.
  • The Fund was recognized in the Wall Street Journal in December as a top performer and the #2 Fund for 2020 1-year performance in the Small-Cap Core category.  The Fund was also recognized earlier in the year with two 2020 Refinitiv Lipper 2020 Fund awards for delivering strong risk-adjusted returns over the three-year and five-year time periods in the Small-Cap Core category.  We are excited about these recognitions and appreciate the long-term support of our investors. 
  • The Fund’s top 4Q20 contributions included FireEye, Inc. (FEYE), AXT, Inc. (AXTI), Cambium Networks Corp. (CMBM), Telos Corp. (TLS) and 8×8, Inc. (EGHT).  The Fund did not have any M&A announcements in the quarter; companies continue to evaluate risk and the ability to integrate new acquisitions during the pandemic.   
  • The Fund entered the quarter with a smaller than normal cash position but remained vigilant throughout as volatility provided both exit and investment opportunities.  Following the election, we deployed capital as the outcome became known.


  • While large cap stocks enjoyed substantial gains in 2020, we believe economic growth will continue accelerating 2021, and that it will benefit a broader array of companies including many with smaller capitalizations.  Generally, small cap stocks do well at the beginning of a new economic cycle, and we believe we are in those early days of a recovery following the devastation brought on by the pandemic.
  • The technology sector remains strong, with major secular trends firmly in place to support continued growth.  Industries and long-term themes we continue to like are semiconductors, semiconductor capital equipment, communications infrastructure, 5G devices, wireless connectivity, military modernization, software and security and specialty material manufacturing.   
  • Although we are equity investors, we constantly monitor the bond markets and interest rate curve for signs of nervousness in the financial system.  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.  This outlook could change if some of the following events were to unfold: 1) An increase in government regulations could slow growth and increase costs. 2) Higher corporate taxes could give pause to U.S. corporate investment and may slow a recovery.  3) If the Federal Reserve were to slow its bond purchasing program, it could be a headwind for risk assets. 

[1] https://research.ftserussell.com/products/downloads-research/FTSE_Russell_Monthly_Performance_Report_LCY.pdf?utm_source=marketmaps&utm_medium=email&utm_term=01aug2019&utm_campaign=gmr

[2] Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of December 31, 2020