Effective December 18, 2019, the name of the Pax Balanced Fund changed to the Pax Sustainable Allocation Fund.
Performance and Portfolio Update
- The Pax Sustainable Allocation Fund Institutional Class returned -10.73% in the first quarter, slightly outperforming its benchmark (60% S&P500△/40% Bloomberg Barclays US Aggregate Bond Index∼) which returned -10.88%, and substantially outperforming its peer group index, the Morningstar 50%-70% Equity Allocation, which returned -14.74%.
- The COVID-19 crisis is an unprecedented event for our global society and drove unprecedented moves in markets. Equity markets experienced the fastest retreat from a market high to a bear market in history, before rallying into quarter-end on the hope that fiscal stimulus might lessen the impact of COVID-19. The S&P 500 Index was down -19.6% for the quarter, while non-US developed market stocks were off even more, with the MSCI EAFE Indexƒ off -22.8%. Bonds, as represented by the Bloomberg Barclays US Aggregate Index, delivered a positive return of 3.2%, driven by the strong performance of US Treasuries as interest rates dropped dramatically in a flight to quality, but corporate spreads widened significantly as credit concerns deepened, negatively impacting the returns of corporate bonds.
- Overshadowed by COVID-19 was what would have been the major story of any other period: Oil prices collapsed after Saudi Arabia induced a price war with Russia, further contributing to the fall in equities. Driven by this price war, as well as additional pressure on oil prices from plummeting demand due to the implications of COVID-19, Energy was the worst-performing sector in the S&P 500 Index for the quarter, dropping more than -50%.
- We expect that these whipsaw markets are likely to continue. As we write at quarter end, uncertainty about the extent of COVID-19’s spread and the duration of various quarantine measures are clearly negative for the economy and investor sentiment. The stark impact on human life continues to unfold in the US and Europe, with new cases and lives lost every day. Until new cases begin to subside, uncertainty about the timing of a recovery will persist. In such an environment, we are managing our equity and bond allocation in near proximity to 60%/40% neutral targets. We are closely monitoring relative valuation between asset classes as visibility on factors improves, and we continue to strive to add value through the underlying fund strategies.
- During the quarter, the Pax Sustainable Allocation Fund Institutional Class maintained its 4-Star Overall Morningstar Rating based on risk-adjusted returns in the Morningstar Allocation 50%-70% Equity category (640 peers) for the period ending March 31, 2020, which we believe is reflective of both its strong performance and risk management.1 The Fund’s institutional class performance ranks in the 11th percentile (out of 640 funds) over the 3-year and 15th percentile (out of 561 funds) for 5-year period ending March 31, 2020 based on average annual returns within the Morningstar Allocation 50%-70% Equity.2 In addition, the Fund has received a 5-Globe Morningstar Sustainability Rating™, which is reflective of the Fund’s strong sustainability profile relative to peers.3
Performance(as of 3/31/20)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception4|
|Sustainable Allocation Fund - Investor Class||-7.46||-10.79||-10.79||-0.50||4.16||4.10||6.24||8.03|
|Sustainable Allocation Fund - Institutional Class||-7.42||-10.73||-10.73||-0.24||4.42||4.36||6.51||8.11|
|S&P 500 Index||-12.35||-19.60||-19.60||-6.98||5.10||6.73||10.53||-|
|60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Bond Index||-7.65||-10.88||-10.88||-0.39||5.32||5.63||8.08||-|
|Morningstar Allocation--50% to 70% Equity||-10.24||-14.74||-14.74||-7.01||1.48||2.40||5.75||-|
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. To obtain performance for the most recent month-end, call 800.767.1729 or visit impaxam.com.
Figures include reinvested dividends, capital gains distributions and changes in principal value.
1 The Morningstar Ratings™ shown are as of 3/31/2020. The Morningstar Rating for funds, or ‘star rating’, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five- and ten- year (if applicable) Morningstar Rating metrics. The weights are 100% three-year rating for 36-59 months of total returns, 60% five-year rating, 40% three-year rating for 60-119 months of total returns, and 50% ten-year rating, 30% five-year rating, 20% three-year rating for 120 or more months of total returns. While the ten-year overall rating formula seems to give the most weight to the ten-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. ©2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Morningstar, Inc. is an independent investment research firm that compiles and analyzes fund, stock and general market data.
