Performance and Portfolio Update

  • The Pax Small Cap Fund trailed the Russell 2000 Index during the fourth quarter. The Fund benefited from strong stock selection within the Technology sector, however this was primarily offset by poor results within the Healthcare sector.
  • Small cap stocks led the equity market higher, with the Russell 2000 Index posting its highest return ever. Positive vaccine news, the prospects of additional fiscal stimulus and accommodative monetary policy encouraged investors to look through the short-term negative impact of COVID-19. With the rally being driven by lower quality companies, the fourth quarter was a difficult period for small cap active managers, as only 25% of funds in the Lipper Small-Cap Core peer group beat the Russell 2000 Index. For the calendar year 2020, the Fund outperformed the Lipper Small-Cap Core Funds Index and ranked in the 36th percentile (out of 900) of that peer group.
  • Healthcare was the Fund’s worst performing sector, primarily due to an underweight to the strong performing biotech industry. In addition, portfolio holdings in this sector lagged their peers. Coherus, a leading biopharmaceutical company, declined -5% and was the largest detractor. Coherus’s cancer drug, Udenyca, has seen its market share gains slow and investors have begun to worry about the potential for price declines. We remain positive on the company and expect several additional products to reach the market over the next 12-24 months, which should boost growth and reduce single product risk.
  • Technology was the Fund’s top performing sector in the period due to strong selection. 8X8 Inc., a communications software company, returned 122% on excitement around the hiring of a new CEO from a competitor, RingCentral. We are encouraged by the hire and see continued upside in shares as 8X8 continues to trade at a significant discount to RingCentral.
  • We continue to view the small cap market favorably. Despite its strong outperformance versus large cap in the fourth quarter, relative valuation continues to favor small cap. In addition, small cap companies tend to be more cyclically oriented, which should serve them well as the economy reopens. With fiscal stimulus arriving in the first quarter and continued vaccinations, the potential for rapid economic growth exists. We are mindful about the high absolute level of valuations currently in the market and their potential to magnify volatility if risks surface and there are changes in investor sentiment. That said, absent a change in monetary accommodation from the Federal Reserve, sell-offs are likely opportunities to deploy capital.

Performance

(as of 12/31/20)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund – Investor Class9.6128.5011.7711.775.078.269.168.73
Small Cap Fund – Class A9.5628.5111.7311.735.048.249.158.72
Small Cap Fund – Institutional Class9.6928.6412.0612.065.328.549.449.01
Russell 2000 Index8.6531.3719.9619.9610.2513.2611.2010.07
Lipper Small-Cap Core Funds Index7.6629.7310.6910.697.0611.3710.009.26

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 5/1/20 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 1.20%, 1.20% and 0.95%, respectively.

Performance
after sales charge

(as of 12/31/20)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Small Cap Fund - Class A (Load)3.5321.455.605.603.097.038.548.25

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 9.17% (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 12/31/20)
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 12/31/20)
FundBenchmark
Market Cap (weighted avg.)$3,341M$3,227M
Forward Price/Earnings17.0119.17
ROE8.790.45
Beta
0.791.00
Number of Securities642,041

Top Ten Holdings

(as of 12/31/20)
Victory Capital Holdings, Inc., Class A 5.7%, HomeTrust Bancshares, Inc. 4.5%, Meridian Bancorp, Inc. 3.8%, White Mountains Insurance Group, Ltd. 2.9%, Ligand Pharmaceuticals, Inc. 2.7%, Voya Financial, Inc. 2.6%, Coherus BioSciences, Inc. 2.5%, RealPage, Inc. 2.4%, Darling Ingredients, Inc. 2.1% and Natus Medical, 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.

IMPX0030 (4/21)

Nathan Moser, CFA®

Senior Vice President, 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 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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