Performance and Portfolio Update
- The Pax Sustainable Allocation Fund returned 3.95% in the first quarter, outperforming its benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index∼) which returned 2.31%, while modestly underperforming its peer group index, the Morningstar 50%-70% Equity Allocation, which returned 4.21%.
- The environment was quite favorable for stocks in the first quarter as prospects for strong economic growth, additional fiscal stimulus and accommodative monetary policy encouraged investors to look through the short-term negative impact from COVID-19. The S&P 500 Index△ rose 6.17%, but significantly lagged small cap stocks with the Russell 2000 Index∞ returning 12.7%. The MSCI EAFE Indexƒ returned 3.48%, as non-US developed market stocks lagged US stocks. Bonds significantly underperformed as interest rates rose in the first quarter and the Bloomberg Barclays Aggregate Index returned -3.37%.
- Relative to the benchmark, the Fund’s largest positive contributor to performance came from the Pax Large Cap Fund, which represents its largest equity allocation and outperformed the S&P 500 Index by 3.2%. An allocation to the Pax Small Cap Fund contributed as well, as small cap stocks significantly outperformed large cap stocks. The Fund also benefited from an underweight to fixed income, as bonds considerably lagged stocks in the quarter. No weight in Energy detracted from performance, particularly in the equity markets as it was the top performing sector in the first quarter.
- Equity valuations remain stretched, but economic prospects supported by fiscal and monetary policy have provided a positive backdrop for continued strong earnings, reinforcing the near-term outlook for stocks. Interest rates remain low relative to history despite the rise during the first quarter. These low rates combined with very tight spreads limit the upside potential of bond returns. While investors may be more tolerant of high equity valuations in this low interest rate environment, equities could potentially be susceptible to volatility as particular risks come into focus. In this environment, we remain vigilant in ensuring the Sustainable Allocation Fund asset allocation reflects an appropriate tolerance for risk. The Fund remains modestly overweight equity, with an underweight to fixed income and a modest allocation to cash.
- 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 (641 peers) for the period ending March 31, 2021, which we believe is reflective of both its strong performance and risk management.1 The Fund’s institutional class performance ranks in the 12th percentile (out of 641 funds) over the 3-year and 20th percentile (out of 574 funds) for 5-year period ending March 31, 2020 based on average annual returns within the Morningstar Allocation 50%-70% Equity category.2
Performance(as of 3/31/21)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception3|
|Pax Sustainable Allocation Fund - Investor Class||2.28||3.83||3.83||35.30||12.10||10.69||8.05||8.53|
|Pax Sustainable Allocation Fund - Institutional Class||2.35||3.95||3.95||35.65||12.38||10.97||8.32||8.60|
|S&P 500 Index||4.38||6.17||6.17||56.35||16.78||16.29||13.91|
|60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Bond Index||2.13||2.31||2.31||31.71||12.24||11.15||9.87|
|Morningstar Allocation--50% to 70% Equity||2.24||4.21||4.21||36.90||9.72||9.70||7.99|
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.
3The 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.
Asset AllocationRelative Contribution (%)
Past performance is no guarantee of future results.
XEffective March 31, 2021, the name of the Pax ESG Beta Dividend Fund changed to the Pax Global Sustainable Infrastructure Fund and the name of the Pax MSCI EAFE ESG Leaders Index Fund changed to the Pax International Sustainable Economy Fund.
Asset Allocation (%)(as of 3/31/21)
|Pax Large Cap Fund||42.3|
|Pax Global Sustainable Infrastructure Fund||3.2|
|Pax Small Cap Fund||3.3|
|Pax Global Opportunities Fund||2.4|
|Pax Global Environmental Markets Fund||2.6|
|Pax Ellevate Global Women's Leadership Fund||2.6|
|Pax International Sustainable Economy Fund||7.2|
|Pax Core Bond Fund||30.3|
|Pax High Yield Bond Fund||0.9|
|Cash & Other||5.6|
1The Morningstar Ratings™ shown are as of 3/31/2021. 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 Morningstar Rating does not include any adjustment for sales loads. 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.
Pax Sustainable Allocation Fund Investor Class (PAXWX) Morningstar ratings were 4 stars out of 641 funds overall, 4 stars out of 641 funds for 3-years, 4 stars out of 574 funds for 5-years, 3 stars out of 412 funds for 10-years. Pax Sustainable Allocation Fund Institutional Class (PAXIX) Morningstar ratings were 4 stars out of 641 funds overall, 4 stars out of 641 funds for 3-years, 4 stars out of 574 funds for 5-years, 3 stars out of 412 funds for 10-years.
2Rankings in other time periods may be lower. Comparison based on the Morningstar 50%-70% Equity peer group for the period ending 3/31/21. The Pax Sustainable Allocation Fund’s Institutional Class performance for the 1-year period ranked 302 out of 666 (48th percentile), for the 3-year period ranked 62 out of 641 (12th percentile), for the 5-year period ranked 103 out of 574 (20th percentile), and for the 10-year period 168 out of 412 (41st percentile). The Pax Sustainable Allocation Fund’s Investor Class performance for the 1-year period ranked 322 out of 666 (52nd percentile), for the 3-year period ranked 80 out of 641 (16th percentile), for the 5-year period ranked 141 out of 574 (26th percentile), and for the 10-year period 200 out of 412 (48th percentile).
© 2021 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.
Top 10 Equity Holdings
(as of 3/31/21)
Microsoft Corp. 2.7%, Apple, Inc. 1.7%, Amazon.com, Inc. 1.4%, Applied Materials, Inc. 1.4%, Procter & Gamble Co., The 1.3%, United Parcel Service, Inc., Class B 1.2%, Voya Financial, Inc. 1.2%, Alphabet, Inc., Class A 1.2%, Bristol-Myers Squibb Co. 1.2% and Lowe’s Cos., Inc. 1.1%. Holdings are subject to change.
△The S&P 500 Index is an unmanaged index of large capitalization common stocks.
∞The Russell 2000 Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 Index is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.
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.