ESG SMID Cap Fund | KESGX

Overall Morningstar Rating™, risk-adjusted total returns are measured against 576 funds in Morningstar’s Small Blend Category as of June 30, 2022.

Annual Impact Report 2021


Fact Sheet 6/30/22

Overview
Performance
Risk
Portfolio
Resources
Contact

Highlights

  • ESG variables are considered on both an inclusionary and exclusionary basis. In the stock selection process, special emphasis is placed on companies that leverage a competitive advantage related to environmental or social characteristics.
  • Portfolios are actively managed using a bottom-up investment approach and best of breed data for ESG assessment –not reliant upon 3rd party scoring.
  • Portfolio positioning focused on ESG variables that are measurable and comparable.
  • Directly interact with company management to gain better understanding of ESG-related advantages.
  • Portfolio exposure across the investment spectrum, from deep value to aggressive growth.

The ESG Process at Kennedy

How We Define ESG

ESG Integration

The Fund’s portfolio construction process does not rely on third party ESG rankings or a scoring mechanism but rather incorporates inclusionary and exclusionary ESG criteria as part of the fundamental research process.   

The Advisor may complement its internal ESG assessment of a company with relevant data from third parties regarding ESG considerations, which may include:

  • Reported and estimated greenhouse gas emissions
  • Carbon reserves
  • Industry exposure
  • Business involvement, including exposure to tobacco, civil firearms, or controversial weapons
  • Board structure and diversity
  • Executive compensation
  • Audit and accounting risk
  • Shareholder rights

The Fund is fossil fuel free, excluding companies that hold fossil fuel reserves on their balance sheets. The Fund prioritizes reduced greenhouse gas emissions (reported and estimated) in the portfolio construction process. In addition, the Fund’s ESG criteria is generally designed to exclude companies that are involved in, and/or derive significant revenue from, certain industries or product lines, including tobacco, civil firearms, and controversial weapons, such as cluster munitions and land mines.

Kennedy Capital ESG SMID Cap Fund Facts

  • Objective: The Fund investment objective is capital appreciation.
  • Portfolio Manager: Christian McDonald, CFA®
  • Ticker Symbol: KESGX
  • CUSIP: 46141T562
  • Share Class: Institutional
  • Inception Date: 06/28/2019
  • Investment style: U.S. Domestic SMID Cap Core Equity 
  • Minimum Initial Investment: $5,000
  • Expense Ratios: Gross 2.49% | Net 0.82%
  • Management Fee: 0.75%
  • Benchmark: Russell 2500™

Fact Sheet 6/30/22

 

The Fund’s advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses do not exceed 0.82% of the average daily net assets of the Institutional Class, exclusive of certain expenses identified in the Fund’s prospectus. This agreement is in effect until April 30th, 2023, and it may be terminated before that date only by the Trust’s Board of Trustees. The Fund’s advisor is permitted to seek reimbursement from the Fund of fees waived or payments made to the Fund for a period ending three full years after the date of the waiver or payment, subject to limitations described in the prospectus.

About Kennedy Capital

Kennedy Capital Management is a boutique investment firm focused on a goal of generating attractive returns in the small and mid-cap domestic equity markets for our clients since 1980. Led by our Director of Research, our centralized research team uses a detail-oriented, bottom-up proprietary research process driven by a team of more than a dozen sector-specific analysts. We believe this level of specialization provides a competitive advantage allowing us to regularly capitalize on overlooked opportunities. We are an independent and 100% employee-owned investment adviser.  

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC 

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary ProspectusPlease read carefully before investing.

Month-End Returns
as of 7/31/2022
CumulativeAnnualized
1 MonthQuarter-to-DateYear-to-DateSince Inception
(06/28/2019)
1 Year3 YearsSince Inception
(06/28/2019)
ESG SMID Cap Fund
(I-Share Class)
9.74%9.74%-12.87%43.95%-7.11%12.87%12.51%
RUSSELL 2500™10.35%10.35%-13.72%31.10%-11.27%9.07%9.16%

Quarter-End Returns
as of 6/30/2022
CumulativeAnnualized
1 MonthQuarter-to-DateYear-to-DateSince Inception
(06/28/2019)
1 Year3 YearsSince Inception
(06/28/2019)
ESG SMID Cap Fund
(I-Share Class)
-7.77%-14.19%-20.60%31.18%-14.58%9.47%9.45%
RUSSELL 2500™-9.55%-16.98%-21.81%18.80%-21.00%5.91%5.90%

The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call (833) 737-7788. Cumulative performance may not be indicative of the Fund’s long-term potential. The Fund returns will fluctuate over long and short-term period. Periods over one year are annualized.

Expense ratio as of most recent prospectus is 2.49% (gross) / 0.82% (net). The net expense ratio reflects the contractual agreement to waive fees and/or pay operating expenses until April 30, 2023. The net expense ratio ensures total annual fund operating expenses do not exceed 0.82% (exclusions exist) until April 30, 2023.

