Performance and Portfolio Update
- The Pax Large Cap Fund slightly underperformed the S&P 500 Index† during the first quarter, with stock selection and sector allocation detracting modestly from performance.
- The S&P 500 Index returned 3.45% in the second quarter, bouncing back from a slight decline in the first quarter of the year. The equity markets have been battling a number of cross-currents, as a combination of strong earnings reports, higher interest rates, and trade skirmishes have compressed the price-to-earnings multiple of the S&P 500 Index this year by 2 points to 16.1 times earnings.
- Information Technology, Financials, and Industrials detracted the most from performance during the quarter. Within Technology, TE Connectivity (down 9%) was a detractor, as investors worried about its exposure to China and the auto sector. The Fund’s bank holdings (JPMorgan, Bank of America and Citizen’s Financial) were all weak going into the Federal Reserve’s annual stress test, but all of them passed and will be able to distribute an average of 8-9% of their market capitalizations back to investors over the next 12 months. Within Industrials, the Fund’s large overweight to machinery stocks continued to pressure performance. Stanley Black & Decker (down 13%) and Cummins (down 17%) were weak as investors weighed how cost pressures would impact earnings for these cyclical companies.
- Stocks within Consumer Discretionary and Consumer Staples outperformed this quarter. Notable holdings included Discovery, Inc. Class A (up 28%) in Consumer Discretionary, which benefitted from renewed merger and acquisition interest in the media industry, and spice maker McCormick Group (up 10%) in Consumer Staples, which reported strong earnings in the context of a very challenging grocery environment. Another contributor to returns was zero exposure to tobacco, an industry that was down 13% in the quarter.
- We continue to believe the risk/reward for large cap stocks is constructive looking forward. We remain focused on bottom-up stock selection, while avoiding large sector over- and under-weights. We believe our ESG integration approach will serve as a “flywheel” to better performance over time as more investors focus on the opportunities and risks arising from the transition to a more sustainable economy.
Performance(as of 6/30/18)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Large Cap Fund - Individual Investor Class||0.92||2.73||3.12||14.57||-||-||-||14.68|
|Large Cap Fund - Institutional Class||0.94||2.84||3.23||14.90||-||-||-||14.95|
|S&P 500 Index||0.62||3.43||2.65||14.37||11.93||13.42||10.17||15.10|
|Lipper Large-Cap Core Funds Index||0.52||3.09||1.85||13.07||10.87||12.10||9.02||13.94|
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. For most recent month-end performance information call 800.767.1729 or visit paxworld.wpengine.com
Figures include reinvested dividends, capital gains distributions, and changes in principal value.
1The inception date for the Pax Large Cap Fund Institutional Class and the Individual Investor Class is December 16, 2016.
As of 5/1/17 prospectus, total annual Pax Large Cap Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Individual Investor Class and Institutional Class shares are 0.95% and 0.70%, respectively.
(as of 3/31/18)
Sector: Average Active Weights (%)
|Total Relative Contribution (%)|
XOther: ETFs (for short-term cash mgmt. purposes) and Cash & Equivalents.
Past performance is no guarantee of future results.
Portfolio Characteristics(as of 3/31/18)
|Market Cap (weighted avg.)∱||$219,219M||$199,034M|
|Number of Securities||45||505|
Top Ten Holdings
(as of 6/30/18)
Microsoft Corp. 5.4%, Amazon.com, Inc. 4.9%, Apple, Inc. 3.8%, Home Depot, Inc., Alphabet, Inc., Class C 2.9%, Alphabet, Inc., Class A 2.9%, The 3.1%, Bank of America Corp. 2.9%, Biogen Idec, Inc. 2.8%, PepsiCo, Inc. 2.8% and JPMorgan Chase & Co. 2.7%. Holdings are subject to change.
†The S&P 500 Stock Index is an unmanaged index of large capitalization common stocks. One cannot invest directly in any index.
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.
∞An Ex-Ante Beta is used for Funds with less than 2 years of performance history under its new mandate. The Ex-Ante Beta is calculated using a multi-factor risk model. Beta explains common variations in stock returns due to different stock sensitivities to the market relative to its underlying benchmark for the current period, not historical. 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.