Effective December 18, 2019, the name of the Pax Balanced Fund changed to the Pax Sustainable Allocation Fund.
Performance and Portfolio Update
- The Pax Balanced Fund returned 2.06% in the third quarter, outperforming the 60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index (Blended Index), which returned 1.96% and significantly outpaced its peer group benchmark, the Morningstar Allocation — 50% to 70% Equity (Morningstar Allocation), which returned 0.92%.
- Markets were volatile as investors grappled with uncertainty surrounding economic growth and U.S. trade policy with China. The S&P 500 Index† rose 1.7% but dropped by more than 6% from peak-to-trough during the quarter, before recovering by quarter-end. Small-cap stocks as represented by the Russell 2000 Index‡ were down -2.4% and Non-U.S. Developed Market stocks also finished with a negative return as the MSCI EAFE Indexƒ was down -1.1%. Bonds, as measured by the Bloomberg Barclays Aggregate Index,~ delivered a solid 2.3% return.
- The Pax Large Cap Fund, which represents the largest equity allocation in the Balanced Fund, contributed the most to performance, as it outperformed the S&P 500 Index by 1.4%.
- The Balanced Fund’s allocation to non-U.S. equities detracted from performance versus the Blended Index, since non-U.S. developed market equities lagged their U.S. counterparts. However, the Fund’s non-U.S. equity allocation is less than peers, which helped relative performance versus the Morningstar Allocation peer group benchmark.
- The investment backdrop for the rest of the year remains uncertain. Federal Reserve easing is in full swing, while leading indicators are flashing caution on the potential for a recession over the next one to two years. The Fund’s 57% allocation to equity remains below its 60% neutral target, while the fixed income allocation remains just below its 40% target. We continue to maintain a modest 4% allocation to cash that we will be prepared to deploy across U.S. equity, non-U.S. equity or fixed income as we perceive more clarity on risks and opportunities across these asset classes.
- The Fund made an initial allocation in the Pax Ellevate Global Women’s Leadership Fund in late September. This strategy is designed to capture the investment returns associated with gender-diverse leadership and increases the Fund’s allocation to global equity specialist strategies alongside the Pax Global Environmental Markets Fund and the Pax Global Opportunities Fund.
- The Pax Balanced Fund Institutional Class received a 4-Star Overall Morningstar Rating based on risk-adjusted returns in the Morningstar Allocation 50%-70% Equity category (658 peers) for the period ending September 30, 2019,1 which we believe is reflective of both its strong performance and risk management.
Performance(as of 9/30/19)
|Returns (%)||Average Annual Returns (%)|
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception2|
|Balanced Fund – Investor Class||1.31||2.00||14.61||5.27||7.49||6.12||7.59||8.26|
|Balanced Fund – Institutional Class||1.33||2.06||14.85||5.50||7.75||6.38||7.86||8.33|
|S&P 500 Index||1.87||1.70||20.55||4.25||13.39||10.84||13.24|
|60% S&P 500 Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index||0.91||1.96||15.86||7.10||9.32||8.00||9.59|
|Morningstar Allocation – 50% to 70% Equity||1.00||0.92||13.42||3.53||7.13||5.60||7.80|
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 paxstaging.wpengine.com.
Figures include reinvested dividends, capital gains distributions and changes in principal value.
1The Morningstar Ratings™ shown are as of 9/30/2019. The Pax Balanced Fund – Institutional (PAXIX) Morningstar ratings were 4 stars out of 658 funds overall, 4 stars out of 658 funds for 3 years, 4 stars out of 581 funds for 5 years, 3 stars out of 427 funds for 10 years. The ratings for other Balanced Fund share classes may differ. 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 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.
©2019 Morningstar, Inc. All Rights Reserved. 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. Morningstar, Inc. is an independent investment research firm that compiles and analyzes fund, stock and general market data.
2The inception date for the Pax Balanced 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.
As of the 5/1/2019 prospectus, the Pax Balanced Fund All-In Gross expense ratio includes indirect expenses (Acquired Fund Fees and Expenses “AFFE”) of 0.61%. 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 0.66% and 0.91%, respectively. Pax Balanced Fund expense ratios, excluding indirect AFFE, are 0.05% and 0.30% for Institutional Class and Investor Class shares, respectively. The management fee is a unified fee that includes all of the operating costs and expenses of the Fund (other than taxes, charges of governmental agencies, interest, brokerage commissions incurred in connection with portfolio transactions, distribution and/or service fees payable under a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 and extraordinary expenses), including accounting expenses, administrator, transfer agent and custodian fees, Fund legal fees and other expenses. (For this purpose, Impax Asset Management LLC does not consider acquired fund fees and expenses to be operating costs and expenses of the Fund.)
Asset AllocationRelative Contribution (%)
Past performance is no guarantee of future results.
XThe Inception date of the Pax Large Cap Fund, Pax ESG Beta Dividend Fund and Pax Core Bond Fund is December 16, 2016. The Inception date of the Pax Global Opportunities Fund is June 27, 2018.
Asset Allocation (%)(as of 9/30/19)
|Pax Large Cap Fund||37.8|
|Pax ESG Beta® Dividend Fund||6.5|
|Pax Small Cap Fund||1.6|
|Pax Global Opportunities Fund||1.5|
|Pax Global Environmental Markets Fund||1.3|
|Pax Ellevate Global Women's Leadership Fund||1.1|
|Pax MSCI EAFE ESG Leaders Index Fund||7.3|
|Pax Core Bond Fund||37.7|
|Pax High Yield Bond Fund||1.2|
|Cash & Other||4.5|
Top 10 Equity Holdings
(as of 9/30/19)
Apple, Inc. 2.5%, Microsoft Corp. 2.5%, Amazon.com, Inc. 1.9%, Procter & Gamble Co., The 1.7%, Merck & Co., Inc. 1.5%, AT&T, Inc. 1.4%, Ingersoll-Rand PLC 1.3%, Alphabet, Inc., Class A 1.2%, JPMorgan Chase & Co. 1.2% and Visa, Inc., Class A 1.1%. Holdings are subject to change.
†Standard & Poor’s 500 Stock Index is an unmanaged index of large capitalization common stocks.
‡The Russell 2000 Index measures the performance of the small-cap segment of the U.S. 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.
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 U.S. 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.
One cannot invest directly in an index.
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.