Quarterly Commentary

4Q 2023


  • Inflation has significantly improved, but the headwinds of elevated costs in housing, food, and labor remain. We believe the Federal Reserve is finished raising rates and will begin to cut rates in summer 2024.
  • The next few quarters should allow the economy to continue digesting the impact of higher interest rates. Global economic growth should continue to slow as the impact of the higher cost of capital filters throughout the economy. We do not expect a major recession.
  • Corporate layoffs continue as management teams prepare for the possibility of a weaker economy and slower business opportunities. Higher unemployment would support the argument for interest rate cuts later in 2024.
  • Companies continue to adjust inventory levels to meet lower demand and the higher cost of capital needed to retain inventory levels. We expect inventory levels to stabilize over the first half of 2024, leading to a more balanced supply and demand relationship.
  • Unfortunately, geopolitical risks around the world have escalated, and we expect will persist for an extended period. The U.S. presidential election in November will also add volatility and uncertainty.


  • The Fund’s Institutional (NESIX) and Retail classes (NESGX) returned 14.73% and 14.63% in the fourth quarter, compared to the Russell 2000 Growth’s 12.75%.
  • The Fund started the quarter under pressure. However, by mid-quarter and into year-end, the appetite for small-cap stocks rallied substantially. We deployed the majority of our cash position on the market pullback in October and ended the year with a historically low cash position.
  • We believe there is significant value within the small-cap asset class after years of selling pressure and investor avoidance. We look forward to 2024 and investing in management teams that focus on improving cost structures and strengthening balance sheets. However, the transition to this improved profile is not over yet.
  • The Fund’s top five performers in 4Q23 were: Aspen Aerogels, Inc. (ASPN), TTM Technologies, Inc. (TTMI), nLIGHT, Inc. (LASR), Alteryx, Inc. (AYX), and Frequency Electronics, Inc. (FEIM).
  • The Fund’s top five detractors in 4Q23 were: Vicor Corp. (VICR), ADTRAN Holdings, Inc. (ADTN), Cambium Networks Corp. (CMBM), Standard BioTools, Inc (LAB), and Akoustis Technologies, Inc. (AKTS).


  • Higher interest rates are impacting economic activity as companies are focused on their balance sheets and hoarding cash. Investments are being delayed, which impacts supply chains. The financial meltdown we experienced last March highlighted the fragility of our financial system and the interconnectedness of financial institutions. Higher interest rates may cause further stress within the economy, as real interest rates increase as inflation decreases.
  • Capital markets continue to face challenges, and companies needing to raise funds are finding that the cost of capital is substantially higher than in past years. We expect capital markets to show signs of recovery in 2024, as the expectation of lower Fed Funds rates is more visible on the horizon.
  • Technology remains a long-term strength of the economy, and several major secular trends remain firmly in place to support continued growth. Areas of long-term investment that we continue to like are mobile electrification, communications infrastructure, defense, AI, cloud computing, wireless connectivity, software and security, and specialty material manufacturers. Innovation within our portfolio companies continues, and long-term, we believe these investments will benefit the Fund.