Performance and Portfolio Update

  • The Pax Small Cap Fund meaningfully outperformed the Russell 2000 Index in the fourth quarter, with holdings in Financials, Healthcare and Utilities driving performance.
  • The fourth quarter was one of the worst in the history of the small cap asset class as the pendulum of investor psychology went from complacency to panic in the span of just three months. While our defensive positioning over the past couple of years has been a headwind to performance, that changed in the fourth quarter.
  • The Russell 2000 Index declined -20.2% during the quarter as investors reacted negatively to tighter Federal Reserve policy, rising trade tensions and the prospects of a slowing economy. Due largely to lofty valuations, growth underperformed value by approximately 300 basis points (bps) as investors searched for safe havens. Utilities were one bright spot, declining just -2%.
  • The Financials sector was the strongest contributor to the Fund’s results. Our holding in Victory Capital increased 7.1% on the accretive acquisition of USAA Asset Management. We continue to view the shares as attractive and have been adding to our position.
  • The Fund was overweight Utilities and benefitted from a flight to quality during the market sell-off. In addition, our holding in Unitil Corp. was our top contributor, adding 88 bps to performance.
  • Real Estate was our largest detractor during the period. Our holding in Catchmark Timber declined -37%. The combination of high leverage and investor fears regarding homebuilding and timber demand were the likely causes. We continue to remain comfortable with our position and view the valuation as deeply discounted. While leverage is higher than we would prefer, management is taking steps to reduce leverage via asset sales.
  • We have taken a more constructive view of the market for the first part of 2019. Valuations and investor sentiment have reset lower and we believe the Federal Reserve will take a wait-and-see approach before tightening policy further. While we remain concerned with the prospects of slower economic growth and continued trade tensions, we expect to use periods of increased volatility as opportunities to exploit. We are finding many opportunities and are particularly focused on secular growers within the Healthcare and Technology sectors.


(as of 12/31/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Investor Class-9.99-15.75-15.80-15.802.592.1412.017.20
Small Cap Fund - Class A1-9.99-15.76-15.82-15.822.582.1312.017.19
Small Cap Fund - Institutional Class-9.92-15.69-15.59-15.592.862.3912.307.47
Russell 2000 Index-11.88-20.20-11.01-11.017.364.4111.977.88
Lipper Small-Cap Core Funds Index-11.54-18.81-11.19-11.197.444.3312.247.79

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 6.43% (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 12/31/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-14.93-20.38-20.43-20.430.670.9811.396.63

Performance Attribution

(as of 12/31/18)
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 12/31/18)
Market Cap (weighted avg.)$2,205M$2,013M
Forward Price/Earnings14.8314.34
Number of Securities522,031


Top Ten Holdings

(as of 12/31/18)
Unitil Corp. 5.9%, HomeTrust Bancshares, Inc. 5.9%, Natus Medical, Inc. 4.9%, Meridian Bancorp, Inc. 4.2%, Victory Capital Holdings, Inc., Class A 3.6%, White Mountains Insurance Group, Ltd. 3.4%, Comfort Systems USA, Inc. 3.1%, Maple Leaf Foods, Inc. 2.9%, Hanover Insurance Group, Inc. 2.7% and Verint Systems, Inc. 2.7%. Holdings are subject to change.


One basis point is equivalent to 1/100th of 1%, 0.0001. This is a common unit of measurement of changes in interest rates.
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.

PAX008376 (4/19)

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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