Performance and Portfolio Update

  • For the third quarter, returns for the Pax Sustainable Allocation Fund institutional share class, were flat. The Fund underperformed its blended benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index) which returned 0.40%. The Fund outperformed its peer group index, the Morningstar 50%-70% Equity Allocation, which returned -0.71%.
  • Equity markets moved negative during September, erasing most of the gains achieved earlier in the quarter. The S&P 500 Index (SPX) ended the third quarter slightly positive, returning 0.6% and outperformed the MSCI EAFE Indexƒ, which returned -0.45%. Non-US developed market stocks lagged US stocks during the third quarter. Investment grade bonds, as measured by the Bloomberg Barclays Aggregate Bond Index, had a positive, but small return of 0.05%. The 10-year Treasury, which drives rates for much of the investment grade market, was volatile throughout the quarter but ended September virtually flat compared with start of the quarter.
  • Relative to the Fund’s benchmark, the Pax Large Cap Fund, the portfolio’s largest equity allocation, was the biggest detractor as it modestly underperformed the SPX. Although small cap stocks underperformed large cap stocks and detracted from the Fund’s relative performance, the Pax Small Cap Fund significantly outperformed its benchmark, the Russell 2000 Index, during the third quarter and helped to mitigate losses in the small cap space. The Fund’s slight overweight to equities and underweight to fixed income had a negligible impact on performance as there was little difference between equity and bond market returns last quarter. The allocation to international stocks was a small detractor from relative performance, as non-US stocks underperformed their US counterparts.
  • As we near the end of an eventful 2021, greater confidence in a full reopening of the economy has been offset by increased concern about supply shortages and inflationary pressures impacting corporate margins. We believe the earnings trajectory of companies will moderate over the next few quarters, leading to a more uneven return profile for the equity market. Equity valuations remain stretched, but interest rates remain low relative to historical levels and low rates combined with tight spreads1, continue to limit the upside to bond returns. In this environment, we have been trimming the portfolio’s equity exposure to manage risk and the Fund is just above its 60% equity allocation target, with an underweight to fixed income and a small allocation to cash.
  • The Pax Sustainable Allocation Fund institutional share class maintained its 4-star Overall Morningstar Rating for the period ending September 30, 2021, which we believe is reflective of the Fund’s strong risk adjusted returns in the Morningstar Allocation 50%-70% Equity category (653 peers). The Fund’s institutional share class received a 5-star Morningstar Rating for the 3-year period ending September 30, 2021 in the Morningstar Allocation 50%-70% Equity category (653 peers).2 The Fund’s institutional class performance ranks in the 9th percentile (out of 653 funds) for the 3-year period and in the 18th percentile (out of 596 funds) for the 5-year period ending September 30, 2021 in the Morningstar Allocation 50%-70% Equity category.3

Performance

(as of 9/30/21)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception4
Pax Sustainable Allocation Fund - Investor Class-3.53-0.079.6419.4512.2210.7810.238.55
Pax Sustainable Allocation Fund - Institutional Class-3.530.009.8619.7412.4811.0510.508.63
S&P 500 Index-4.650.5815.9230.0015.9916.9016.63-
60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Bond Index-3.140.408.7116.9212.1011.4311.24-
Morningstar Allocation--50% to 70% Equity-3.11-0.718.9120.049.659.529.52-

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.

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.

Asset Allocation

Relative 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 9/30/21)
Fund
Equity62.5
Pax Large Cap Fund41.9
Pax Global Sustainable Infrastructure Fund3.1
Pax Small Cap Fund3.0
Pax Global Opportunities Fund2.5
Pax Global Environmental Markets Fund2.6
Pax Ellevate Global Women's Leadership Fund2.6
Pax International Sustainable Economy Fund6.8
Fixed Income31.9
Pax Core Bond Fund29.0
Pax High Yield Bond Fund2.9
Cash & Other5.6
Total100.0

1A spread refers to the difference between two prices, rates, or yields.

2The Morningstar Ratings™ shown are as of 9/30/2021. 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 653 funds overall, 5 stars out of 653 funds for 3-years, 4 stars out of 596 funds for 5-years, 4 stars out of 427 funds for 10-years. Pax Sustainable Allocation Fund Institutional Class (PAXIX) Morningstar ratings were 4 stars out of 653 funds overall, 5 stars out of 653 funds for 3-years, 4 stars out of 596 funds for 5-years, 4 stars out of 427 funds for 10-years.

