Performance and Portfolio Update
- The Fund underperformed the benchmark Russell 1000 Index in the second quarter. The main driver of the return difference was the low volatility factor used in the strategy construction.
- The overweight toward quality factors had negative results for the period. The Fund’s exposure to companies with lower volatility (i.e., low beta) was the largest factor detractor as riskier stocks outperformed low-volatility stocks during the market surge. Exposure to companies with higher earnings quality and earnings yield were also material detractors. These results were slightly offset by the Fund’s positive exposure to profitability, as this factor has performed well in recent history.
- Weighting the portfolio toward companies with stronger ESG characteristics is one of the five factors used in this smart beta strategy, which is designed to deliver strong long-term investment performance. On a short-term basis, however, ESG and other factors can negatively affect returns. During the quarter, companies with stronger ESG profiles, particularly those in the top quartile as measured by the Impax Sustainability Score, underperformed companies with weaker ESG profiles. The Fund’s overweight to the strongest ESG profiles and underweight to the weaker ESG profiles detracted slightly from relative performance.
- Industry exposures, which are driven by the factor and ESG tilts, added to relative returns for the quarter. Particularly, an underweight to Aerospace and Defense companies helped relative results as the industry has been severely impacted by reduced travel demand. These results were partly offset by the underweight to oil and gas companies, which bounced back in the second quarter following extremely poor returns in the first quarter of 2020.1
Performance(as of 6/30/20)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception2|
|Pax ESG Beta Quality Fund - Investor Class||2.02||19.29||-5.23||4.51||8.95||8.21||12.09||5.51|
|Pax ESG Beta Quality Fund - Class A||2.02||19.28||-5.25||4.47||8.96||8.20||12.09||5.51|
|Pax ESG Beta Quality Fund - Institutional Class||2.02||19.35||-5.14||4.72||9.22||8.47||12.37||5.65|
|Russell 1000 Index||2.21||21.82||-2.81||7.48||10.64||10.47||13.97|
|Lipper Multi-Cap Core Funds Index||3.45||23.14||-3.46||5.65||8.53||8.47||12.08|
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.
2The inception date for the Pax ESG Beta Quality 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 7.82% (annualized).
Total annual Pax ESG Beta Quality Fund operating expenses, gross of any fee waivers or reimbursements, for Investor Class, Class A and Institutional Class shares are 0.90%, 0.90% and 0.65%, respectively, as of 5/1/2020 prospectus.ˆ
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 10.68% (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%.
Performance (as of 6/30/20)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Pax ESG Beta Quality Fund - Class A (Load)||-3.58||12.70||-10.45||-1.29||6.93||6.98||11.46||5.25|
(for quarter ended 6/30/20)
|Total Relative Factor
Past performance is no guarantee of future results.
3Beta 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.
Portfolio Characteristics(as of 6/30/20)
|Market Cap (weighted avg.)∱||$337,664M||$348,396M|
|Number of Securities||153||1,003|
1Q1 2020 Energy sector performance as represented by S&P 500 Index Energy sector.
Top 10 Holdings
(as of 6/30/20)
Apple, Inc. 5.3%, Microsoft Corp. 5.0%, Amazon.com, Inc. 4.0%, Alphabet, Inc., Class A 2.9%, Johnson & Johnson 2.8%, Texas Instruments, Inc. 2.5%, Verizon Communications, Inc. 2.4%, Thermo Fisher Scientific, Inc. 2.3%, Intel Corp. 2.0% and Home Depot, Inc. 1.8%. 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.
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.