Performance and Portfolio Update

  • The Fund modestly underperformed its benchmark (60% S&P 500 Index/ 40% Bloomberg Barclays US Aggregate Bond Index) in the fourth quarter.
  • The Fund’s asset allocation, which favors equities relative to bonds, was a positive contributor. It was another strong quarter for equities as the S&P 500 Index returned 6.64%, significantly outperforming bonds, as the Bloomberg Barclays US Aggregate Bond Index returned 0.39%. However, the allocation to non-US developed market equities was a large detractor, as US equities outperformed international equities.
  • Underlying fund performance was mixed, with the two large cap portfolios outperforming their benchmarks while the mid cap and bond funds underperformed their benchmarks. The Pax Large Cap Fund was the largest contributor to return due to strong stock selection in the Consumer Discretionary, Energy and Technology sectors. The Pax ESG Beta Dividend Fund, a smart beta offering tilted toward higher yielding, higher quality companies with strong ESG profiles, outperformed in an environment where quality metrics were rewarded. The Pax Mid Cap Fund underperformed the Russell Midcap Growth Index§ largely due to stock selection in Financials.
  • The Fund’s equity allocation remains modestly above its 60% neutral target and the fixed income allocation is modestly below its 40% target as we have valuation concerns in both markets. Equity market valuations remain stretched after their strong run in 2017, but near-term earnings prospects continue to drive stock prices higher. We also believe current interest rate and spread levels pose valuation concerns for bonds. With continuing extreme low levels of volatility and evidence of investor complacency toward risk, we believe caution is warranted. We remain focused on risk at both the Balanced Fund level and within each of the underlying Funds to assure that risk levels are maintained appropriately in-line with desired risk tolerance.

Performance

(as of 12/31/17)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Balanced Fund - Individual Investor Class0.893.8013.1613.166.018.404.408.36
Balanced Fund - Institutional Classƒ0.883.8813.4213.426.288.684.668.43
S&P 500 Index1.116.6421.8321.8311.4115.798.50
60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Bond Index0.854.1214.2114.217.8010.256.98
Lipper Mixed-Asset Target Growth Funds Index0.983.8916.6716.677.669.966.24

Performance data quoted represent past performance, which does not guarantee 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. To obtain performance for the most recent month-end call 800.767.1729 or visit paxworld.wpengine.com

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 Individual Investor Class inception date is August 10, 1971. The performance information shown for Institutional Class shares includes the performance of Individual 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.

Effective 5/1/2017, the Pax Balanced Fund Net Annual Fund Operating Expense ratio including acquired Fund Fees and net fee waivers or reimbursements for the Institutional Share Class is 0.63%, the Total Annual Fund Operating Expense ratio including acquired Fund Fees and gross fee waivers or reimbursements is 0.68%. The Pax Balanced Fund Net Annual Fund Operating Expense ratio including acquired Fund Fees and net fee waivers or reimbursements for the Individual Investor Share Class is 0.93%, the Total Annual Fund Operating Expense ratio including acquired Fund Fees and gross fee waivers or reimbursements is 0.92%.

Asset Allocation

Relative Contribution (%)

Past performance is no guarantee of future results.
XThe Inception date of the Pax Large Cap Fund, Pax ESG Beta Dividend Fund and Pax Core Bond Fund is December 16, 2016.

Asset Allocation (%)

(as of 12/31/17)
Fund
Equity62.3
Pax Large Cap Fund35.9
Pax ESG Beta® Dividend Fund7.4
Pax Mid Cap Fund6.9
Pax MSCI EAFE ESG Leaders Index Fund12.1
Fixed Income34.7
Pax Core Bond Fund34.7
Cash & Other3.0
Total100.0

~Inception 12/16/16

Top Ten Holdings

(as of 12/31/17)
Apple, Inc. 2.3%, Microsoft Corp. 1.8%, Amazon.com, Inc. 1.8%, PepsiCo, Inc. 1.3%, Home Depot, Inc., The 1.3%, Johnson & Johnson 1.2%, Citizens Financial Group, Inc. 1.2%, Zoetis, Inc. 1.2%, Bank of America Corp. 1.2% and Texas Instruments, Inc. 1.1%. Holdings are subject to change.

Definitions

Standard & Poor’s 500 Stock Index is an unmanaged index of large capitalization common stocks.
Bloomberg Barclays US Aggregate Bond Index represents securities that are US domestic, taxable and dollar denominated. The index covers the US investment grade fixed rate bond market, with index components for government and corporate securities and asset-backed securities. One cannot invest directly in an index. One cannot invest directly in an index.
§Russell Midcap Growth Index is a market capitalizationweighted index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth rates. The stocks are also members of the Russell 1000 Growth Index. One cannot invest directly in any index.

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.

PAX007666 (4/18)

Steve Falci, CFA®

Head of Systematic & Multi-Asset Strategies

Steve Falci is Executive Vice President and Head of Systematic & Multi-Asset Strategies at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

Steve oversees the firm’s systematic equity, multi-asset and fixed income strategies, as well as the integration of Environmental, Social and Governance (ESG) research into these strategies.