The Fund’s advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses do not exceed 0.82% of the average daily net assets of the Institutional Class, exclusive of certain expenses identified in the Fund’s prospectus. This agreement is in effect until April 30th, 2023, and it may be terminated before that date only by the Trust’s Board of Trustees. The Fund’s advisor is permitted to seek reimbursement from the Fund of fees waived or payments made to the Fund for a period ending three full years after the date of the waiver or payment, subject to limitations described in the prospectus.

The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. You cannot invest directly into an index.

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary Prospectus. Please read carefully before investing.

Risk Management

The Fund is generally managed on a sector neutral basis with modest over- and under-weights as compared to the Index, driven by bottom-up stock selection and ESG considerations.  The fund seeks to manage investment risk by maintaining broad issuer and industry diversification among the Fund’s holdings, and by utilizing fundamental analysis of risk/return characteristics in the security selection process.

Sell Discipline

The Advisor may sell all or a portion of a position of the Fund’s portfolio holding when in its opinion one or more of the following occurs, among other reasons:

  • There is a significant change in the company’s performance relative to ESG criteria
  • Security has realized its full valuation
  • Fundamentals deteriorate
  • More attractive investment opportunities are identified

Important Information:  Equity securities (stocks) are generally more volatile and carry more risk than fixed income securities (bonds) and money market investments. The net asset value per share of the ESG SMID Cap fund (the Fund) will fluctuate as the value of the securities in the portfolio changes. Common stocks, and funds investing in common stocks, generally provide greater returns over long time periods than fixed income securities. The Fund is comprised primarily of equity securities and is subject to market risk. Stocks may decline due to general market and economic conditions or due to company specific circumstances. The Fund is comprised of small-mid capitalization (“SMID cap”) stocks. SMID cap stocks typically carry additional risk, since smaller companies generally have a higher risk of failure, and historically have experienced a greater degree of volatility. ESG criteria may affect the Fund’s exposure to risks associated with certain issuers, industries and sectors, which may impact the Fund’s investment performance. The Fund may forgo some market opportunities available to funds that do not use these criteria. Small-mid capitalization companies generally have a greater risk of failure, and their stocks generally have greater volatility, than large companies. Mutual fund investing involves risk, including loss of principal. 

ESG criteria may affect the Fund’s exposure to risks associated with certain issuers, industries and sectors, which may impact the Fund’s investment performance. The Fund may forgo some market opportunities available to funds that do not use these criteria.

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC 

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary ProspectusPlease read carefully before investing.

Data as of 6/30/22

Portfolio Manager

Christian McDonald, CFA®
Portfolio Manager

  • 22 years of industry experience
  • Joined KCM in November 2005
  • B.S. in Finance from Washington University in St. Louis
  • M.B.A. from UCLA Anderson School of Business
  • Fundamentals of Sustainability Accounting (FSA) Credential Holder

As Compared to the Benchmark, ESG SMID Cap has:

Carbon Emissions (Scope1 Wtd. Avg., mt.) is a weighted average of companies’ reported or estimated Scope 1 greenhouse gas emissions measured in metric tons. Scope 1 emissions are those from sources owned or controlled by the company. The assessment is sourced from MSCI’s Carbon Metrics database.  Companies not included in the MSCI Carbon Metrics database are not included in the weighted average calculation for the portfolio or the benchmark.  The fund is assessed quarterly compared to the weighted average emissions (reported or estimated as sourced from the MSCI Carbon Metrics database) of the Russell 2500™ index.  The fund’s weighted average emissions will be at least 80% lower than that of the index.

The Governance Score refers to the ISS Governance QualityScore, which is derived from publicly disclosed data on a company’s governance practices and for which a lower score is preferable. The Score is calculated as a weighted average for the fund and compared to the weighted average score for the Russell 2500™ index.  Companies not included in the ISS Governance QualityScore database are not included in the weighted average calculation for the portfolio or the benchmark. The QualityScore provides an indication of relative governance quality supported by factor-level data.  The fund’s weighted average QualityScore will be at least 15% lower (better) than that of the index. Companies receive an overall QualityScore and a score for each of four categories: Board Structure, Compensation/ Remuneration, Shareholder Rights,and Audit & Risk Oversight. A score in the 1st decile indicates relatively higher quality governance practices and relatively lower governance risk, and, conversely, a score in the 10th decile indicates relatively higher governance risk.

Top 10 Holdings 

Company Name% of Assets
Teledyne Technologies, Inc.2.0
Valmont Industries, Inc.1.9
Vishay Precision Group, Inc.1.7
ICU Medical, Inc.1.7
WNS (Holdings) Limited1.5
Mercury Systems, Inc.1.4
Trimble, Inc.1.4
Callaway Golf Company1.4
Regal Rexnord Corporation1.4
Reliance Steel & Aluminum Company1.3

Top 10 Sector Weightings1

SectorKESGXRUSSELL 2500™
Industrials21.1%16.7%
Information Technology17.2%14.8%
Financials14.6%15.9%
Health Care13.9%13.1%
Consumer Discretionary11.6%11.2%
Real Estate7.6%8.8%
Materials3.2%5.6%
Consumer Staples3.2%3.4%
Utilities2.4%3.2%
Energy2.0%4.7%

The holdings and weightings are subject to change.

