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-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Balanced Fund - Individual Investor Class0.893.8013.1613.166.018.404.408.36
Balanced Fund - Institutional Classƒ0.883.8813.4213.426.288.684.668.43
S&P 500 Index1.116.6421.8321.8311.4115.798.50
60% S&P 500 Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index0.854.1214.2114.217.8010.256.98
Lipper Mixed-Asset Target Growth Funds Index0.983.8916.6716.677.669.966.24

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 Allocation

Relative 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)
Fund
Equity62.3
Pax Large Cap Fund35.9
Pax ESG Beta® Dividend Fund7.4
Pax Mid Cap Fund6.9
Pax MSCI EAFE ESG Leaders Index Fund12.1
Fixed Income34.7
Pax Core Bond Fund34.7
Cash & Other3.0
Total100.0

~Inception 12/16/16

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.

Definitions

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.

PAX007666 (4/18)

Steve Falci, CFA®

Chief Investment Officer, Impax Asset Management LLC
Executive Vice President, Pax World Funds

Steve Falci is Chief Investment Officer at Impax Asset Management LLC and Executive Vice President of Pax World Funds. Steve oversees the investment management of Pax World Funds, the development of fund strategy and the collaboration between investment analysis and environmental, social and governance-based research to enhance the firm’s sustainable investing strategy.

Steve has 30 years of experience in investment management. Prior to joining the firm, he served as Head of Strategy Development, Sustainable Investment at Kleinwort Benson Investors, where his duties included strategic direction, product development and identifying new market opportunities in the sustainable investment business. Steve previously served as Chief Investment Officer, Equities at Calvert Group and was a Principal and Senior Portfolio Manager at Mellon Equity Associates.

Steve serves on the board of directors of the US Forum for Sustainable and Responsible Investment (US SIF). He also serves on the Investment Committee for Mercy Investment Services. Steve has a Bachelor of Science in Economics and a Master of Business Administration from the Stern School of Business at New York University and a Master of Arts from Pittsburgh Theological Seminary. Steve is a CFA® charter holder.

CFA® is a trademark owned by the CFA Institute.

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In this quarter’s commentary, we consider how sustainability and competitiveness go hand-in-hand. Companies that embrace sustainability can improve their ability to compete today and over the long-term.

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Nathan Moser, CFA®

SVP, Portfolio Manager, Pax Small Cap Fund, Pax Sustainable Allocation Fund, Impax Asset Management LLC
Senior Vice President, Pax World Funds

Nathan Moser is SVP and Portfolio Manager of the Pax Small Cap Fund at Impax Asset Management LLC and a Senior Vice President at Pax World Funds. Nathan is also a member of the portfolio management team of the Pax Sustainable Allocation Fund.

Nathan has been responsible for management of the Pax Small Cap Fund since its inception in 2008 and has been a member of the portfolio management team of the Balanced Fund since 2015. He joined the firm in 2008 from Citizens Funds, where he worked for six years, first as an equity analyst and then as portfolio manager. He started his career with John Hancock Funds, where he was an equity analyst.

Nathan holds a Bachelor of Science from Babson College, is a CFA® charterholder and member of the CFA Society Boston.

CFA® is a trademark owned by the CFA Institute.

Recent blog posts

Andrew Braun

Portfolio Manager, Pax Large Cap Fund, Pax Sustainable Allocation Fund, Impax Asset Management LLC
Senior Vice President, Pax World Funds

Andrew Braun is a Portfolio Manager of the Pax Large Cap Fund at Impax Asset Management LLC and is a Senior Vice President at Pax World Funds. He is also a member of the portfolio management team of the Pax Sustainable Allocation Fund.

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 the Product Development Group in 1993. He was promoted to Portfolio Manager in 2001 and served as Co-Chief Investment Officer from 2008 to 2014. Prior to joining Goldman Sachs Asset Management, Andy was a Financial Analyst in the Corporate Finance Division at Dillon, Read & Co. Inc.

Andy has a Bachelor of Arts in Economics from Harvard College and a Master of Business Administration in Finance and Economics from the Stern School of Business at New York University.

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Anthony Trzcinka, CFA®

SVP, Portfolio Manager, Pax Core Bond Fund, Pax Sustainable Allocation Fund, Impax Asset Management LLC
Senior Vice President, Pax World Funds

Anthony Trzcinka is SVP and Portfolio Manager of the Pax Core Bond Fund at Impax Asset Management LLC and a Senior Vice President at Pax World Funds. Tony is also a member of the portfolio management team of the Pax Sustainable Allocation Fund.

Tony has been responsible for multiple strategies during his tenure at Impax Asset Management LLC, formerly Pax World Management LLC. He joined the firm in 2003 from AEW Capital Management where he spent over three years as an Assistant Vice President working in a Senior Analyst role. He began his financial services career as an analyst in 1999.

He holds a Master of Business Administration degree from Northeastern University and a Bachelor of Arts degree from the University of Massachusetts. Tony is a CFA® charterholder and member of the Boston Security Analysts Society.

CFA® is a trademark owned by the CFA Institute.

Recent blog posts

Peter Schwab, CFA®

SVP, Portfolio Manager, Pax High Yield Bond Fund, Pax Sustainable Allocation Fund, Impax Asset Management LLC
Senior Vice President, Pax World Funds

Peter Schwab is SVP and Portfolio Manager of the Pax High Yield Bond Fund at Impax Asset Management LLC and a Senior Vice President at Pax World Funds. Peter is also a member of the portfolio management team of the Pax Sustainable Allocation Fund.

Prior to joining the firm, Peter was a Managing Director on the High Yield Bond and Loan Team at Goldman Sachs Asset Management. Peter joined Goldman Sachs Asset Management as a Senior Sector Analyst in 2000 and was promoted to Director of High Yield Research in 2010. Prior to joining Goldman Sachs Asset Management, Peter 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 a Master of Business Administration in Finance from Columbia Business School. He is a CFA charter holder, a member of the New York Society of Security Analysts and holds the Series 7 and 63 registrations.

Peter Schwab is a registered representative of ALPS Distributors, Inc.

CFA® is a trademark owned by the CFA Institute.

Recent blog posts

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