Performance and Portfolio Update
- The Fund modestly underperformed its benchmark (60% S&P 500 Index/ 40% Bloomberg Barclays U.S. Aggregate Bond Index) in the fourth quarter.
- The Fund’s asset allocation, which favors equities relative to bonds, was a positive contributor. It was another strong quarter for equities as the S&P 500 Index† returned 6.64%, significantly outperforming bonds, as the Bloomberg Barclays U.S. Aggregate Bond Index‡ returned 0.39%. However, the allocation to non-U.S. developed market equities was a large detractor, as U.S. equities outperformed international equities.
- Underlying fund performance was mixed, with the two large cap portfolios outperforming their benchmarks while the mid cap and bond funds underperformed their benchmarks. The Pax Large Cap Fund was the largest contributor to return due to strong stock selection in the Consumer Discretionary, Energy and Technology sectors. The Pax ESG Beta Dividend Fund, a smart beta offering tilted toward higher yielding, higher quality companies with strong ESG profiles, outperformed in an environment where quality metrics were rewarded. The Pax Mid Cap Fund underperformed the Russell Midcap Growth Index§ largely due to stock selection in Financials.
- The Fund’s equity allocation remains modestly above its 60% neutral target and the fixed income allocation is modestly below its 40% target as we have valuation concerns in both markets. Equity market valuations remain stretched after their strong run in 2017, but near-term earnings prospects continue to drive stock prices higher. We also believe current interest rate and spread levels pose valuation concerns for bonds. With continuing extreme low levels of volatility and evidence of investor complacency toward risk, we believe caution is warranted. We remain focused on risk at both the Balanced Fund level and within each of the underlying Funds to assure that risk levels are maintained appropriately in-line with desired risk tolerance.
Performance(as of 12/31/17)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Balanced Fund - Individual Investor Class||0.89||3.80||13.16||13.16||6.01||8.40||4.40||8.36|
|Balanced Fund - Institutional Class||0.88||3.88||13.42||13.42||6.28||8.68||4.66||8.43|
|S&P 500 Index||1.11||6.64||21.83||21.83||11.41||15.79||8.50|
|60% S&P 500 Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index||0.85||4.12||14.21||14.21||7.80||10.25||6.98|
|Lipper Mixed-Asset Target Growth Funds Index||0.98||3.89||16.67||16.67||7.66||9.96||6.24|
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 paxworld.wpengine.com
Figures include reinvested dividends, capital gains distributions, and changes in principal value.
1The inception date for the Pax Balanced Fund Institutional Class is April 2, 2007 and the Individual Investor Class inception date is August 10, 1971. The performance information shown for Institutional Class shares includes the performance of Individual 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.
Effective 5/1/2017, the Pax Balanced Fund Net Annual Fund Operating Expense ratio including acquired Fund Fees and net fee waivers or reimbursements for the Institutional Share Class is 0.63%, the Total Annual Fund Operating Expense ratio including acquired Fund Fees and gross fee waivers or reimbursements is 0.68%. The Pax Balanced Fund Net Annual Fund Operating Expense ratio including acquired Fund Fees and net fee waivers or reimbursements for the Individual Investor Share Class is 0.93%, the Total Annual Fund Operating Expense ratio including acquired Fund Fees and gross fee waivers or reimbursements is 0.92%.
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.
Asset Allocation (%)(as of 12/31/17)
|Pax Large Cap Fund∼||35.9|
|Pax ESG Beta® Dividend Fund∼||7.4|
|Pax Mid Cap Fund||6.9|
|Pax MSCI EAFE ESG Leaders Index Fund||12.1|
|Pax Core Bond Fund∼||34.7|
|Cash & Other||3.0|
Top Ten Holdings
(as of 12/31/17)
Apple, Inc. 2.3%, Microsoft Corp. 1.8%, Amazon.com, Inc. 1.8%, PepsiCo, Inc. 1.3%, Home Depot, Inc., The 1.3%, Johnson & Johnson 1.2%, Citizens Financial Group, Inc. 1.2%, Zoetis, Inc. 1.2%, Bank of America Corp. 1.2% and Texas Instruments, Inc. 1.1%. Holdings are subject to change.
†Standard & Poor’s 500 Stock Index is an unmanaged index of large capitalization common stocks.
‡Bloomberg Barclays U.S. Aggregate Bond Index represents securities that are U.S. domestic, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities and asset-backed securities. One cannot invest directly in an index. One cannot invest directly in an index.
§Russell Midcap Growth Index is a market capitalizationweighted index that measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth rates. The stocks are also members of the Russell 1000 Growth Index. One cannot invest directly in any index.
The statements and opinions expressed are those of the author 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.