3Rankings in other time periods may be lower. Comparison based on the Morningstar 50%-70% Equity peer group for the period ending 9/30/21. The Pax Sustainable Allocation Fund’s Institutional Class performance for the 1-year period ranked 227 out of 689 (35th percentile), for the 3-year period ranked 47 out of 653 (9th percentile), for the 5-year period ranked 95 out of 596 (18th percentile), and for the 10-year period 122 out of 427 (28th percentile). The Pax Sustainable Allocation Fund’s Investor Class performance for the 1-year period ranked 250 out of 689 (39th percentile), for the 3-year period ranked 57 out of 653 (11th percentile), for the 5-year period ranked 124 out of 596 (23rd percentile), and for the 10-year period 151 out of 427 (34th 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 9/30/21)
Microsoft Corp. 3.0%, Apple, Inc. 1.7%, Alphabet, Inc., Class A 1.4%, Amazon.com, Inc. 1.3%, T-Mobile US, Inc. 1.2%, Procter & Gamble Co., The 1.2%, United Parcel Service, Inc., Class B 1.2%, CVS Health Corp. 1.2%, Applied Materials, Inc. 1.2% and Citizens Financial Group, Inc. 1.2%. Holdings are subject to change.

Definitions

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.
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.
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.

IMPX0768 (1/22)

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.

Recent Insights

Andrew Braun, Pax World Funds

Andrew Braun

Senior Portfolio Manager

Andrew Braun is 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 a Senior Portfolio Manager of the US Large Cap Strategy, which includes the Pax Large Cap Fund. He is also a member of the Pax Sustainable Allocation Fund portfolio management team.

Prior to joining the firm in 2017, Andy was Managing Director on the value equity team at Goldman Sachs Asset Management, where he led a team of 30 portfolio managers and analysts. Andy joined Goldman Sachs Asset Management as a Product Development Associate in 1993. He was promoted to Portfolio Manager in 2001 and served as Co-Chief Investment Officer from 2008 to 2014. Before Goldman Sachs, Andy was a Financial Analyst in the corporate finance division of Dillon, Read & Co. Inc.

Andy has a Bachelor of Arts in economics from Harvard University and a Master of Business Administration in finance and economics from the Stern School of Business at New York University.

Recent Insights

Anthony Trzcinka, CFA®

Senior Portfolio Manager

Anthony (Tony) Trzcinka 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 a Senior Portfolio Manager of the Core Bond Strategy, which includes the Pax Core Bond Fund. Tony is also a member of the Pax Sustainable Allocation Fund portfolio management team. A pioneer in sustainable fixed income investing, Tony has been managing strategies investing in impact bonds for over 10 years.

Tony has been responsible for multiple strategies since joining the firm in 2003. Before Impax, Tony spent three years as an Assistant Vice President at AEW Capital Management, where he worked in a Senior Analyst role. He began his financial services career as an analyst in 1999.

Tony is a CFA® charterholder and a member of the Boston Security Analysts Society. He holds an MBA from Northeastern University and a Bachelor of Arts from the University of Massachusetts.

Recent Insights

Peter Schwab, CFA®

Senior Portfolio Manager

Peter Schwab 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 a Senior Portfolio Manager of the High Yield Bond Strategy, which includes the Pax High Yield Bond Fund. Peter is also a member of the Pax Sustainable Allocation Fund portfolio management team.

Prior to joining the firm in 2015, Peter was a Managing Director on the High Yield Bond and Loan Team at Goldman Sachs Asset Management. Prior to that he was an Investment Associate in the High Yield Group at Putnam Investments and a member of the High Yield Research Group at Donaldson, Lufkin and Jenrette.

Peter has a Bachelor of Arts in history and economics from Union College and an MBA in finance from Columbia Business School. He is a CFA® charterholder, a member of the New York Society of Security Analysts and holds the FINRA Series 7 and 63 registrations.

Peter Schwab is a registered representative of Foreside Financial Services, LLC.

Recent Insights

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