Performance and Portfolio Update
- The Pax Large Cap Fund underperformed the S&P 500 Index† in the fourth quarter. The Fund’s cyclical holdings were particularly hard hit as fears of higher interest rates and a looming recession weighed on company share prices.
- The S&P 500 Index decreased by -13.52% in the fourth quarter. Risks had been building throughout the first three quarters of 2018, especially around an eventual economic slowdown, but really showed up in stock prices during the fourth quarter. Notably, many cyclical stocks underperformed. By the end of the period, panic selling took hold and even safe havens like Real Estate Investment Trusts (REITs), Consumer Staples and Utilities were sold. We took the opportunity to meaningfully add to some of our Health Care names with resilient business models during the fourth quarter, and now the Fund is overweight the sector.
- Turning to attribution, most of the Fund’s underperformance can be attributed to security selection. The worst performing sectors were Consumer Discretionary and Financials. The best performing sectors for the Fund were Industrials and Health Care.
- We recognize that the next few quarters will likely show earnings growth deceleration from the torrid pace throughout 2018. However, the steep stock selloff in the fourth quarter has brought valuations to more attractive levels, so we are more optimistic than we were at the end of the third quarter of 2018. 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 12/31/18)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Large Cap Fund - Investor Class||-9.06||-15.15||-5.01||-5.01||-||-||-||6.47|
|Large Cap Fund - Institutional Class||-9.02||-15.11||-4.79||-4.79||-||-||-||6.72|
|S&P 500 Index||-9.03||-13.52||-4.38||-4.38||9.26||8.49||13.12||7.35|
|Lipper Large-Cap Core Funds Index||-8.84||-13.23||-5.13||-5.13||8.80||7.33||12.09||6.54|
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 paxstaging.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 Investor Class is December 16, 2016.
As of 5/1/18 prospectus, total annual Pax Large Cap Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Investor Class and Institutional Class shares are 0.95% and 0.70%, respectively.
(as of 12/31/18)
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 12/31/18)
|Market Cap (weighted avg.)∱||$216,530M||$200,861M|
|Number of Securities||45||503|
Top 10 Holdings
(as of 12/31/18)
Microsoft Corp. 5.1%, Amazon.com, Inc. 4.7%, Apple, Inc. 3.6%, Ingersoll-Rand PLC 3.3%, JPMorgan Chase & Co. 3.2%, Eli Lilly & Co. 2.8%, Merck & Co., Inc. 2.8%, Becton Dickinson & Co. 2.8%, IBM 2.8% and Alphabet, Inc., Class C 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.
‡Earnings before interest, tax, depreciation and amortization (EBITDA) is a measure of a company’s operating performance.
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 corporations’ 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.