Performance and Portfolio Update
- The Fund underperformed the MSCI EAFE Index during the quarter, as momentum and high beta international developed stocks drove market returns. These conditions were unfavorable due to the Fund’s lower risk profile, a byproduct of the Fund’s ESG focus. The Fund’s Institutional Class (PXNIX) has produced 11% lower beta and 9% lower risk (as measured by standard deviation†) than the EAFE Index over the trailing 3 years, ending December 31, 2017.‡
- International developed markets, as represented by the MSCI EAFE Index, had strong absolute results for the fourth straight quarter, posting a 4.23% return, while underperforming the U.S. equity markets return of 6.64%, as represented by the S&P 500 index.Δ
- The Fund’s ESG profile detracted from relative performance versus the MSCI EAFE Index during the quarter. The Fund’s large overweight to ESG Leaders detracted from relative performance, as did its underweight to the average- and lowest-rated groups. Longer term since the Fund’s inception, an overweight to the highest-rated ESG companies has contributed the most to relative performance.△△
- In the fourth quarter, almost half of the Fund’s relative underperformance could be attributed to holdings not held in the Fund, since they did not meet minimum ESG thresholds to become a constituent of our Fund’s underlying MSCI EAFE ESG Leaders Index.
- From a sector perspective, eight out of the 11 sectors produced negative relative results in the fourth quarter. Stock selection in Financials, driven by ESG leaders within Banks and Insurance, detracted from performance. Stock selection and an underweight allocation within the Energy sector, driven by Oil, Gas and Consumable Fuels companies hurt relative performance. In addition, the Materials sector and the Fund’s underweight to the Metals & Mining industry detracted from performance.
- Stock selection within Telecommunications, Information Technology and Consumer Discretionary helped relative results in the fourth quarter, led by Diversified and Wireless Telecom, Communications Equipment and Household Durables.
- On a regional basis, the European and Pacific regions detracted from relative performance versus the MSCI EAFE Index. Within Europe, ESG Leaders within the UK, Switzerland and Germany detracted, and within the Pacific region, Australia and Hong Kong produced negative relative results in Q4.
Performance(as of 12/31/17)
|1-Month||Quarter||YTD||1 Year||3 Year||5 Year||10 Year||Since Inception1|
|Pax MSCI EAFE ESG Leaders Index Fund - Individual Investor Class||0.71||3.01||23.01||23.01||6.81||7.43||-||5.32|
|Pax MSCI EAFE ESG Leaders Index Fund - Institutional Class||0.75||3.10||23.34||23.34||7.08||7.70||-||5.59|
|MSCI EAFE ESG Leaders (Net) Index||1.04||3.49||23.37||23.37||7.92||8.35||-||6.18|
|MSCI EAFE (Net) Index||1.61||4.23||25.03||25.03||7.80||7.90||1.94||5.58|
|Lipper International Large-Cap Core Funds Index||1.40||3.51||25.46||25.46||7.62||7.45||1.60||5.26|
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. For most recent month-end performance information call 800.767.1729 or visit paxworld.wpengine.com
Figures include reinvested dividends, capital gains distributions, and changes in principal value.
1The inception date for the Pax MSCI EAFE ESG Leaders Index Fund Institutional Class is January 27, 2011 and the Individual Investor Class inception date is March 31, 2014.
As of 5/1/17 prospectus, total annual Pax MSCI EAFE ESG Leaders Index Fund operating expenses, gross of any fee waivers or reimbursements, for Individual Investor Class and Institutional Class shares are 0.80% and 0.55%, respectively.
ESG Ratings(as of 12/31/17)
Average Active Weights (%)
|3-month Relative Contribution (%)||Since Inception 1/27/11
Relative Contribution (%)
XOther: ETFs (for short-term cash mgmt. purposes) and Cash & Equivalents.
Past performance is no guarantee of future results.
Portfolio Characteristics(as of 12/31/17)
|Market Cap (weighted avg.)∱||$56,974M||$62,091M|
|Number of Securities||338||928|
Top Ten Holdings
(as of 12/31/17)
Novartis AG 2.2%, Roche Holding AG 2.2%, Novo Nordisk A/S, Class B 1.7%, Total SA 1.7%, SAP SE 1.7%, Commonwealth Bank of Australia 1.7%, GlaxoSmithKline PLC 1.5%, BASF SE 1.5%, Allianz SE 1.3% and Siemens AG 1.3%. Holdings are subject to change.
†Standard Deviation measures a Fund’s variation around its mean performance; a high standard deviation implies greater volatility.
‡The Pax MSCI EAFE ESG Leaders Index Fund — Institutional Class (PXNIX) three-year beta is 0.89 compared to 1.00 for the MSCI EAFE Index. The Fund’s (PXNIX) three-year standard deviation is 10.81 compared to 11.83 for the MSCI EAFE Index. The minimum investment needed for investment in PXNIX is $250,000.
ΔThe S&P 500 Stock Index is an unmanaged index of large capitalization common stocks. One cannot invest directly in any index.
∞IVA stands for Intangible Value Assessment.
△△MSCI ESG Research evaluates companies’ ESG characteristics and derives corresponding ESG scores and ratings. Companies are ranked by ESG score against their sector peers to determine their eligibility for the MSCI ESG indices. MSCI ESG Research identify es the highest-rated companies in each peer group to meet the float-adjusted market capitalization sector targets. The rating system is based on general and industry-specific ESG criteria, assigning ratings on a 7-point scale from AAA (highest) to CCC (lowest).
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 2 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.
On 3/31/2014 Pax International Fund and Pax MSCI EAFE ESG Index ETF merged into the Pax MSCI International ESG Index Fund (the Fund), a passively managed index fund which seeks investment returns that closely correspond to the price and yield performance, before fees and expenses, of the MSCI EAFE ESG Index. Based on the similarity of the Fund to Pax MSCI EAFE ESG Index ETF, Pax MSCI EAFE ESG Index ETF (the Predecessor Fund) is treated as the survivor of the mergers for accounting and performance reporting purposes. Accordingly, all performance and other information shown for the Fund for periods prior to 3/31/2014 is that of the Predecessor Fund.
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.