Performance and Portfolio Update

  • The Pax High Yield Bond Fund outperformed its benchmark by 30 basis points in the quarter.
  • Strong credit selection in the Telecommunications, Retail and Capital Good sectors contributed to performance, while negative selection in the Energy and Healthcare sectors partially offset positive performance.
  • In a period of rising interest rates, the performance impact from our duration positioning was negligible and consistent with our strategy of being “duration-neutral” relative to our benchmark.
  • The High Yield market was volatile in the first quarter as a result of higher interest rates, increased equity volatility and growing concerns about global trade policy. The BofA Merrill Lynch High Yield – Cash Pay – Master I Index delivered a total return of negative -0.94% as Option Adjusted Spreads (OAS) widened from 363 to 372. High quality BB rated bondsX were down -1.65% due to their higher duration characteristics, while B rated bonds were down -0.46%. While interest rate concerns were the primary driver this quarter, the volatile stock market also contributed to the weakness in performance as the S&P 500 Index was down -0.76%. The Fund’s outperformance in this type of market volatility and weakness is consistent with our expectations.
  • In this environment of relatively low spreads and heightened uncertainty about the trajectory of the economy and interest rates, we are becoming modestly more defensive but still targeting a risk level which is consistent with our benchmark. Current spreads, while low relative to history, still provide meaningful compensation given the overall positive fundamental outlook for the US economy and corporate earnings. We are actively positioned in several sectors that we deem attractive such as Consumer Goods, Industrials (including Auto Suppliers) and Real Estate. We remain more cautious in Financial Services, Utilities and Healthcare.


(as of 6/30/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Individual Investor Class0.260.20-0.810.963.783.295.165.28
High Yield Bond Fund - Class A˜0.260.20-0.810.963.783.325.175.29
High Yield Bond Fund - Institutional Classƒ0.430.25-0.551.354.043.575.425.48
BofA Merrill Lynch US High Yield - Cash Pay - BB-B (Constrained 2%) Index0.230.65-0.461.864.965.327.35
Lipper High Yield Bond Funds Index0.220.71-0.142.544.494.846.67

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

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

As of 5/1/17 prospectus, total annual High Yield Bond Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Individual Investor Class, Class A, and Institutional Class shares are 0.99%, 0.98% and 0.74%, respectively.

1The inception date for the Pax High Yield Bond Fund Institutional Class is June 1, 2004, the Individual Investor Class inception date is October 8, 1999 and the Class A shares inception date is May 1, 2013.

The performance information shown for Institutional Class shares represents the performance of the Individual Investor Class shares for the period prior to Institutional Class inception date (June 1, 2004). 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 June 1, 2004 is 6.06% (annualized).

The performance information shown for Class A represents the performance of the Individual 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 2.82% (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 4.50%.

after sales charge

(as of 6/30/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Class A (Load)-4.25-4.27-5.27-3.552.182.374.705.03

Performance Attribution

(as of 3/31/18)
Average Active Weights (%)
Total Relative Contribution (%)

Past performance is no guarantee of future results.

Portfolio Characteristics

(as of 3/31/18)
Effective Duration)4.034.28
Years to Maturity6.176.39
30 Day SEC Yield
Class A4.89%


Top Ten Holdings

(as of 6/30/18)
HCA, Inc., 5.875%, 2/15/26 1.2%, Standard Industries, Inc., 6.000%, 10/15/25 1.1%, Fly Leasing, Ltd., 6.375%, 10/15/21 0.8%, Royal Bank Of Scotland PLC, 6.125%, 12/15/22 0.8%, First Data Corp., 5.000%, 1/15/24 0.8%, Hca, Inc., 5.875%, 5/1/23 0.7%, Scientific Games International, Inc., 10.000%, 12/1/2022 0.7%, Esh Hospitality, Inc. 5.250%, 8/15/21 0.7%, Manitowoc Company, Inc. 12.750% 8/15/21 0.7% and Exterran Energy Solutions Lp, 8.125%, 5/1/25% 0.7%. Holdings are subject to change.


A basis point (bps) is a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.
Option-Adjusted Spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. Typically, an analyst uses the Treasury securities yield for the risk-free rate. The spread is added to the fixed-income security price to make the risk-free bond price the same as the bond.
XCredit quality ratings by Standard & Poor’s assist investors by evaluating the credit worthiness of many bond issues. A: An obligation rated “˜A’ is somewhat more susceptible to adverse effects of changes in circumstances and economic conditions than higher-rated obligations. However, the obligor’s capacity to meet its obligation is still strong. BBB: An obligation rated “˜BBB’ exhibits adequate protection parameters. Adverse economic conditions or changing circumstances are more likely to lead to weakened capacity of the obligor to meet its obligation. BB: An obligation rated “˜BB’ is less vulnerable to nonpayment than other speculative issues. It faces ongoing uncertainties and adverse business, financial, or economic conditions could lead to the obligor’s inadequate capacity to meet its obligation. B: An obligation rated “˜B’ is more vulnerable to nonpayment than obligations rated “˜BB,’ but the obligor currently has the capacity to meet its obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity to meet its obligation. CCC: An obligation rated “˜CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its obligation. Adverse business, financial, or economic conditions could cause the obligor to be unable to meet its obligation. NR: This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate the obligation.
Effective Duration is a measure of a security’s price sensitivity to changes in interest rates. Securities with longer durations are more sensitive
to changes in interest rates than securities of shorter durations.
Years to Maturity (weighted average) is the number of years until the bond matures and/or expires.
30 Day SEC Yield: An annualized yield based on the most recent 30 day period.

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.

PAX008022 (10/18)

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.

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