Performance and Portfolio Update

  • The Pax Small Cap Fund lagged the Russell 2000 Index in the first quarter due to the Fund’s defensive positioning being out of favor and security selection within the Healthcare sector.
  • Equity markets rallied sharply during the first quarter, reversing most of the previous quarter’s decline. Investors cheered the Federal Reserve’s decision to abandon their tightening policy and took a more positive view that trade tensions with China would be resolved.
  • The Russell 2000 Index increased 14.6% during the quarter, outperforming large caps by 58 basis points (bps). Small cap growth outperformed small cap value by 5.2% as investors sought out higher growth in a slowing economy. Notably, non-earners outperformed their profitable counterparts by more than 7% as investors added risk by moving down the quality spectrum. In addition, the most expensive quintile of small cap stocks also outperformed the Index. In periods like this, our higher-quality, lower-risk approach tends to lag the benchmark.
  • Healthcare was the Fund’s largest detractor during the period. Our holding in Natus Medical, a medical device company focused on neurology, hearing and newborn care, declined -25%. The company is implementing a turnaround plan and initial financial guidance and cost cutting estimates disappointed investors. We continue to believe there is meaningful value in Natus’ shares but expect investors will need to be patient as much of the anticipated margin expansion won’t occur until later this year.
  • The Industrials sector was the strongest contributor to the Fund’s results. Our holding in MRC Global, a diversified distributor of pipes, valves and fittings, advanced 43% as fourth quarter results and management’s outlook were better than expected. Financials also helped relative performance with continued strength in Victory Capital, which increased 47%. Investors appear to be growing more confident in the earnings power of the business and its significant free cash flow potential.
  • We’ve tempered our positive view on the market as valuations are back at levels where we believe meaningful upside will be difficult. Stock market appreciation in the first quarter was based on price-to-earnings (P/E) multiple expansion as the Federal Reserve’s dovishness pushes a potential recession from a near-term concern to a longer-term one. Investors seemingly have ignored the slowing economy and corresponding negative earnings revisions. With valuations at these levels and an expectation that consensus estimates are unlikely to start increasing in the near term, we have positioned the portfolio to perform well in a risk-off market environment.


(as of 3/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Investor Class0.6712.5712.57-2.485.564.1613.638.19
Small Cap Fund - Class A0.6012.5212.52-2.485.534.1513.628.18
Small Cap Fund - Institutional Class0.6612.6212.62-2.215.814.4213.928.47
Russell 2000 Index-2.0914.5814.582.0512.927.0515.369.04
Lipper Small-Cap Core Funds Index-2.0913.6313.631.6311.556.7715.078.87

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 call 800.767.1729 or for more information visit

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

As of 5/1/18 prospectus, total annual Small Cap Fund operating expenses, gross of any fee waivers or reimbursements, for Investor Class, Class A, and Institutional Class shares are 1.19%, 1.19% and 0.95%, respectively.

1The inception date for the Pax Small Cap Fund Institutional Class and Investor Class is March 27, 2008. The inception date for the Class A shares is May 1, 2013.

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 8.30% (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 5.50%.


(as of 3/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-4.946.316.31-7.863.552.9712.977.63

Performance Attribution

(as of 3/31/19)
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 3/31/19)
Market Cap (weighted avg.)$2,709M$2,391M
Forward Price/Earnings14.7816.09
Number of Securities571,998


Top Ten Holdings

(as of 3/31/19)
Unitil Corp. 5.3%, Victory Capital Holdings, Inc., Class A 5.1%, HomeTrust Bancshares, Inc. 5.1%, Meridian Bancorp, Inc. 4.7%, Natus Medical, Inc. 3.5%, White Mountains Insurance Group, Ltd. 3.2%, Maple Leaf Foods, Inc. 2.8%, Parsley Energy, Inc., Class A 2.6%, Wendy’s Co, The 2.6% and MRC Global, Inc. 2.6%. Holdings are subject to change.


One basis point is equivalent to 1/100th of 1%, 0.0001. This is a common unit of measurement of changes in interest rates.
Free cash flow is a measure of profitability that represents the cash a company generates after cash outflows to support operations and maintain its capital assets.
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.
A historical Beta is used for Funds with greater than 2 years of performance history under the same mandate. Three year Beta is used. Beta reflects the sensitivity of a Fund’s return to fluctuations in its benchmark; 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.

PAX008531 (7/19)

Nathan Moser, CFA®

Senior Portfolio Manager

Nathan Moser 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 Senior Portfolio Manager of the US Small Cap Strategy, including the Pax Small Cap Fund. Nathan has been a member of the Pax Sustainable Allocation Fund portfolio management team since 2015.

Nathan has managed the Pax Small Cap Fund since its inception in 2008, which is the year he joined the firm. Prior to that, he worked at Citizens Funds, first as an Equity Analyst then as a Portfolio Manager. Nathan started his career with John Hancock Funds, where he was an Equity Analyst.

Nathan holds a Bachelor of Science from Babson College. He is a CFA® charterholder and a member of the CFA Society Boston.

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