Performance and Portfolio Update

  • The Pax Small Cap Fund outperformed its benchmark during the first quarter. Stock selection within Real Estate and Consumer Discretionary impacted performance favorably. In addition, the Fund’s cash allocation and no exposure to the Energy sector were positive contributors to relative performance.
  • Small cap companies as represented by the Russell 2000 Index declined more than -30% during the quarter as investors expect the COVID-19 crisis to force the economy into recession. Selling was most severe in companies with high levels of debt and industries directly impacted by the virus and/or shelter-in-place orders. In some cases, selling appeared indiscriminate as investors were broadly de-risking portfolios and many stocks traded lower together. While investing during times like these are difficult, extreme volatility creates attractive investment opportunities and we’ve been adding selectively to our highest conviction ideas.
  • Real Estate was one of the Fund’s top performers relative to the Russell 2000 Index, due largely to strong stock selection. Healthcare Realty Trust, an owner of medical office buildings, declined -16% during the period, which was much better performance than the small cap market as a whole. Relative to more consumer-exposed areas of real estate, Healthcare tends to be relatively immune to economic downturns. While we’re mindful of reduced patient visits and the deferral of some procedures, we view Healthcare Realty as well positioned to weather the impact of a short-term disruption.
  • Industrials was the Fund’s worst performing sector. Specifically, MRC Global, a distributor of pipes, valves and fittings was largely responsible for the underperformance. The company has been negatively impacted by reduced spending by customers and higher balance sheet leverage. We are monitoring this position closely and take comfort in its strong free cash flow1 generation capabilities, which should allow it to reduce debt this year.
  • The sharp sell-off during the first quarter reflects the unprecedented speed by which the US economy has declined into recession. Economists expect second quarter gross domestic product (GDP) will be sharply negative and while that is likely discounted in equity valuations, the pace and timing of an eventual recovery is highly uncertain. In this environment, we remain focused on upgrading the quality of the portfolio and rotating from holdings most at risk to those strong enough to survive the downturn and thrive after. In terms of sector allocations, we were most active adding Healthcare exposure, which we find attractive due to valuation and its long-term growth outlook. As fundamental, bottom-up investors, we remain focused on adding value from stock selection and we believe we are well positioned during these volatile markets.


(as of 3/31/20)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception2
Small Cap Fund – Investor Class-21.30-29.24-29.24-22.51-7.34-2.775.925.22
Small Cap Fund – Class A-21.35-29.25-29.25-22.50-7.35-2.775.915.22
Small Cap Fund – Institutional Class-21.31-29.22-29.22-22.35-7.13-2.536.185.49
Russell 2000 Index-21.73-30.61-30.61-23.99-4.64-0.256.905.81
Lipper Small-Cap Core Funds Index-23.16-32.73-32.73-26.12-5.96-0.796.295.41

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 5/1/19 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 1.18%, 1.18% and 0.93%, respectively.

2The 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 3.17% (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 3/31/20)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-25.70-33.14-33.14-26.74-9.09-3.865.324.73

Performance Attribution

(as of 3/31/20)
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 3/31/20)
Market Cap (weighted avg.)$2,335M$2,047M
Forward Price/Earnings12.3313.22
Number of Securities631,978

Top Ten Holdings

(as of 3/31/20)
Victory Capital Holdings, Inc., Class A 5.4%, HomeTrust Bancshares, Inc. 4.8%, Natus Medical, Inc. 4.2%, Meridian Bancorp, Inc. 4.1%, Maple Leaf Foods, Inc. 3.1%, White Mountains Insurance Group, Ltd. 2.9%, Coherus BioSciences, Inc. 2.7%, Ligand Pharmaceuticals, Inc. 2.7%, ONE Gas, Inc. 2.6% and Ciena Corp. 2.6%. Holdings are subject to change.

1Free cash flow represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.


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. Ten-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.

PAX009163 (7/20)

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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