United StatesPerformance and Portfolio Update
- The Pax Global Environmental Markets Fund trailed the global equity markets (MSCI ACWI) and the comparative environmental markets index (FTSE Environmental Opportunities All Share) during the second quarter.
- The Fund represents a portfolio of differentiated, historically profitable, secular growth companies whose businesses address growing environmental challenges. The need for environmental solutions around the globe grows more pressing by the day. In contrast to these steady long-term trends, equity markets were volatile in the second quarter. As investing in environmental solutions focuses on an investment universe with inherent sector tilts and market cap size differences, periods of performance dispersion are not unusual.
- In the second quarter, concerns about higher interest rates, trade wars, and European politics had investors shying away from Industrials, Utilities, and Chinese stocks, and instead favoring IT, conventional Energy, and US listed companies. As experienced previously in the history of the Fund, volatility presents an opportunity for the investment team to take advantage of market dislocations.
- Typically an overweight sector for the Fund, Industrials were the weakest part of the market in the second quarter and a number of the top detractors were industrial companies. Xylem (Water Infrastructure, US) saw profit-taking after a long period of strong performance, and GEA (Logistics, Food Safety & Packaging, Germany) did not communicate well with investors during their Capital Markets Day.
- Pollution mitigation has a history of adding positive returns to the Fund, including in the second quarter. Intertek Group (Environmental Testing & Gas Sensing, UK) was a top performer due to strong organic growth and a better outlook globally in most of their end-markets.
- Merger and acquisition activity provided positive momentum – Praxair (Diversified Environmental, US) saw strong price appreciation in anticipation of its planned merger with Linde. Industrial gases have many applications ranging from energy efficiency to water treatment and food preservation.
- The economics driving investment in the Environmental Markets continue to be compelling due to technological innovation, resource scarcity, changing consumer preferences, and regulatory tailwinds globally. Notable high growth opportunities the investment team is pursuing are: pollution mitigation; the transition to electric vehicles; the digitization of manufacturing processes to reduce energy; water and recycling infrastructure; and disruption in the food value chain in response to changing consumer demand and regulatory change.
Performance(as of 6/30/18) | 1-Month | Quarter | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception1 |
|---|---|---|---|---|---|---|---|---|
| Global Environmental Markets Fund - Individual Investor Class | -1.50 | -2.51 | -5.17 | 4.14 | 7.35 | 8.96 | 5.84 | 5.64 |
| Global Environmental Markets Fund - Class A | -1.43 | -2.44 | -5.17 | 4.14 | 7.35 | 8.97 | 5.85 | 5.65 |
| Global Environmental Markets Fund - Institutional Class | -1.43 | -2.43 | -5.08 | 4.37 | 7.61 | 9.23 | 6.11 | 5.91 |
| MSCI ACWI (Net) Index | -0.54 | 0.53 | -0.43 | 10.73 | 8.19 | 9.41 | 5.80 | 5.44 |
| FTSE Environmental Opportunities Index Series | -1.80 | -1.97 | -3.38 | 8.90 | 9.91 | 11.06 | - | - |
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 Global Environmental Markets Fund Institutional Class and the Investor Class is March 27, 2008. The Class A shares inception date is May 1, 2013.
Total annual Global Environmental Markets Fund operating expenses, gross of any fee waivers or reimbursements, for Institutional Class, Investor Class and Class A shares are 1.02%, 1.26%, and 1.26%, respectively, as of 5/1/2018 prospectus. Total annual Global Environmental Markets Fund operating expenses, net of any fee waivers, reimbursements and acquired fund fees and expenses, for Institutional Class, Investor Class, and Class A shares were 0.98%, 1.23% and 1.23%, respectively.
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 8.76% (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 6/30/18) | 1-Month | Quarter | YTD | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception1 |
|---|---|---|---|---|---|---|---|---|
| Global Environmental Markets Fund - Class A (Load) | -6.85 | -7.80 | -10.40 | -1.60 | 5.35 | 7.75 | 5.25 | 5.07 |
Performance AttributionEnvironmental Markets Classification | Total Relative Contribution (%) |
|---|---|
 |  |
XThe Environmental Markets Classification System (EMCS) is a comprehensive global classification system for environmental markets. Environmental market companies are defined as providing products and services that deliver solutions to environmental challenges, and include environmental technology. Relative results of the Fund compared to the FTSE Environmental Opportunities All Shares Index. Source: FTSE.
Past performance is no guarantee of future results.
Portfolio Characteristics(as of 6/30/18) | Fund | Benchmark |
|---|---|---|
| Market Cap (weighted avg.)∱ | $23,467M | $142,558M |
| Forward Price/Earnings∼ | 17.43 | 15.28 |
| ROE∘ | 16.07 | 17.43 |
| Beta∞ | 0.99 | 1.00 |
| Number of Securities | 47 | 2,781 |
Top Ten Holdings
(as of 6/30/18)
Sealed Air Corp. 3.8%, Siemens AG 3.4%, East Japan Railway Co. 3.4%, TE Connectivity, Ltd. 3.4%, SUEZ Environnement Co., SA 3.3%, Danaher Corp. 3.3%, Ecolab, Inc. 3.0%, Ferguson PLC 3.0%, Praxair, Inc. 3.0% and Aptiv PLC 2.9%. Holdings are subject to change.
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.
∞A historical Beta is used for Funds with greater than 2 years of performance history under the same mandate. Three year Beta is used. Beta 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.
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.
PAX008166 (10/18)