Performance

  • The Pax Sustainable Allocation Fund (“the Fund”) underperformed its blended benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index) in an environment where both equity and fixed income markets ended the quarter in negative territory.

Market Review

  • Despite a relief rally at the start of the quarter, equity and bond markets were weaker over the period as central banks moved to contain inflation by further raising interest rates. While rate hikes were not unexpected, the magnitude and the associated commentary took the market by surprise. The Federal Reserve indicated it would continue raising rates into next year, dampening hopes that a peak is in sight. Further volatility came from the United Kingdom, where the announcement of tax cuts, unsupported by full budget disclosure, led to sterling weakness and a sharp selloff in bonds.
  • In this environment, US stocks and bonds delivered comparable negative returns as the S&P 500 Index (SPX) lost -4.9% and the Bloomberg Barclays US Aggregate Bond Index (Agg) was down -4.8%. International equities lagged US Equities considerably more as the MSCI EAFE Indexƒ was down -9.4%.

Contributors

  • The Fund’s allocation to high yield bonds contributed positively to performance as these securities performed better than the broad investment grade market.
  • The cash allocation was also a positive contributor in a quarter where both equity and bond markets posted negative returns.

Detractors

  • Relative to the Fund’s benchmark, the Pax Large Cap Fund (“the Large Cap Fund”), which represents the Sustainable Allocation Fund’s core allocation to US Equities, was the largest detractor as it underperformed its benchmark, the S&P 500. Underperformance was a function of negative impacts from sector allocation and some individual stock selection. The Large Cap Fund’s portfolio underweights to carbon-based energy, extractive commodities, and consumer discretionary names provided headwinds for the period; while these areas of the economy performed well in the quarter, they have substantial risks and limited opportunities vis a vis the transition to a more sustainable economy.
  • The allocation to International Equities also detracted from performance relative to the Fund’s benchmark, as non-US equities underperformed US equities.

Outlook

  • Against a backdrop of higher inflation and rising rates, economic data is generally indicating slower growth across most regions. While corporate earnings overall have been broadly supportive, the outlook for demand remains uncertain. Companies must continue to navigate an environment of higher input prices, supply chain complexities and potentially slower growth. In this environment, we reduced our equity allocation in August after the July equity market relief rally, and we remained underweight equities at quarter end.
  • Despite a challenging environment for equities, we believe market dislocations can offer opportunities for our underlying funds, as they often suggest stocks that have been sold off beyond their intrinsic long-term value. The Impax investment strategies that constitute the underlying funds in the Sustainable Allocation Fund remain focused on finding companies with strong market positions, elements of pricing protection and attractive valuations in this market.

Performance

(as of 9/30/22)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Pax Sustainable Allocation Fund - Investor Class-7.32-5.62-21.06-16.983.714.946.397.99
Pax Sustainable Allocation Fund - Institutional Class-7.30-5.56-20.93-16.763.975.216.658.07
S&P 500 Index-9.21-4.88-23.87-15.478.169.2411.70-
60% S&P 500 Index / 40% Bloomberg Barclays US Aggregate Bond Index-7.25-4.75-20.10-14.853.855.707.50-
Morningstar Allocation--50% to 70% Equity-6.34-4.48-18.29-14.802.493.605.64-

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.

As of the 5/1/2022 prospectus, the Pax Sustainable Allocation Fund All-In Gross expense ratio includes indirect expenses (Acquired Fund Fees and Expenses “AFFE”) of 0.57%. 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 Investor Class shares are 0.64% and 0.89%, respectively. Pax Sustainable Allocation Fund expense ratios, excluding indirect AFFE, are 0.05% and 0.30% for Institutional Class and Investor Class shares, respectively.

1The 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.

Asset Allocation (%)

(as of 9/30/22)
Fund
Equity56.8
Pax Large Cap Fund39.9
Pax Global Sustainable Infrastructure Fund3.0
Pax Small Cap Fund2.7
Pax Global Opportunities Fund2.4
Pax Global Environmental Markets Fund2.2
Pax Ellevate Global Women's Leadership Fund2.5
Pax International Sustainable Economy Fund4.1
Fixed Income37.7
Pax Core Bond Fund33.3
Pax High Yield Bond Fund4.4
Cash & Other5.5
Total100.0

Top 10 Equity Holdings

(as of 9/30/22)
Schneider Electric SE 0.8%, Microsoft Corp. 0.7%, AstraZeneca PLC 0.7%, Roche Holding, Ltd. 0.7%, ASML Holding NV 0.7%, Air Liquide SA 0.7%, Novo Nordisk A/S Class B 0.6%, Victory Capital Holdings, Inc., Class A 0.5%, Apple, Inc. 0.5% and SAP SE 0.5%. Holdings are subject to change.

Definitions

The S&P 500 Index is an unmanaged index of large capitalization common stocks.

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.

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.

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.

IMPX1273 (1/23)

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

Additional 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 and a member of the New York Society of Security Analysts.

Recent Insights

Additional Insights

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