Pax Sustainable Allocation Fund Commentary Q4 2021

Performance

• The Pax Sustainable Allocation Fund returned 5.2% in the fourth quarter, underperforming its blended benchmark, (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index) which returned 6.6%. The Fund outperformed its peer group index, the Morningstar 50%-70% Equity Allocation, which returned 4.8%.

Market Review

• Equity markets posted solid gains over the quarter, backed by robust economic data and strong corporate earnings. The S&P 500 Index (SPX)^△ was up 11%, and outperformed international stocks, as measured by the MSCI EAFE Index^ƒ, which returned 2.7%. Despite converging headwinds from inflation, interest rates, Covid-19 and geopolitical uncertainties, US large cap stocks continue to be a haven of strength within global equity markets.
• During the quarter, the Federal Reserve announced their intention to begin tapering their balance sheet in the coming months and gave indications that three interest rate hikes were likely in 2022. These announcements were generally expected, and the reaction of fixed income market participants was mostly relief that the Fed is acting to combat high inflation. Bond market returns during the further quarter, as measured by the Bloomberg Barclays US Aggregate Bond Index (Agg)^∼ were flat and returned 0.01%.

Detractors

• Relative to the Fund’s benchmark, The Pax Large Cap Fund, the Fund with the largest equity allocation, was the biggest detractor as it underperformed the SPX.
• The Fund’s allocation to international stocks detracted from relative performance as non US stocks underperformed their US counterparts and international stocks are not included in the Fund’s blended benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index).

Contributors

• 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^† during the fourth 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 positive impact on performance as the SPX significantly outperformed the Agg.

Outlook

• While the economy continues to be strong, the momentum in economic recovery may be peaking, as there are signs of moderation as higher than anticipated inflation is starting to impact growth. Complicating the outlook is the change in stance at the Federal Reserve and the likelihood that they will initiate a transition to more restrictive monetary policies. The combination of potentially rising interest rates into an economy with moderating growth is atypical and could lead to periods of increased volatility. Equity valuations continue to 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, the Fund continues to be modestly above its 60% neutral equity 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 December 31, 2021, which we believe is reflective of the Fund’s strong risk adjusted returns in the Morningstar Allocation 50%-70% Equity category (735 peers). The Fund’s institutional share class received a 5-star Morningstar Rating for the 3-year period ending December 31, 2021 in the Morningstar Allocation 50%-70% Equity category (665 peers)². The Fund’s institutional share class performance ranks in the 12th percentile (out of 665 funds) for the 3-year period and in the 16th percentile (out of 601 funds) for the 5-year period ending December 31, 2021 in the Morningstar Allocation 50%-70% Equity category.³

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.

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

²The Morningstar Ratings™ shown are as of 12/31/2021. 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 735 funds overall, 5 stars out of 665 funds for 3-years, 4 stars out of 601 funds for 5-years, 4 stars out of 433 funds for 10-years. Pax Sustainable Allocation Fund Institutional Class (PAXIX) Morningstar ratings were 4 stars out of 735 funds overall, 5 stars out of 665 funds for 3-years, 4 stars out of 601 funds for 5-years, 4 stars out of 433 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 12/31/21. The Pax Sustainable Allocation Fund’s Institutional Class performance for the 1-year period ranked 183 out of 710 (32nd percentile), for the 3-year period ranked 70 out of 665 (12th percentile), for the 5-year period ranked 77 out of 601 (16th percentile), and for the 10-year period 123 out of 433 (29th percentile). The Pax Sustainable Allocation Fund’s Investor Class performance for the 1-year period ranked 204 out of 710 (34th percentile), for the 3-year period ranked 96 out of 665 (17th percentile), for the 5-year period ranked 102 out of 601 (21st percentile), and for the 10-year period 154 out of 433 (36th percentile).

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Top 10 Equity Holdings

(as of 12/31/21)
Microsoft Corp. 3.3%, Apple, Inc. 2.1%, Alphabet, Inc., Class A 1.6%, Procter & Gamble Co., The 1.3%, Amazon.com, Inc. 1.2%, Alphabet, Inc., Class C 1.1%, Lowe’s Cos., Inc. 1.1%, Voya Financial, Inc. 1.1%, Citizens Financial Group, Inc. 1.1% and CVS Health Corp. 1.1%. 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.

IMPX0908 (4/22)