Performance and Portfolio Update

  • The Pax Small Cap Fund outperformed the Russell 2000 Index during the second quarter. Overall, Fund performance was driven by strong stock selection with a modest offset from sector allocation.
  • Small cap stocks advanced 4.29% during the period and by 17.54% for the first half of the year as measured by the Russell 2000 Index. The U.S. economy continues to emerge from the COVID-19 recession, with second quarter gross domestic product (GDP) expected to exceed 6%. As a result, investors have favored the more cyclical, value-oriented sectors of Energy, Consumer Discretionary and Materials.
  • From an attribution perspective, Financials was the Fund’s best performing sector due to strong stock selection. Victory Capital, a multi-boutique asset manager, was our top contributor, advancing 27% during the quarter. The combination of market appreciation and improving fund flows has driven positive earnings revisions. We remain positive on the long-term prospects of the company, finding their business model well suited for the current environment.
  • The Healthcare sector detracted from performance. Exelixis, a biotechnology company, was the largest detractor, declining -19% in the quarter. The company reported clinical results for its lead drug, Cabometyx, which were disappointing. After the quarter ended, we exited our position due to less conviction in the long-term fundamental outlook.
  • In terms of portfolio positioning from a sector perspective, we have overweight allocations to Financials, Industrials, Consumer Staples and Real Estate. A notable new position during the quarter is Hannon Armstrong, a real estate investment trust (REIT) that invests in alternative energy projects. We are particularly attracted to the high quality management team, track record of strong project results and Hannon’s contribution to the low carbon energy transition.
  • Despite moderation in small cap stock returns during the quarter, we remain optimistic in the long-term outlook for this segment of the market. Smaller companies are levered to the U.S. economy, which is growing rapidly with the easing of COVID-related restrictions and a return to normalcy. Valuations and investor expectations are high, but deservedly so, in our view, since the fundamental outlook remains positive. Due to surging demand coupled with supply chain and labor challenges, inflation is running at levels not seen in decades. Market participants don’t appear too concerned, viewing the increase as short term in nature. If this view changes, that could lead to rising volatility. We continue to view such periods of turbulence as opportunities to purchase high quality companies at discounted valuations.

Performance

(as of 6/30/21)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund – Investor Class1.458.6923.5661.5712.1711.9110.6210.13
Small Cap Fund – Class A1.508.7123.6461.6912.1611.9110.6210.13
Small Cap Fund – Institutional Class1.548.8023.7762.1012.4612.2010.9010.42
Russell 2000 Index1.944.2917.5462.0313.5216.4712.3411.02
Lipper Small-Cap Core Funds Index-0.234.0521.1061.6912.1714.7211.4510.48

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 impaxam.com.

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

As of 5/1/21 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 0.94%, respectively.

Performance
after sales charge

(as of 6/30/21)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-4.102.7416.8152.7610.0710.6510.009.67

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 11.45% (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%.

Performance Attribution


(as of 6/30/21)
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 6/30/21)
FundBenchmark
Market Cap (weighted avg.)$3,952M$3,398M
Forward Price/Earnings17.3417.64
ROE-0.71-3.03
Beta
0.801.00
Number of Securities581.985

Top Ten Holdings

(as of 6/30/21)
Victory Capital Holdings, Inc., Class A 5.3%, HomeTrust Bancshares, Inc. 4.0%, Meridian Bancorp, Inc. 3.7%, Vertiv Holdings Co. Class A 3.0%, Voya Financial, Inc. 2.6%, Natus Medical, Inc. 2.3%, AZEK Company, Inc., Class A 2.3%, SI-BONE, Inc. 2.1%, CryoPort, Inc. 2.1% and Health Catalyst, Inc. 2.1%. Holdings are subject to change.

Definitions

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.

IMPX0523 (10/21)

Nathan Moser, CFA®

Senior Vice President, Senior Portfolio Manager

Nathan Moser is Senior Vice President 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 U.S. 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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