- In the first quarter, the Pax US Sustainable Economy Fund underperformed the Russell 1000 Index.
- The strategy integrates the Impax Sustainability Lens, a proprietary tool that helps the adviser systematically overweight the portfolio toward sub-industries we identify as high opportunity in the context of the transition to a more sustainable economy, while removing exposure to sub-industries classified as low opportunity and high risk. The Fund is also constructed to provide higher exposure to companies with favorable environmental, social and governance (ESG) ratings relative to their sector and industry peers, as determined by the Impax Systematic ESG Rating. Lastly, the strategy is fossil fuel free, utilizing SmartCarbonTM, a proprietary tool that replaces energy sector holdings with energy efficiency stocks. The Fund’s optimization process applies appropriate constraints to create a diversified portfolio of approximately 200 stocks.
- US equity markets, as measured by the Russell 1000 Index, fell by -5.13% during a difficult macroeconomic environment. Market weakness started in early January as concerns over slower economic growth, Federal Reserve (Fed) interest rate hikes and Russia-Ukraine tensions evolved. February and March saw these fears materialize and rising inflation, supply chain issues and new COVID-19 variants concerns in China continued to push investor sentiment negative. The Energy sector produced oversized returns relative to all other sectors during the quarter, as the rise in oil prices was exacerbated by Russia’s invasion of Ukraine. Within this backdrop, the Fund’s lower volatility profile helped performance.
Impax Sustainability Lens
- We believe the Impax Sustainability Lens is a central tool to guide the Fund to identify sub-industries that will benefit from the transition to a more sustainable economy over the long-term, but acknowledge it was a challenging quarter for that transition. The Low Opportunity and High Risk sub-industries, as identified by the Impax Sustainability lens outperformed the other areas of the market. The Fund’s overweight to High Opportunity and Low Risk sub-industries as well its underweight to High Risk and Low Opportunity subindustries detracted from performance. Additionally, the Fund’s complete avoidance of the combined Low Opportunity/High Risk sub-industries detracted significantly from performance. Stock specific results within Neutral Opportunity sub-industries were also a drag to performance, driven in part by outperforming companies that are avoided by the Fund due to its weapons and fossil fuel free approach.
- Companies in High Opportunity sub-industries that also have higher ESG ratings added the most to relative return during the quarter. Standout performers include Unum and MetLife within Life & Health Insurance, and Bristol-Myers Squibb and Johnson & Johnson in Pharma. In addition, the Fund also benefited from not owing Meta, a lower rated ESG company within Interactive Media & Services that underperformed in the first quarter.
Impax Systematic ESG Rating
- Companies with higher ESG scores that fall in the in top quartile, as determined by the Impax Systematic ESG Rating, underperformed the other three quartiles. Both selection and an overweight allocation to top quartile ESG companies detracted during the quarter. However, selection within the second quartile added to relative performance driven by strong results from Paramount Global, Allstate and AbbVie.
- In a quarter in which Energy was the dominant contributor to equity market returns, not owning traditional Energy companies detracted significantly. The Fund’s SmartCarbon approach, which replaces the traditional energy exposure with energy efficiency companies that are positioned to provide cleaner, more efficient energy solutions also detracted modestly from performance this quarter.
Performance(as of 3/31/22)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Pax US Sustainable Economy Fund - Investor Class||3.26||-6.01||-6.01||13.82||16.19||14.15||12.32||6.73|
|Pax US Sustainable Economy Fund - Class A||3.23||-6.00||-6.00||13.84||16.18||14.15||12.32||6.73|
|Pax US Sustainable Economy Fund - Institutional Class||3.26||-5.94||-5.94||14.13||16.47||14.43||12.60||6.88|
|Russell 1000 Index||3.37||-5.13||-5.13||13.27||18.71||15.82||14.53||-|
|Lipper Multi-Cap Core Funds Index||2.74||-5.10||-5.10||10.28||17.16||14.07||13.00||-|
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 5/1/2021 prospectus, total annual Pax US Sustainable Economy Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Institutional Class, Investor Class and Class A shares are 0.65%, 0.90% and 0.90%, respectively.ˆ
Performance (as of 3/31/22)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Pax US Sustainable Economy Fund - Class A (Load)||-2.43||-11.18||-11.18||7.58||14.02||12.86||11.69||6.49|
1The inception date for the Pax US Sustainable Economy Fund Institutional Class is April 2, 2007, the Investor Class inception date is June 11, 1997, and the Class A shares inception date is May 1, 2013.
The performance information shown for Institutional Class shares represents the performance of the Investor Class shares for the period prior to Institutional Class inception (April 2, 2007). 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. Institutional Class shares average annual return since April 2, 2007, is 9.65% (annualized).
The performance information shown for Class A represents the performance of the Investor Class shares for the period prior to Class A inception. Expenses have not been adjusted to reflect the expenses allocable to Class A shares. Class A inception date return since May 1, 2013, is 13.21% (annualized). A 1.00% CDSC (contingent deferred sales charge) may be charged on any shares sold within 18 months of purchase over $1 million. POP (public offering price) reflects the maximum sales load for the Fund’s Class A Shares of 5.50%.
Portfolio Characteristics(as of 3/31/22)
|Market Cap (weighted avg.)∱||$478,405M||$585,949M|
|Number of Securities||197||1,022|
Top 10 Holdings
(as of 3/31/22)
Apple, Inc. 6.1%, Microsoft Corp. 4.9%, Alphabet, Inc., Class A 3.2%, NVIDIA Corp. 3.2%, Johnson & Johnson 2.0%, Texas Instruments, Inc. 2.0%, Waste Management, Inc. 1.6%, Verizon Communications, Inc. 1.6%, MetLife, Inc. 1.6% and Morgan Stanley 1.5%. Holdings are subject to change.
ƒWeighted Average is an average in which each quantity to be averaged is assigned a weight. These weightings determine the relative importance of each quantity on the average.
∼Forward Price-Earnings Ratio or P/E FY1 ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings over the next 12 months.
∘Return on Equity: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested.
∞A historical Beta is used for Funds with greater than 3 years of performance history under the same mandate. Three-year Beta is used. Beta reflects the sensitivity of a Fund’s return to fluctuations in its benchmark; a beta for a benchmark is 1.00; a beta greater than 1.00 indicates above-average volatility and risk.