Performance and Portfolio Update

  • The Pax Balanced Fund underperformed its benchmark (60% S&P500/40% Bloomberg Barclays US Aggregate Bond Index) in the fourth quarter but outperformed its Morningstar Allocation 50%-70% Equity peer group index which is representative of multi-asset funds with similar risk and asset allocation objectives.
  • Equity markets sold off significantly in the fourth quarter, with the S&P 500 Index down -13.52%, as investors reacted to concerns about the onset of the next recession, rising interest rates, disruptions from trade/tariffs and the prospect of slowing earnings growth in 2019. Non-U.S. developed market stocks also were off significantly, with the MSCI EAFE Index down -12.54%, but in a reversal of recent results, they modestly outperformed U.S. equities primarily due to a stronger December. Bonds delivered a positive return as the Bloomberg Barclays US Aggregate rose 1.64%.
  • The allocation to the Pax Large Cap Fund was the largest detractor to performance. After delivering strong performance through the third quarter, the Large Cap Fund’s cyclical holdings were particularly hard hit during the market downturn as fears of higher interest rates and recession weighed on multiples. The Pax MSCI EAFE ESG Leaders Index Fund and Pax ESG Beta Dividend Fund were positive contributors, as was the modest allocation to cash.
  • The Fund’s equity allocation was reduced early in the quarter and remains modestly below its 60% neutral target. The fixed income allocation remains in line with its 40% target, with the Fund maintaining a modest, transitional allocation to cash. The fourth quarter decline in the market brought equity prices to more attractive valuation levels, both relative to its own history and investment grade bonds, particularly with the 10-year Treasury closing the year at a yield of 2.69%. Amid this volatility, we are continually assessing whether current valuations across asset classes fully reflect a myriad of risks or if recent volatility has overly discounted these risks.
  • The Pax Balanced Fund Institutional Class ranked in the 22nd percentile in the Morningstar 50%-70% Equity peer group for the one-year period ended 12/31/18. We believe the Fund’s 28th percentile ranking for the five-year period ended 12/31/2018 is reflective of both its strong performance and risk management.*

*Rankings in other time periods may be lower. Comparison based on the Morningstar 50%-70% Equity peer group for the period ending 12/31/18. The Pax Balanced Fund’s Institutional Class performance for the 1-year period ranked 157 out of 775 (22nd percentile), for the 3-year period ranked 283 out of 697 (42nd percentile), for the 5-year period ranked 163 out of 610 (28th percentile), and for the 10-year period 240 out of 440 (55th percentile). The Pax Balanced Fund’s Investor Class performance for the 1-year period ranked 186 out of 775 (25th percentile), for the 3-year period ranked 364 out of 697 (52nd percentile), for the 5-year period ranked 210 out of 610 (34th percentile), and for the 10-year period 276 out of 440 (63rd percentile).

Performance

(as of 12/31/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Balanced Fund - Investor Class-4.45-8.15-4.08-4.084.724.297.858.08
Balanced Fund - Institutional Class-4.42-8.14-3.85-3.854.984.548.128.15
S&P 500 Index-9.03-13.52-4.38-4.389.268.4913.12
60% S&P 500 Index / 40% Bloomberg Barclays U.S. Aggregate Bond Index-4.68-7.56-2.35-2.356.506.249.42
Morningstar Allocation--50% to 70% Equity-4.94-8.64-5.76-5.764.713.678.33

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 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 5/1/2018 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 Individual 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 Individual 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 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. The Inception date of the Pax Global Opportunities Fund is June 27, 2018.

Asset Allocation (%)

(as of 12/31/18)
Fund
Equity57.5
Pax Large Cap Fund34.8
Pax ESG Beta® Dividend Fund6.8
Pax Mid Cap Fund6.1
Pax Global Opportunities Fund1.4
Pax Global Environmental Markets Fund0.9
Pax MSCI EAFE ESG Leaders Index Fund7.5
Fixed Income40.2
Pax Core Bond Fund40.2
Cash & Other2.3
Total100.0


Top 10 Equity Holdings

(as of 12/31/18)
Microsoft Corp. 2.1%, Amazon.com, Inc. 1.9%, Apple, Inc. 1.5%, Ingersoll-Rand PLC 1.2%, JPMorgan Chase & Co. 1.2%, Waste Management, Inc. 1.2%, IBM 1.1%, Eli Lilly & Co. 1.1%, Merck & Co., Inc. 1.1% and Alphabet, Inc., Class A 1.1%. Holdings are subject to change.

Definitions

Standard & Poor’s 500 Stock Index is an unmanaged index of large capitalization common stocks.
The 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. One cannot invest directly in an index.

©2019 Morningstar, Inc. 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.

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.

PAX008406 (4/19)

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 Pax Sustainable Allocation 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.

Recent blog posts

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.

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