Pax Balanced Fund Commentary Q3 2018

Performance and Portfolio Update

• The Pax Balanced Fund underperformed its benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index) in the third quarter but outperformed its Morningstar Allocation 50%-70% Equity peer group index which is representative of multi-asset funds with similar risk and asset allocation objectives. The Fund’s allocation to Non-US Equities was the largest detractor to performance relative to the benchmark as US Equity securities significantly outperformed International Equities securities.
• Buoyed by continued strong economic data and earnings, the S&P 500 Index^† delivered a 7.71% return, its strongest quarter in five years. In contrast, Non-US Equities did not fare well as the MSCI EAFE Index^‡ returned 1.35%. Political uncertainty in Italy and surrounding Brexit, and more vulnerability to a trade war were among the factors weighing on Non-US developed market stocks, particularly in Europe. Bonds were flat in the third quarter as rates rose in anticipation of continued Federal Reserve tightening.
• The allocation to Non-US Equities was the largest detractor to quarterly performance relative to its benchmark as the S&P 500 Index had a significant performance advantage over the MSCI EAFE Index.
• The Fund’s modest tilt toward equities relative to bonds and the strong performance of the Pax Large Cap Fund contributed positively to performance.
• The Fund’s equity allocation remains modestly above its 60% neutral target and fixed income allocation is modestly below its 40% target. We continue to balance strong near-term earnings prospects with the impact of potential risks, including the potential for challenging earnings comparisons in the first quarter of 2019, the impact of rising interest rates on both stocks and bonds, and the escalation of trade tensions.

Figures include reinvested dividends, capital gains distributions, and changes in principal value.

¹The inception date for the Pax Balanced Fund Institutional Class is April 2, 2007 and the Investor Class inception date is August 10, 1971. The performance information shown for Institutional Class shares includes the performance of Investor Class shares for the period prior to Institutional Class inception. Expenses have not been adjusted to reflect the expenses allocable to Institutional Class shares. If such expenses were reflected, the returns would be higher than those shown.

As of the 5/1/2018 prospectus, the Pax Balanced Fund All-In Gross expense ratio includes indirect expenses (Acquired Fund Fees and Expenses “AFFE”) of 0.61%. AFFE are fees and expenses charged by their investment companies in which the Fund invests a portion of its assets and are not direct costs paid by Fund shareholders. The All-In Gross expense ratio for Institutional Class and the Individual Investor Class shares are 0.66% and 0.91%, respectively. Pax Balanced Fund expense ratios, excluding indirect AFFE, are 0.05% and 0.30% for Institutional Class and Individual Investor Class shares, respectively. The management fee is a unified fee that includes all of the operating costs and expenses of the Fund (other than taxes, charges of governmental agencies, interest, brokerage commissions incurred in connection with portfolio transactions, distribution and/or service fees payable under a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 and extraordinary expenses), including accounting expenses, administrator, transfer agent and custodian fees, Fund legal fees and other expenses. (For this purpose, Impax Asset Management LLC does not consider acquired fund fees and expenses to be operating costs and expenses of the Fund.)

Asset Allocation Relative Contribution (%)

Top Ten Equity Holdings

(as of 9/30/18)
Amazon.com, Inc. 2.3%, Microsoft Corp. 2.1%, Apple, Inc. 2.0%, JPMorgan Chase & Co. 1.2%, IBM 1.2%, Ingersoll-Rand PLC 1.1%, Alphabet, Inc., Class A 1.1%, AT&T, Inc. 1.1%, Eli Lilly & Co. 1.1% and Becton Dickinson & Co. 1.1%. Holdings are subject to change.

Definitions

^†Standard & Poor’s 500 Stock Index is an unmanaged index of large capitalization common stocks.
^‡The MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US and Canada. The MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. Performance for the MSCI EAFE Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax. One cannot invest directly in an index.

©2018 Morningstar, Inc. All Rights Reserved. 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. Morningstar, Inc. is an independent investment research firm that compiles and analyzes fund, stock and general market data.

The statements and opinions expressed are those of the author as of the date of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security. Past performance does not guarantee future results.

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