Performance and Portfolio Update

  • The Pax High Yield Bond Fund underperformed its benchmark index in the second quarter, primarily due to an underweight in the Energy sector, which outperformed with the increase in oil prices. The Fund’s more conservative positioning was also a headwind during a period of outperformance in low-quality credits. This was partially offset by strong credit selection in Healthcare, Media and Technology sectors.
  • The second quarter was relatively strong for high yield as credit spreads declined due to optimistic earnings forecasts and continued strong equity markets. Interest rate volatility has become a focus of market participants but did not meaningfully impact the Fund’s performance or the credit markets more broadly. We continue to manage the Fund’s duration to be generally in-line with the benchmark.
  • The primary factors driving underperformance were the Fund’s underweight to the Energy sector and our more conservative positioning in the Automotive, Transportation and Financial Services sectors. In addition, we are overweight several higher growth sectors including Healthcare, Technology and Media which underperformed in this period. Notable securities that detracted from performance included Endo, Diversified Healthcare Trust, and not owning Occidental Petroleum.
  • Credit selection contributed to performance during the period, particularly in the three growth sectors referenced above (Healthcare, Media and Technology) despite their out-of-favor higher quality bias. Specific issuers that contributed to performance included Avantor, Nokia and Urban One. Not owning Bausch Health and Talen Energy also helped relative returns.
  • While we remain optimistic that corporate earnings are likely to normalize post-COVID, we are also aware that compensation for credit risk is approaching all-time lows. In this environment, we are closely monitoring the factors that impact credit spreads and the intentions of management teams of companies in our portfolio.
  • We believe the high yield Energy sector’s longer-term fundamentals remain challenged despite the recent improvement in commodity prices. While this may have recently presented a headwind to Fund performance, we remain consistent in our approach of selecting more durable business models that can withstand their debt loads and emphasizing sectors that we believe are better positioned in the transition to a more sustainable economy.

Performance

(as of 6/30/21)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Investor Class1.021.991.9211.726.997.034.975.49
High Yield Bond Fund - Class A1.162.142.0611.707.047.055.005.50
High Yield Bond Fund - Institutional Class1.19
2.21
2.1912.027.26
7.30
5.25
5.69
ICE BofA Merrill Lynch U.S. High Yield - Cash Pay - BB-B (Constrained 2%) Indexx1.27
2.57
2.8613.407.397.00
6.43
-
Lipper High Yield Bond Funds Index1.31
2.834.27
16.686.66
6.92
5.89-

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 impaxam.com

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

As of 5/1/21 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 0.96%, 0.96% and 0.72%, respectively.ˆ

Performance
after sales charge

(as of 6/30/21)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Class A (Load)-3.44
-2.52
-2.54
6.63
5.41
6.07
4.52
5.28

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 6.16% (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 4.29% (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%.

Performance Attribution


(as of 6/30/21)
Average Active Weights (%)
Total Relative Contribution (%)

Past performance is no guarantee of future results.

Portfolio Characteristics

(as of 6/30/21)
FundBenchmark
Effective Duration)3.724.13
Years to Maturity6.816.84
30 Day SEC Yield
Investor2.96%
Class A2.96%
Institutional3.19%

Top 10 Holdings

(as of 6/30/21)
Avantor Funding, Inc., 4.625%, 7/15/28 1.1%, Kraft Heinz Foods Co., 4.375%, 6/1/46 0.9%, Cco Holdings LLC, 4.750%, 3/1/30 0.9%, Standard Industries, Inc., 5.0%, 2/15/27 0.9%, Univar Solutions, Inc., 5.125%, 12/1/27 0.7%, Iqvia, Inc., 5.0%, 5/15/27 0.7%, Tenet Healthcare Corp., 5.125%, 11/1/27 0.7%, Ford Motor Co., 9.0%, 4/22/25 0.6%, Seg Holding LLC, 5.625%, 10/15/28 0.6% and Ncr Corp., 5.125%, 4/15/29 0.6%. Holdings are subject to change.

Definitions

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.

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.

IMPX0531 (10/21)

Peter Schwab, CFA®

Senior Vice President, Portfolio Manager

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

He is 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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