Performance and Portfolio Update

  • The Pax High Yield Bond Fund outperformed its benchmark index in the third quarter due primarily to strong credit selection in a number of sectors, including Services, Technology, Healthcare and Capital Goods. The Fund also benefited from an underweight in the Energy sector. The outperformance was partially offset by an underweight in the Leisure sector, which performed well during this period, and an overweight in Media, which lagged.
  • The high yield market continued to recover in the third quarter from the COVID-induced weakness earlier this year. High yield spreads contracted from 644 at the end of the second quarter to 544 at the end of the third quarter producing a total return of 4.72% as represented the ICE BofA US High Yield Index.x  The performance was supported by strong equity markets, relatively stable interest rates and growing confidence in the Federal Reserve’s explicit support for credit markets. The Fund’s outperformance during bullish market conditions is generally not consistent with our more conservative positioning, but we experienced a number of positive credit developments to particular holdings in the quarter.
  • The Fund benefited from positive selection within the Services sector. Specifically, our position in Diebold, which manufactures cash machines and related software, performed very well due to several re-financing transactions that they were able to execute. In Technology, our position in software provider Veritas contributed to performance as this higher-risk company recovered from a volatile period earlier this year. Within Capital Goods, our position in short-dated Bombardier bonds performed well as the company announced progress toward several asset sales.
  • Offsetting these tailwinds above, the Fund is underweight several travel and entertainment related sectors, such as airlines, cruise lines and gaming which presented headwinds this quarter as they recovered from steep losses earlier this year.
  • We remain focused on downside risk management and credit selection given the uncertainty facing the global economy in the next few quarters. With corporate credit spreads approaching long-term averages, we intend to be cautious with risk taking and remain invested in companies that we believe have more durable balance sheets. We continue to favor sectors that we believe are better positioned for the transition to a more sustainable economy and companies that have strong ESG profiles.

Performance

(as of 9/30/20)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Investor Class-0.794.662.925.394.485.924.985.37
High Yield Bond Fund - Class A-0.794.492.925.394.485.914.995.37
High Yield Bond Fund - Institutional Class-0.63
4.73
3.265.814.79
6.21
5.24
5.56
BofA Merrill Lynch U.S. High Yield - Cash Pay - BB-B (Constrained 2%) Index-1.22
4.34
0.62
3.214.436.61
6.29
-
Lipper High Yield Bond Funds Index-0.61
5.12
-1.54
1.19
3.18
5.54
5.67-

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.

As of 5/1/20 prospectus, total annual High Yield Bond Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Investor Class, Class A and Institutional Class shares are 0.96%, 0.96% and 0.71%, respectively.

Performance
after sales charge

(as of 9/30/20)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
High Yield Bond Fund - Class A (Load)-5.23
-0.24
-1.70
0.60
2.91
4.94
4.50
5.14

1The inception date for the Pax High Yield Bond Fund Institutional Class is June 1, 2004, the Investor Class inception date is October 8, 1999, 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 date (June 1, 2004). 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 June 1, 2004 is 6.01% (annualized).

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 3.79% (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 4.50%.

Performance Attribution


(as of 9/30/20)
Average Active Weights (%)
Total Relative Contribution (%)

Past performance is no guarantee of future results.

Portfolio Characteristics

(as of 9/30/20)
FundBenchmark
Effective Duration)3.774.06
Years to Maturity6.636.60
30 Day SEC Yield
Individual3.77%
Class A3.78%
Institutional4.00%

Top 10 Holdings

(as of 9/30/20)
Cco Holdings LLC, 4.750%, 3/1/30 1.0%, Ford Motor Co., 9.0%, 4/22/25 0.9%, Usg Corp., 4.875%, 6/1/27 0.9%, Lennar Corp.,5.25%,6/1/26 0.8%, Verscend Escrow Corp., 9.75%, 8/15/26 0.8%, Centene Corp., 4.625%, 12/15/29 0.8%, Iqvia, Inc., 5.0%, 5/15/27 0.8%, Telecom Italia Capital Sa, 7.2%, 7/18/36 0.8%, Standard Industries, Inc., 5.0%, 2/15/27 0.8%, Avantor Funding, Inc., 4.625%, 7/15/28 0.8%. Holdings are subject to change.

Definitions

x The ICE BofA Merrill Lynch High Yield Index tracks the performance of below investment grade, but not in default, US dollar denominated corporate bonds publicly issued in the US domestic market, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P. One cannot invest directly in an index.

Effective Duration is a measure of a security’s price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

Years to Maturity (weighted average) is the number of years until the bond matures and/or expires.
30-Day SEC Yield: An annualized yield based on the most recent 30-day period.

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.

PAX009509 (1/21)

Peter Schwab, CFA®

Senior Vice President, Portfolio Manager

Peter Schwab is Senior Vice President at Impax Asset Management LLC, the North American division of Impax Asset Management Group and investment adviser to Pax World Funds.

He is Portfolio Manager of the High Yield Bond Strategy, which includes the Pax High Yield Bond Fund. Peter is also a member of the Pax Sustainable Allocation Fund portfolio management team.

Prior to joining the firm in 2015, Peter was a Managing Director on the High Yield Bond and Loan Team at Goldman Sachs Asset Management. Prior to that he 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 an MBA in finance from Columbia Business School. He is a CFA® charterholder, a member of the New York Society of Security Analysts and holds the FINRA Series 7 and 63 registrations.

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

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