Performance and Portfolio Update

  • The Pax Small Cap Fund underperformed its benchmark in the fourth quarter. Stock selection within the Healthcare and Technology sectors were the key detractors to performance. In addition, the Fund’s lower risk, more defensive positioning was a headwind to results given the very strong market returns.
  • Cyclical stocks and micro-cap companies outperformed during the period, as investors continued to rotate into higher risk segments of the market. Specifically, biotech and semiconductor companies increased 31% and 17%, respectively, as measured by the Russell 2000 Index industry returns.
  • The Financials sector was the strongest contributor to the Fund’s results. Our holding in Victory Capital, an asset manager, increased 36.7% during the period. The company benefited from strong equity markets, which drove assets under management higher and earnings to record levels. In addition, the integration of USAA Asset Management is going well, with cost synergies above expectations. We continue to view the company favorably, finding its shares significantly undervalued relative to peers.
  • The Healthcare sector was the largest detractor to performance due largely to biotech. Our holdings in that industry increased during the period but lagged the more speculative biotech names in the Russell 2000 Index. In addition, the Fund’s biotech underweight allocation was a meaningful detractor to performance. Given our higher quality approach, the unprofitable companies within biotech can create performance challenges.
  • What a difference a year makes. One year ago, investors had just endured a very difficult fourth quarter when many were preoccupied with the Federal Reserve, China and recession fears. Fast forward to today, and investors have a decidedly bullish outlook, with equity markets setting new highs on an almost daily basis. It’s clear that the fundamental outlook has improved with strong employment, dovish monetary policy and an easing of US-China trade tensions. What keeps our expectations somewhat grounded for the year ahead is that many of these positives are well known and likely reflected in current valuations. While it is true that small cap valuations are attractive relative to large cap, we believe just as investors were too bearish a year ago, they may be too bullish today.


(as of 12/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund – Investor Class1.886.5423.2923.294.135.0610.858.48
Small Cap Fund – Class A1.886.5523.2723.274.125.0410.858.47
Small Cap Fund – Institutional Class1.936.6223.5623.564.45.3211.128.76
Russell 2000 Index2.889.9425.5225.528.598.2311.839.27
Lipper Small-Cap Core Funds Index2.627.9624.7124.718.078.1711.49.13

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 8.80% (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 12/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)-3.750.6916.4616.462.183.8610.227.96

Performance Attribution

(as of 12/31/19)
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 12/31/19)
Market Cap (weighted avg.)$2,692M$2,465M
Forward Price/Earnings17.6817.34
Number of Securities621,994

Top Ten Holdings

(as of 12/31/19)
HomeTrust Bancshares, Inc. 5.6%, Victory Capital Holdings, Inc., Class A 5.0%, Meridian Bancorp, Inc. 4.9%, Natus Medical, Inc. 4.4%, Healthcare Realty Trust, Inc. 2.6%, Four Corners Property Trust, Inc. 2.6%, Maple Leaf Foods, Inc. 2.5%, CatchMark Timber Trust, Inc, Class A, REIT 2.5%, EMCOR Group, Inc. 2.4% and Thermon Group Holdings, Inc. 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. 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.

PAX009013 (4/20)

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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