Performance and Portfolio Update

  • The Pax ESG Beta Quality Fund underperformed the benchmark Russell 1000 Index in the third quarter. The main drivers of the return difference were factors 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 and residual volatility) was the largest factor detractor for the period as riskier stocks outperformed low-volatility stocks during the market surge. Exposure to companies with higher earnings quality was also a material detractor. These results were slightly offset by the Fund’s positive exposure to profitability and earnings yield.
  • 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 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 oil and gas companies helped relative results as the industry has been severely impacted by global oversupply.

Performance

(as of 9/30/20)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Pax ESG Beta Quality Fund - Investor Class-3.297.842.209.7310.0311.4711.435.79
Pax ESG Beta Quality Fund - Class A-3.267.862.209.7610.0411.4811.435.79
Pax ESG Beta Quality Fund - Institutional Class-3.287.892.349.9910.2811.7311.705.93
Russell 1000 Index-3.659.476.4016.0112.3814.0913.76-
Lipper Multi-Cap Core Funds Index-2.958.524.7714.099.9112.1511.83-

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.

1The 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 8.28% (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 11.43% (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
after sales charge

(as of 9/30/20)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Pax ESG Beta Quality Fund - Class A (Load)-8.561.93-3.413.717.9910.2210.815.54

Factors


(for quarter ended 9/30/20)
Factor Exposure
Total Relative Factor
Contribution (%)

Past performance is no guarantee of future results.
2Beta 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 9/30/20)
FundBenchmark
Market Cap (weighted avg.)$393,098M$407,049M
Forward Price/Earnings18.0924.26
ROE29.0421.75
Beta
0.921.00
Number of Securities1581,014

Top 10 Holdings

(as of 9/30/20)
Apple, Inc. 5.9%, Microsoft Corp. 4.9%, Amazon.com, Inc. 4.2%, Verizon Communications, Inc. 3.0% , Johnson & Johnson 2.8%, Alphabet, Inc., Class A 2.8%, Thermo Fisher Scientific, Inc. 2.7%, Texas Instruments, Inc. 2.7%, Intel Corp. 2.0%, Home Depot, Inc., The 1.8%. Holdings are subject to change.

Definitions

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.

PAX009503 (1/21)

Ran Leshem

Aperio Group, Portfolio Manager

Ran Leshem is a member of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund portfolio management team.

At Aperio Group LLC, subadviser of these funds, Ran is Chief Investment Officer. He oversees portfolio management and operations of Aperio’s U.S., foreign and global products. Ran has extensive experience applying quantitative techniques and information technology to complex operational problems. Prior to joining Aperio in 2006, Ran was a Manager of Operating Strategy at the Gap, Inc.

With Aperio co-authors Lisa Goldberg and Patrick Geddes, in 2014 Ran received a Harry M. Markowitz Distinction Award from the Journal of Investment Management for the paper “Restoring Value to Minimum Variance.” He also co-authored “Optimizing Value” with Lisa Goldberg and Alan Cummings, which was published in The Journal of Portfolio Management in 2016. With Lisa Goldberg and Michael Branch, Ran authored “Factoring Probability,” which was published in Risk-Based and Factor Investing in 2015.

Ran earned a Bachelor of Science in mathematics from the University of Waterloo, in Canada, where he received the Hewlett-Packard Award for academic excellence. He received an MBA from the University of California at Berkeley.

ALPS Distributors, Inc. is not affiliated with Aperio Group, LLC.

Recent blog posts

Michael Branch, CFA®

Aperio Group, Portfolio Manager

Michael Branch is Senior Portfolio Manager and Manager of Portfolio Research at Aperio Group LLC, subadvisor of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund. He is a member of the portfolio management teams of both of these Funds.

Before joining Aperio in 2007, Michael was a Fund Operations Specialist for California Investment Trust, a mutual fund company.

Michael co-authored “Factoring Probability” with Lisa Goldberg and Ran Leshem; it was published in Risk-Based and Factor Investing in 2015. He was the sole author of “The Case for Global Stock Portfolios,” published in the Journal of Indexes in 2011.

Michael received a Bachelor of Science in finance from the University of Arizona. He holds the Chartered Financial Analyst designation and is a member of the CFA® Society of San Francisco.

ALPS Distributors, Inc. is not affiliated with Aperio Group, LLC.

Recent blog posts

Robert Tymoczko

Aperio Group, Portfolio Manager

Robert Tymoczko is a member of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend portfolio management team.

At Aperio Group LLC, subadviser of these Funds, Robert is Director of Portfolio Management. He oversees the day-to-day portfolio management and strategy implementation of all investment products.

Prior to joining Aperio, Robert was a Managing Partner at AlphaStream Capital Management, LLC, where he oversaw quantitative research and portfolio management. Before AlphaStream, Robert served as Lead Portfolio Manager and Co-Head of U.S. Quantitative Equity Products at Zurich Scudder Investments.

Robert earned a Bachelor of Arts in quantitative economics from Stanford University and an MBA with concentrations in finance and econometrics from the University of Chicago.

ALPS Distributors, Inc. is not affiliated with Aperio Group, LLC.

Recent blog posts

Annie Tan

Aperio Group, Portfolio Manager

Annie Tan is Manager of ESG Implementation at Aperio Group LLC, subadviser of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund. She is a member of the portfolio management teams of both Funds.

. At Aperio, Annie oversees ESG/SRI integration into portfolio construction and strategy data updates.

Before joining Aperio, Annie was an investment analyst at Dragon Financial Group. She received a Bachelor of Arts in economics from the University of California at Davis and a Master of Science in financial analysis from the University of San Francisco.

ALPS Distributors, Inc. is not affiliated with Aperio Group, LLC.

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