Example Characteristics of Portfolio Companies

  • Provider of hardware and software for electrical grid reliability and renewable energy project development
  • Producer of energy efficient electric motors for HVAC applications
  • Provider of irrigation equipment for optimized water consumption and improved crop yields
  • Multiple constituents of World’s Most Ethical Companies ²
  • Leading recycler of used automotive parts ³
  • Precision agriculture technology provider enabling increased yields and lower fuel/fertilizer consumption
  • Enzyme-based drug delivery technology provider that reduces the treatment burden and lowers healthcare costs
  • Provider of building products produced with recycled materials

Annual Carbon Emissions

(Scope 1 Weighted Average in Thousands of Tons)5

Potential Emissions from Carbon Reserves

(Emissions in Millions of Tons) 4

Characteristics

 KESGXRUSSELL 2500™
Carbon Emissions (Scope1 Wtd. Avg., mt.) 594,397618,371
Governance Score (lower = better) 63.44.2
Forecasted Price/Earnings Ratio (Fiscal Year 2)(x) 712.912.7
Weighted Average Market Cap ($M)6,4975,601

Source: FactSet Research Systems, MSCI, Inc. ISS Governance

1.) Based on Global Industry Classification Standard (GICS), which was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (S&P). Excludes cash.
2.) Source: Ethisphere, The 2022 World’s Most Ethical Companies Honoree List, 2022
3.) Source: SunTrust Robinson Humphrey Company Update, June 3, 2019
4.) The portfolio is Fossil Fuel Free (no carbon reserves on the balance sheet of any holding – defined as 1) a zero value for carbon reserves in the MSCI Carbon Metrics Database, and 2) no constituents of the Oil & Gas Exploration and Production GICS industry or the Coal & Consumable Fuels GICS industry). The assessment of carbon reserves data is sourced from MSCI’s Carbon Metrics database and derived by using Fossil Fuel Emissions Wtd Avg (mt) metric, which represents the total potential emissions from carbon reserves held by a company. The fund is assessed quarterly compared to the Russell 2500™ index.
5.) Carbon Emissions (Scope1 Wtd. Avg., mt.) is a weighted average of companies’ reported or estimated Scope 1 greenhouse gas emissions measured in metric tons. Scope 1 emissions are those from sources owned or controlled by the company, typically direct combustion of fuel as in a furnace or vehicle. Exposure to Fossil Fuels is a measurement of how much of a company’s business model is invested in or tied to fossil fuels.  The Carbon Emissions data can change on a periodic basis based on changes in the carbon emissions data computed and reported by MSCI’s Carbon Metrics database.  The comparison of the portfolio to the benchmark is updated and disclosed on a quarterly basis.
6.) The Governance Score is the ISS Governance QualityScore, which is derived from publicly disclosed data on a company’s governance practices and for which a lower score is preferable and a score of 10 is considered high risk.  The ISS QualityScore is a decile ranking relative to peer companies and can change on a periodic basis based on changes in the governance profile of the company, or changes in the universe of peer companies.  The comparison of the portfolio to the benchmark is updated and disclosed on a quarterly basis.  Governance practices in the Governance Score are based on an assessment of four pillars of governance: Board Structure, Compensation, Shareholder Rights, and Audit & Risk Oversight.
7.) The price-to-earnings (P/E) ratio is defined as a ratio for valuing a company that measures its current share price relative to its per-share earnings.
The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as “smid” cap. It includes approximately 2500 of the smallest securities based on a combination of their market cap and current index membership. You cannot invest directly into an index.

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC 

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary ProspectusPlease read carefully before investing.

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC 

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary ProspectusPlease read carefully before investing.

For more information about Kennedy Capital Management’s strategies and investment management services, call (833) 737-7788 or send us an email at funds@kennedycapital.com.

Not FDIC Insured. No Bank Guarantee. May Lose Value. Distributed by IMST Distributors, LLC 

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. This and other important information is contained in the fund's full Prospectus and Summary ProspectusPlease read carefully before investing.

The UNPRI is the world’s leading proponent of responsible investment. It works to understand the investment implications of environmental, social and governance (ESG) factors, and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The six Principles for Responsible Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice.

© 2022 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. As of 6/30/2022, KESGX was rated against 576 Small Blend funds for the 3-year period. KESGX received 5 stars for this period. The Small Blend Category includes funds that invest in stocks of small companies where neither growth nor value characteristics predominate. Stocks in the bottom 10% of the capitalization of the U.S. equity market are defined as small cap.