Performance and Portfolio Update

  • The Pax Small Cap Fund underperformed the Russell 2000 Index in the third quarter. Portfolio holdings within Industrials, Financials and Information Technology were key detractors to performance.
  • The Russell 2000 Index returned 3.58% during the third quarter as investors shrugged off trade tensions, higher interest rates and lofty valuations. Growth stocks outperformed value with the Russell 2000 Growth Index topping the Russell 2000 Value Index by 3.91% during the quarter, pushing the year-to-date outperformance of small cap growth to 8.55%. The traditional growth sectors of Healthcare and Technology were the top performing sectors, posting returns of 7.6% and 5.7%, respectively.
  • The Financials sector was one of the largest detractors to Fund performance during the period. FCB Financial Holdings, an operator of community banks in Florida, declined more than -17% during the period. The bank was acquired in an all-stock transaction by Synovus Financial. Unfortunately, there was no premium associated with the acquisition and Synovus shareholders were disappointed with the transaction as they viewed Synovus as a potential seller and the acquisition of FCB reduced the likelihood of a near-term sale.
  • Conversely, the Fund’s performance benefitted from strong stock selection in Healthcare. Our holding in Ligand Pharmaceuticals increased 32.5% on continued positive business momentum. After nearly doubling this year, valuation has become quite full and we’ve been reducing our position. Biotechnology remains a very exciting area within the market, but we are finding valuations unattractive.
  • In our view, investors continue to chase performance by favoring momentum stocks and having very little concern for high valuations. In fact, during the quarter, the highest quintile of Russell 2000 Index members from a valuation perspective outperformed the cheapest two quintiles by more than 7%. As fundamental investors who favor high quality companies trading at reasonable valuations, this has been a very difficult market environment. Relative to the Russell 2000 Index, we remain defensively positioned with overweight allocations to Financials, Industrials, Consumer Staples and Utilities.


(as of 9/30/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Investor Class-2.26-1.56-0.065.459.137.0910.159.14
Small Cap Fund - Class A1-2.21-1.56-0.065.469.
Small Cap Fund - Institutional Class-2.24-1.490.125.729.47.3710.449.43
Russell 2000 Index-2.413.5811.5115.2417.1211.0711.1110.42
Lipper Small-Cap Core Funds Index-2.073.919.3913.9516.2310.6211.2810.15

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 10.18% (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%.

after sales charge

(as of 9/30/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-7.57-6.99-5.54-0.367.075.899.528.56

Performance Attribution

(as of 9/30/18)
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 9/30/18)
Market Cap (weighted avg.)$2,823M$2,407M
Forward Price/Earnings17.6117.84
Number of Securities582,039


Top Ten Holdings

(as of 9/30/18)
Natus Medical, Inc. 4.1%, HomeTrust Bancshares, Inc. 3.9%, Unitil Corp. 3.6%, Capitol Federal Financial, Inc. 3.0%, Antero Resources Corp. 3.0%, Meridian Bancorp, Inc. 2.9%, MRC Global, Inc. 2.8%, Comfort Systems USA, Inc. 2.6%, White Mountains Insurance Group, Ltd. 2.5% and Maple Leaf Foods, Inc. 2.5%. Holdings are subject to change.


Russell 2000 Growth Index is a market capitalization weighted index that measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth rates. One cannot invest directly in an index.
Russell 2000 Value Index is a market capitalization weighted index that measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth rates. One cannot invest directly in an index.
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.

PAX008225 (1/19)

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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