Performance and Portfolio Update

  • The Pax High Yield Bond Fund modestly underperformed its benchmark in the second quarter.
  • Negative credit selection in the Consumer Goods and Media sectors were the primary detractors to relative performance during the quarter. These areas of underperformance were partially offset by positive selection in the Energy and Financial Services sectors. The modest underperformance during strong market conditions is consistent with our more conservative positioning.
  • The high yield market continued to perform well after a strong first quarter and delivered a total return of 2.56% in the second quarter, as represented by the ICE BofAML US Cash Pay High Yield Indexx. Reasonably strong economic data and accommodative signals from the Federal Reserve resulted in good performance for both equities and high yield bonds. High yield spreads rose modestly in the period from 415 basis points (bps) at March 31, 2019 to 420 bps at June 30, 2019, as represented by the ICE BofAML US Cash Pay High Yield Index.
  • On the sustainability front, we are pleased to welcome a new high yield green bond to our market and the Fund during the quarter. Hannon Armstrong Sustainable Infrastructure Capital, Inc. issued a new BB+ ratedΔ $350 million bond which will be used to further the company’s efforts to finance various renewable energy projects. We believe this well-managed company with strong fundamentals will make a good long-term core overweight position.
  • While the outlook for corporate profits is supportive and spreads could compress further, there are a number of risks including slowing global economic activity, volatile equity markets and uncertain trade policy which could reduce risk appetites at any time. As such, we remain relatively cautious as high yield market spreads have compressed to levels that are below long-term averages and could be vulnerable if downside volatility re-emerges.
  • We remain focused on well-positioned companies with manageable debt loads, and on integrating our sustainability research to enhance our ability to select superior credits.


(as of 6/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Investor Class2.252.509.296.817.002.626.365.33
High Yield Bond Fund - Class A2.252.509.286.806.992.656.375.34
High Yield Bond Fund - Institutional Class2.282.579.286.927.212.866.625.52
BofA Merrill Lynch US High Yield - Cash Pay - BB-B (Constrained 2%) Index2.592.8110.368.617.144.818.58
Lipper High Yield Bond Funds Index2.212.8010.026.907.173.978.50

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 5/1/19 prospectus, total annual High Yield Bond Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Investor Class, Class A and Institutional Class shares are 0.97%, 0.97% and 0.72%, respectively.

1The inception date for the Pax High Yield Bond Fund Institutional Class is June 1, 2004, the 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 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 5.99% (annualized).

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 3.37% (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%.


(as of 6/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Class A (Load)-2.37-2.114.441.995.361.715.895.09

Performance Attribution

(as of 6/30/19)
Average Active Weights (%)
Total Relative Contribution (%)

Past performance is no guarantee of future results.

Portfolio Characteristics

(as of 6/30/19)
Effective Duration)3.163.52
Years to Maturity5.915.79
30 Day SEC Yield
Class A4.30%


Top 10 Holdings

(as of 6/30/19)
Altice France Sa, 7.375%, 5/1/26 0.9%, Fly Leasing, Ltd., 6.375%, 10/15/21 0.9%, Air Canada, 7.750%, 04/15/21 0.8%, Standard Industries, Inc., 6.000%, 10/15/25 0.7%, Prestige Brands, Inc., 6.375%, 3/1/24 0.7, Sirius Xm Radio, Inc., 5.375%, 7/15/26 0.7%, Parkland Fuel Corp., 6.000%, 4/1/26 0.7%, Performance Food Group, Inc. 5.500%, 6/1/24 0.7%, New Red Finance, Inc., 5.000%, 10/15/25 0.7% and Party City Holdings Inc., 6.625%, 8/1/26 0.7%. Holdings are subject to change.


xThe ICE BofA Merrill Lynch High Yield Index tracks the performance of below investment grade, but not in default, US dollar denominated corporate bonds publicly issued in the US domestic market, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P. One cannot invest directly in an index.
A high yield bond spread is the percentage difference in current yields of various classes of high-yield bonds compared against investment-grade corporate bonds, Treasury bonds, or another benchmark bond measure. Spreads are often expressed as a difference in percentage points or basis points.
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.
ΔCredit 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.
ƒEffective 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.

PAX008699 (10/19)

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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