Steve has more than 30 years of experience in investment management. Prior to joining the firm in 2014, he served as Head of Strategy Development, Sustainable Investments, at Kleinwort Benson Investors, where he provided strategic direction, product development and identification of new market opportunities in the sustainable investment business. Before that, Steve served as Chief Investment Officer of Equities at Calvert Group and was a Principal and Senior Portfolio Manager at Mellon Equity Associates.

Steve serves on the board of directors for the US Forum for Sustainable and Responsible Investment (US SIF). He also serves on the board of directors for Mercy Investment Services and is the chairperson of their Investment Committee. Steve has a Master of Business Administration from the Stern School of Business at New York University, a Master of Arts from Pittsburgh Theological Seminary and a Bachelor of Science in economics from New York University. He is a CFA® charterholder.

Authored Insights

Pax World Funds Investment Outlook: Fourth Quarter 2020

In this quarter’s commentary, we share perspectives on systemic risks, including pandemic risk, climate risk, biodiversity loss, and racial and gender discrimination and inequality. All these issues have spread quickly around the globe, and all of them have and will continue to affect the economy and financial markets.

15 Oct 2020
Pax World Funds Investment Outlook: Third Quarter 2020

In this quarter’s commentary, we share perspectives on the rapid rebound in equities amid continued COVID-19 uncertainty, resiliency in sustainable investing and the sharper focus placed on sustainability as a result of the pandemic and uprising against racism.

13 Jul 2020
Pax World Funds Investment Outlook: Second Quarter 2020

In this quarter’s commentary, we cover the unprecedented market events of the first quarter and the continued economic uncertainty going forward due to the COVID-19 crisis. We also share perspective about how our investment discipline may help navigate elevated market volatility.

9 Apr 2020

Nathan Moser, CFA®

Senior Portfolio Manager

Nathan Moser is a Senior Portfolio Manager at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds. He is Senior Portfolio Manager of the US Small Cap Strategy, including the Pax Small Cap Fund. Nathan has been a member of the Pax Sustainable Allocation Fund portfolio management team since 2015.

Nathan has managed the Pax Small Cap Fund since its inception in 2008, which is the year he joined the firm. Prior to that, he worked at Citizens Funds, first as an Equity Analyst then as a Portfolio Manager. Nathan started his career with John Hancock Funds, where he was an Equity Analyst.

Nathan holds a Bachelor of Science from Babson College. He is a CFA® charterholder and a member of the CFA Society Boston.

Recent Insights

Andrew Braun, Pax World Funds

Andrew Braun

Senior Portfolio Manager

Andrew Braun is Senior Portfolio Manager at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

He is a Senior Portfolio Manager of the US Large Cap Strategy, which includes the Pax Large Cap Fund. He is also a member of the Pax Sustainable Allocation Fund portfolio management team.

Prior to joining the firm in 2017, Andy was Managing Director on the value equity team at Goldman Sachs Asset Management, where he led a team of 30 portfolio managers and analysts. Andy joined Goldman Sachs Asset Management as a Product Development Associate in 1993. He was promoted to Portfolio Manager in 2001 and served as Co-Chief Investment Officer from 2008 to 2014. Before Goldman Sachs, Andy was a Financial Analyst in the corporate finance division of Dillon, Read & Co. Inc.

Andy has a Bachelor of Arts in economics from Harvard University and a Master of Business Administration in finance and economics from the Stern School of Business at New York University.

Recent Insights

Anthony Trzcinka, CFA®

Senior Portfolio Manager

Anthony (Tony) Trzcinka is a Senior Portfolio Manager at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

He is a Senior Portfolio Manager of the Core Bond Strategy, which includes the Pax Core Bond Fund. Tony is also a member of the Pax Sustainable Allocation Fund portfolio management team. A pioneer in sustainable fixed income investing, Tony has been managing strategies investing in impact bonds for over 10 years.

Tony has been responsible for multiple strategies since joining the firm in 2003. Before Impax, Tony spent three years as an Assistant Vice President at AEW Capital Management, where he worked in a Senior Analyst role. He began his financial services career as an analyst in 1999.

Tony is a CFA® charterholder and a member of the Boston Security Analysts Society. He holds an MBA from Northeastern University and a Bachelor of Arts from the University of Massachusetts.

Recent Insights

Peter Schwab, CFA®

Senior Portfolio Manager

Peter Schwab is a Senior Portfolio Manager at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

He is a Senior Portfolio Manager of the High Yield Bond Strategy, which includes the Pax High Yield Bond Fund. Peter is also a member of the Pax Sustainable Allocation Fund portfolio management team.

Prior to joining the firm in 2015, Peter was a Managing Director on the High Yield Bond and Loan Team at Goldman Sachs Asset Management. Prior to that he was an Investment Associate in the High Yield Group at Putnam Investments and a member of the High Yield Research Group at Donaldson, Lufkin and Jenrette.

Peter has a Bachelor of Arts in history and economics from Union College and an MBA in finance from Columbia Business School. He is a CFA® charterholder, a member of the New York Society of Security Analysts and holds the FINRA Series 7 and 63 registrations.

Peter Schwab is a registered representative of Foreside Financial Services, LLC.

Recent Insights

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