2 Rankings in other time periods may be lower. Comparison based on the Morningstar 50%-70% Equity peer group for the period ending 3/31/20. The Pax Sustainable Allocation Fund’s Institutional Class performance for the 1-year period ranked 28 out of 687 (6th percentile), for the 3-year period ranked 62 out of 640 (11th percentile), for the 5-year period ranked 83 out of 561 (15th percentile), and for the 10-year period 122 out of 413 (32nd percentile). The Pax Sustainable Allocation Fund’s Investor Class performance for the 1-year period ranked 35 out of 687 (7th percentile), for the 3-year period ranked 86 out of 640 (15th percentile), for the 5-year period ranked 106 out of 561 (19th percentile), and for the 10-year period 151 out of 413 (37th percentile).
3 The Morningstar Sustainability Rating measures how well the companies in a fund’s portfolio manage their environmental, social and governance (ESG) risks and opportunities relative to the fund’s peers. First, a Morningstar Portfolio Sustainability Score™ ranging from 0 to 100 is derived from an asset weighted average of the underlying company ESG scores quarterly. Next, scored funds are rated monthly: The top 10% receive 5 globes (High), the next 22.5% receive 4 (Above Average), the next 35% receive 3 (Average), the next 22.5% receive 2 (Below Average), and the bottom 10% receive 1 (Low). Sustainalytics provides company-level analysis used in the calculation of Morningstar’s Sustainability Score. A higher score indicates that a fund, on average, has more of its assets invested in companies that score well according to the Sustainalytics methodology. For details, visit http://morningstar.com/company/sustainability.
© 2020 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Sustainability Score for the Pax Sustainable Allocation Fund as of 12/31/2019 is 22.12. Percent Rank in Category is 4 and Sustainability Rating is 5 globes as of 2/28/2020. Sustainalytics provides company-level analysis used in the calculation of Morningstar’s Sustainability Score.
4The inception date for the Pax Sustainable Allocation Fund Institutional Class is April 2, 2007, and the Investor Class inception date is August 10, 1971. The performance information shown for Institutional Class shares includes the performance of Investor Class shares for the period prior to Institutional Class inception. Expenses have not been adjusted to reflect the expenses allocable to Institutional Class shares. If such expenses were reflected, the returns would be higher than those shown. Institutional Class Inception date return since April 2, 2007 is 4.48 (annualized).
As of the 5/1/2019 prospectus, the Pax Sustainable Allocation Fund All-In Gross expense ratio includes indirect expenses (Acquired Fund Fees and Expenses “AFFE”) of 0.61%. AFFE are fees and expenses charged by their investment companies in which the Fund invests a portion of its assets and are not direct costs paid by Fund shareholders. The All-In Gross expense ratio for Institutional Class and the Individual Investor Class shares are 0.66% and 0.91%, respectively. Pax Sustainable Allocation Fund expense ratios, excluding indirect AFFE, are 0.05% and 0.30% for Institutional Class and Individual Investor Class shares, respectively.ˆ
Asset AllocationRelative Contribution (%)
Past performance is no guarantee of future results.
XThe Inception date of the Pax Large Cap Fund, Pax ESG Beta Dividend Fund and Pax Core Bond Fund is December 16, 2016. The Inception date of the Pax Global Opportunities Fund is June 27, 2018.
Asset Allocation (%)(as of 3/31/20)
|Pax Large Cap Fund||38.3|
|Pax ESG Beta® Dividend Fund||5.7|
|Pax Small Cap Fund||2.4|
|Pax Global Opportunities Fund||1.5|
|Pax Global Environmental Markets Fund||1.7|
|Pax Ellevate Global Women's Leadership Fund||1.9|
|Pax MSCI EAFE ESG Leaders Index Fund||7.3|
|Pax Core Bond Fund||37.5|
|Pax High Yield Bond Fund||1.2|
|Cash & Other||2.5|
Top 10 Equity Holdings
(as of 3/31/20)
Microsoft Corp. 3.2%, Amazon.com, Inc. 1.8%, Apple, Inc. 1.8%, Procter & Gamble Co., The 1.6%, Merck & Co., Inc. 1.5%, Verizon Communications, Inc. 1.2%, Bristol-Myers Squibb Co. 1.2%, Alphabet, Inc., Class A 1.1%, Equinix, Inc. 1.1% and Ingersoll-Rand PLC 1.1%. Holdings are subject to change.
△The S&P 500 Index is an unmanaged index of large capitalization common stocks.
ƒThe MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US and Canada. The MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. Performance for the MSCI EAFE Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax.
∼The Bloomberg Barclays US Aggregate Bond Index is a broad base index, maintained by Bloomberg L.P. often used to represent investment grade bonds being traded in United States.
One cannot invest directly in an index.
CFA® is a trademark owned by the CFA Institute.
Diversification does not eliminate the risk of experiencing investment loss.
The statements and opinions expressed are those of the authors 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.