Pax Sustainable Allocation Fund Commentary Q3 2021

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 Index^ƒ, 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

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 (%)

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).

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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)