Performance and Portfolio Update

  • The Pax Small Cap Fund outperformed its benchmark in the second quarter, with the Institutional Class returning 4.38% versus the Russell 2000 Index return of 2.10%, due to strong stock selection within the Financials, Consumer Discretionary and Utilities sectors.
  • While stock selection was the key driver of the Fund’s outperformance this quarter, the continued underperformance of small caps versus large caps is notable. Specifically, the Russell 1000 Index outperformed the Russell 2000 Index by 2.2% for the quarter and by 13.3% for the past year. Given the Fund’s tilt toward the larger end of the small cap spectrum, the large cap outperformance provided a slight tailwind to the Fund’s results for the quarter. As a result of the meaningful divergence in performance, the small cap asset class relative valuation has improved versus large cap.
  • The Financials sector was the strongest contributor to the Fund’s results. Meridian Bancorp, the holding company for East Boston Savings Bank, advanced 14% during the period. Management is taking steps to improve margins and overall profitability, in part by moderating loan growth. We believe these steps will create shareholder value and we view the bank as a very high quality, scarce asset in the attractive greater Boston metropolitan area.
  • Industrials was a slight laggard for the Fund. While we benefited from an overweight allocation to the sector, stock selection detracted from performance. Wesco International, a distributor of electrical products, declined -4% during the quarter. In our view, the decline was due to softening economic growth and longer-term margin concerns.
  • As we head into the second half of the year, equity markets are near all-time highs. Investors increasingly expect a benign outcome to Chinese trade talks and view the potential for multiple interest rate cuts by the Federal Reserve favorably. While these in isolation would be positive, we are concerned that the slowing US economy and potential for negative earnings revisions aren’t adequately discounted in current valuations. In addition, we believe the odds of additional trade disputes are fairly high. Against this backdrop, our expectation is for increased levels of volatility and have positioned the portfolio with a defensive bias.


(as of 6/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Investor Class5.384.2917.41-2.636.584.2212.068.41
Small Cap Fund - Class A5.334.3117.37-2.686.584.2112.068.40
Small Cap Fund - Institutional Class5.464.3817.55-2.366.874.4912.368.69
Russell 2000 Index7.072.1016.98-3.3112.307.0613.459.03
Lipper Small-Cap Core Funds Index7.162.6816.67-1.5611.496.8013.098.92

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.

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 8.69% (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 6/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-0.49-1.4010.89-8.044.593.0311.437.86

Performance Attribution

(as of 6/30/19)
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 6/30/19)
Market Cap (weighted avg.)$3,137M$2,571M
Forward Price/Earnings16.3816.59
Number of Securities581,976


Top Ten Holdings

(as of 6/30/19)
Victory Capital Holdings, Inc., Class A 5.5%,, Meridian Bancorp, Inc. 5.4%,, HomeTrust, Bancshares, Inc. 5.2%,, Unitil Corp. 4.9%,, White Mountains Insurance Group, Ltd. 3.6%,, Natus Medical, Inc. 3.5%,, Parsley Energy, Inc., Class A 3.3%, EMCOR Group, Inc. 2.8%,, Maple Leaf Foods, Inc. 2.7% and Wright Medical Group NV 2.4%. Holdings are subject to change.


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.

PAX008689 (10/19)

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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