Performance and Portfolio Update

  • The Fund lagged the benchmark Russell 1000 Index in the fourth quarter primarily due to the portfolio’s lower volatility profile, which did not keep pace in the high beta market rally.
  • The overweight towards quality factors had a negative impact on relative performance for the period. The Fund’s exposure to companies with lower volatility (i.e., low beta) was the largest factor detractor for the period. Exposure to companies with higher profitability and earnings quality were also material detractors. These results were slightly offset by the Fund’s exposure to value stocks, as measured by earnings yield, as this style factor has performed well in recent history.
  • The Fund overweights its portfolio toward companies with ESG strength. During the quarter, this overweight to ESG leaders and accompanying underweight to companies with weaker ESG profiles in aggregate had a modestly positive impact on performance.
  • Industry exposures, which are driven by the factor and ESG tilts, added to relative returns for the quarter. Particularly, an underweight to industrial and energy companies bolstered relative results as escalating trade tensions and concerns of slowing global economic growth weighed on the industries.
  • The Fund now incorporates SmartCarbon™ into its investment process. Our proprietary, risk-based investment process manages exposure to companies with fossil fuel reserves on their balance sheets, replacing energy company holdings with a diversified basket of energy efficiency stocks. As a result, the Fund has become fossil fuel free. For more information, visit the SmartCarbon webpage and read our press release.

Performance

(as of 12/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
ESG Beta Quality Fund - Investor Class-2.931.4720.1020.111.858.7311.535.63
ESG Beta Quality Fund - Class A2.717.3927.0827.0813.989.9712.165.89
ESG Beta Quality Fund - Institutional Class2.707.4727.4227.4214.2710.2512.446.03
Russell 1000 Index2.899.0431.4331.4315.0511.4813.54
Lipper Multi-Cap Core Funds Index2.598.7129.0929.0912.819.7011.80

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.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 8.59% (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 5/1/2019 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 12.43% (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

(as of 12/31/19)
Returns (%)Average Annual Returns (%)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
ESG Beta Quality Fund - Class A (Load)-2.931.4720.120.111.858.7311.535.63

Factors


(for quarter ended 12/31/19)
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 12/31/19)
FundBenchmark
Market Cap (weighted avg.)$241,308M$266,348M
Forward Price/Earnings17.4020.02
ROE28.7521.52
Beta
0.911.00
Number of Securities155996

Top 10 Holdings

(as of 12/31/19)
Apple, Inc. 4.0%, Microsoft Corp. 3.5%, MasterCard, Inc., Class A 2.8%, Amazon.com, Inc. 2.8%, Verizon Communications, Inc. 2.6%, Service Properties Trust 2.6%, PepsiCo, Inc. 2.6%, Johnson & Johnson 2.5%, Alphabet, Inc., Class A 2.5% and Texas Instruments, Inc. 2.4%. 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.
An Ex-Ante Beta is used for funds with less than 2 years of performance history under its new mandate. The Ex-Ante Beta is calculated using a multi-factor risk model. Beta explains common variations in stock returns due to different stock sensitivities to the market relative to its underlying benchmark for the current period, not historical. 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.

PAX009036 (4/20)

Ran Leshem

Aperio Group, Portfolio Manager, Pax ESG Beta® Quality Fund and Pax ESG Beta® Dividend Fund

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 (Aperio), subadviser of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund, Ran is Chief Investment Officer. He oversees the portfolio management and operations of Aperio’s US, foreign, and global products.

Ran has extensive experience in applying quantitative techniques and information technology to complex operational problems. Prior to joining Aperio in 2006, Ran was a Manager, Operating Strategy, at the Gap, Inc.

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

Ran received his Bachelor of Science degree in Mathematics from the University of Waterloo, Canada, where he received the Hewlett Packard Award for academic excellence. He received his MBA from the University of California at Berkeley.

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

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Michael Branch, CFA®

Aperio Group, Portfolio Manager, Pax ESG Beta® Quality Fund and Pax ESG Beta® Dividend Fund

Michael Branch is a Portfolio Research, Trading, and Analytics Associate at Aperio Group LLC (Aperio) and is a member of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund portfolio management team. Aperio serves as subadvisor of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund.

Prior to joining Aperio, 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 his 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.

CFA® is a trademark owned by the CFA Institute.

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

Recent blog posts

Robert Tymoczko

Aperio Group, Portfolio Manager, Pax ESG Beta® Quality Fund and Pax ESG Beta® Dividend Fund

Robert Tymoczko is a member of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend portfolio management team. At Aperio Group LLC (Aperio), subadviser of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund Robert is responsible for overseeing 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 was responsible for quantitative research and portfolio management. Before AlphaStream, Robert was Lead Portfolio Manager and Co-Head of U.S. Quantitative Equity Products at Zurich Scudder Investments.

Robert received his Bachelor of Arts in Quantitative Economics from Stanford University and his MBA with concentrations in Finance and Econometrics from the University of Chicago.

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

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Annie Tan

Aperio Group, Portfolio Manager, Pax ESG Beta® Quality Fund and Pax ESG Beta® Dividend Fund

Annie Tan is an Associate Portfolio Manager at Aperio Group LLC (Aperio) and a member of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund portfolio management team.

Aperio serves as subadviser of the Pax ESG Beta Quality Fund and Pax ESG Beta Dividend Fund. At Aperio, Annie is responsible for providing analytical support in the research, portfolio management, and trading of client portfolios.

Prior to Aperio, Annie was an investment analyst at Dragon Financial Group. She received her Bachelor of Arts in Economics from the University of California at Davis and her 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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