Performance and Portfolio Update

  • The Fund underperformed the benchmark Russell 1000 Index in the first quarter. The main drivers of the return difference were the factors used in the strategy construction, which had a negative impact on relative returns.
  • The overweight towards quality factors contributed negatively to relative results for the period. Particularly, the Fund’s exposure to companies with lower beta and higher earnings yield were the largest factor detractors as equity markets rose substantially and stock volatility retreated from elevated levels in the fourth quarter. The Fund’s exposure to companies with higher profitability and earnings quality — both traditional quality factors — detracted as well.
  • Weighting the portfolio toward companies with stronger ESG characteristics is one of the five factors used in this smart beta strategy, which is designed to deliver strong long-term investment performance. On a short-term basis, however, ESG and other factors can negatively affect returns. During the quarter, companies with weaker ESG profiles, particularly those in the bottom quartile as measured by the Impax Sustainability Score, outperformed companies with stronger ESG profiles. The Fund’s underweight to these ESG laggards, which performed well in the high beta first quarter rally, detracted from relative performance. Longer-term, since the Fund’s inception, an overweight to the highest-rated ESG companies has contributed the most to relative performance.
  • Industry exposures, which are driven by the factor and ESG tilts, did not materially contribute to relative returns for the quarter.

Performance

(as of 3/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
ESG Beta Quality Fund - Investor Class1.4512.1112.118.3011.549.3814.755.49
ESG Beta Quality Fund - Class A1.5112.0812.088.3311.559.3814.765.49
ESG Beta Quality Fund - Institutional Class1.5112.1512.158.5611.829.6515.035.63
Russell 1000 Index1.7414.0014.009.3013.5210.6316.05
Lipper Multi-Cap Core Funds Index0.8914.0314.036.0512.138.7214.87

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 paxstaging.wpengine.com

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

1The inception date for the Pax ESG Beta Quality Fund Institutional Class is April 2, 2007, the Investor Class inception date is June 11, 1997, and the Class A shares inception date is May 1, 2013.

The performance information shown for Institutional Class shares represents the performance of the Investor Class shares for the period prior to Institutional Class inception (April 2, 2007). 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. Institutional Class shares average annual return since April 2, 2007, is 11.73% (annualized).

Total annual Pax ESG Beta Quality Fund operating expenses, gross of any fee waivers or reimbursements, for Investor Class, Class A and Institutional Class shares are 0.90%, 0.90% and 0.65%, respectively, as of 5/1/2018 prospectus.

The performance information shown for Class A represents the performance of the Investor Class shares for the period prior to Class A inception. Expenses have not been adjusted to reflect the expenses allocable to Class A shares. Class A inception date return since May 1, 2013, is 10.02% (annualized). A 1.00% CDSC (contingent deferred sales charge) may be charged on any shares sold within 18 months of purchase over $1 million. POP (public offering price) reflects the maximum sales load for the Fund’s Class A Shares of 5.50%.

Performance

(as of 3/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
ESG Beta Quality Fund - Class A (Load)-4.095.935.932.379.468.1414.115.22

Factors


(as of 3/31/19)
Factor Exposure
Total Relative Factor
Contribution (%)

Past performance is no guarantee of future results.
2Beta reflects the sensitivity of a Fund’s return to fluctuations in its benchmark; A beta for a benchmark is 1.00: a beta greater than 1.00
indicates above-average volatility and risk.

Portfolio Characteristics

(as of 3/31/19)
FundBenchmark
Market Cap (weighted avg.)$187,155M$209,282M
Forward Price/Earnings15.3617.34
ROE28.0319.69
Beta
0.901.00
Number of Securities161977

 


Top 10 Holdings

(as of 3/31/19)
Amazon.com, Inc. 3.0%, Apple, Inc. 2.9%, Microsoft Corp. 2.8%, Verizon Communications, Inc. 2.8%, PepsiCo, Inc. 2.5%, MasterCard, Inc., Class A 2.5%, Alphabet, Inc., Class A 2.4%, Johnson & Johnson 2.3%, Texas Instruments, Inc. 2.2% and 3M Co. 1.8%. Holdings are subject to change.

xThe Impax Sustainability Score is a proprietary ranking of companies’ environmental, social and governance (ESG) performance developed by Impax’s Sustainability Research Team. The scoring framework is shaped by the team’s collective experience and insights on how sustainability impacts financial performance. Learn more about the Impax Sustainability Score here.

Definitions

ƒWeighted Average is an average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average.
~Forward Price-Earnings Ratio or P/E FY1 ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings over the next 12 months.
°Return on Equity: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
An Ex-Ante Beta is used for funds with less than 2 years of performance history under its new mandate. The Ex-Ante Beta is calculated using a multi-factor risk model. Beta explains common variations in stock returns due to different stock sensitivities to the market relative to its underlying benchmark for the current period, not historical. A beta for a benchmark is 1.00: A beta greater than 1.00 indicates above-average volatility and risk.

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.

PAX008532 (7/19)

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