Performance and Portfolio Update

  • The Pax Small Cap Fund outperformed its benchmark in the third quarter, with the Institutional Class returning -1.42% versus the Russell 2000 Index return of -2.40%. Strong stock selection within Technology and an underweight allocation to Healthcare were the key performance drivers.
  • The Healthcare sector was among the strongest contributor to the Fund’s results. Natus Medical, a medical device company focused on newborn care and neurology, increased 23.9% during the quarter. Better than expected quarterly results coupled with increased confidence in management’s margin expansion goals likely drove shares higher. The Fund also benefitted from an underweight allocation to the biotechnology industry as investors were concerned about increased regulatory pressure.
  • The Industrials sector was the largest detractor to performance due to poor stock selection. Specifically, our holding in MRC Global, a distributor of pipes, valves and fittings, declined -29.2% on weaker than expected quarterly results and lowered financial guidance. The company faces a difficult operating environment as its customers have reduced spending levels significantly. Management is taking steps to reduce costs and inventory levels which should drive meaningful free cash flow.
  • Small cap growth stocks underperformed their value counterparts by 3.60% during the quarter, as measured by the Russell 2000 Growth Index and Russell 2000 Value Index. While style factors did not have a material impact on the Fund’s relative performance during the quarter given its core orientation, notably, there was a significant reversal during September, where value outperformed growth stocks by 5.96%. Cyclical stocks and micro-caps also outperformed during the month, which suggests investors are positioning for a stronger economy over the coming year.
  • Equity markets have proven to be quite resilient this year, despite a growing list of investor concerns. Bullish investors argue that the economy is strong, trade will be settled and that investors are too bearish. Our outlook is less optimistic. We believe that slowing global growth is starting to impact the US economy. Manufacturing, agricultural and transport sectors have all been negatively impacted by the trade-related slowdown. While the consumer segment of the economy has been strong due to full employment and better wage gains, we don’t believe that segment is immune to the slowdown. As a result, we view consensus earnings estimates as too high and expect increased levels of volatility in the coming months. Against this backdrop, we continue to position the Fund with a defensive bias and look forward to taking advantage of potential opportunities.


(as of 9/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund – Investor Class1.10-1.4315.72-2.504.604.9610.408.07
Small Cap Fund – Class A1.10-1.4415.69-2.554.604.9410.408.07
Small Cap Fund – Institutional Class1.09-1.4215.89-2.294.855.2210.688.35
Russell 2000 Index2.08-2.4014.18-8.898.238.1911.198.59
Lipper Small-Cap Core Funds Index2.64-0.9915.52-6.218.708.1211.038.62

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 8.08% (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 9/30/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-4.45-6.859.30-7.902.653.769.777.54

Performance Attribution

(as of 9/30/19)
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 9/30/19)
Market Cap (weighted avg.)$3,267M$2,229M
Forward Price/Earnings17.0116.11
Number of Securities562,002


Top Ten Holdings

(as of 9/30/19)
Meridian Bancorp, Inc. 5.7%, HomeTrust Bancshares, Inc. 5.7%, Victory Capital Holdings, Inc., Class A 5.0%, Natus Medical, Inc. 4.4%, Unitil Corp. 3.2%, Parsley Energy, Inc., Class A 3.2%, White Mountains Insurance Group, Ltd. 3.1%, Maple Leaf Foods, Inc. 2.9%, EMCOR Group, Inc. 2.5% and CatchMark Timber Trust, Inc, Class A, REIT 2.3%. 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.

PAX008813 (1/20)

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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