• The Pax High Yield Bond Fund modestly underperformed its benchmark index in the fourth quarter. The Fund is fossil fuel free and the portfolio’s lack of exposure to Energy was a slight detractor in this period and offset positive contributions in the Automotive, Healthcare and Services sectors. In aggregate, the Fund benefited from positive credit selection, but this was offset by sector allocation, primarily due to an underweight in Energy.

Market Review

  • High yield asset class returns were muted in the fourth quarter as rising interest rates provided a headwind for the fixed income markets broadly. For the full year, returns were relatively strong at 5.36% as represented by the ICE BofA US High Yield Indexx. Credit spreads1 declined by -71 basis points2 during 2021 due to subsiding COVID concerns and robust global equity market performance. The high yield market absorbed meaningfully higher interest rates and performed well, relative to most fixed income asset classes. We continue to manage the Fund’s duration to be generally in-line with its benchmark.


  • The primary factors driving underperformance were the Fund’s underweight to the Energy sector and more conservative positioning within the Media, Healthcare and Technology sectors. Offsetting the negative attribution from sector allocation was strong credit selection in these three sectors respectively.
  • Positions detracting from relative performance included Michael’s Stores, Crocs and Liberty Latin America. Not owning Occidental Petroleum also detracted.


  • Specific issuers that contributed to relative performance were Ford and Kraft Heinz. Our underweight position in Bausch Health also contributed.


  • The outlook for corporate earnings remains encouraging despite supply disruptions and higher input costs. This earnings backdrop should support credit spreads in the near-term, however, we are aware that credit spreads are narrow and we are closely monitoring the factors that could negatively impact credit spreads. We remain focused on resilient companies with manageable debt loads and have become more cautious as the post-COVID economic recovery remains uncertain.
  • The Fund continues to seek opportunities in high impact labeled securities and we are pleased that a growing number of high yield issuers are participating in this area. In the fourth quarter, we added a green bond to the portfolio issued by Ford Motor Company. The proceeds are earmarked to fund the significant investments they are making in their fleet electrification efforts. Ford remains a top holding for the Fund, which we believe represents a defensive position that should perform well as the company awaits potential credit rating upgrades in the coming year.


(as of 12/31/21)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception*
High Yield Bond Fund - Investor Class1.650.372.962.968.185.475.285.41
High Yield Bond Fund - Class A1.640.373.
High Yield Bond Fund - Institutional Class1.67
ICE BofA Merrill Lynch US High Yield - Cash Pay - BB-B (Constrained 2%) Index1.91
Lipper High Yield Bond Funds Index1.74

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 5/1/21 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

after sales charge

(as of 12/31/21)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception*
High Yield Bond Fund - Class A (Load)-2.90

*The 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 6.05% (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 4.15% (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 12/31/21)
Average Active Weights (%)
Total Relative Contribution (%)

Past performance is no guarantee of future results.

Portfolio Characteristics

(as of 12/31/21)
Effective Duration)3.844.05
Years to Maturity6.736.65
30 Day SEC Yield
Class A3.44%

1Credit spread is the difference between the yield (return) of two different debt instruments with the same maturity but different credit ratings. In other words, the spread is the difference in returns due to different credit qualities.

2Basis points, otherwise known as bps, is a unit of measure to describe the percentage change in the value of financial instruments or the rate change in an index or other benchmark. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form.

Top 10 Holdings

(as of 12/31/21)
Cco Holdings LLC, 4.750%, 3/1/30 1.0%, Avantor Funding, Inc., 4.625%, 7/15/28 0.9%, Centene Corp., 4.625%, 12/15/29 0.9%, Kraft Heinz Foods Co., 4.375%, 6/1/46 0.8%, Prime Security Services Borrower LLC, 6.25%, 1/15/28 0.8%, Standard Industries, Inc., 5.0%, 2/15/27 0.7%, Ncr Corp., 5.125%, 4/15/29 0.6%, Mileage Plus Holdings LLC, 06/20/27 0.6%, Altice France Holding Sa, 10.5%, 5/15/27 0.6% and Ardagh Packaging Finance PLC, 5.25%, 8/15/27 0.6%. 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.

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.

IMPX0905 (4/22)

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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