Manager Commentary
Co-Portfolio Managers
Bruce Jenkyn-Jones is the Co-Portfolio Manager of the Global Green Fund. Mr. Jenkyn-Jones has been responsible for the management of the Global Green Fund since its inception in 2008 and has been a portfolio manager with Impax since 1999. Mr. Jenkyn-Jones holds a Masters of Business Administration from IESE (Barcelona), a Masters of Science in Environmental Technology from Imperial College and a degree in chemistry from Oxford.
Ian Simm is the Co-Portfolio Manager of the Global Green Fund. Mr. Simm has been responsible for the management of the Global Green Fund since its inception in 2008. He is the Chief Executive of Impax and has spent 11 years with the company. He holds a first class honors degree in physics from Cambridge University and has a Masters of Public Administration from Harvard’s Kennedy School of Government.
As of June 30, 2008
During the second quarter the markets reacted negatively to a number of challenging macro economic drivers, including: global increases in inflation; the credit crunch further affecting the cost of borrowing; oil prices increasing to over $140 per barrel; continued housing market softness; and a broad-based slowdown in the global economic climate. These factors had a negative impact on global markets, most specifically in June after a relatively strong month of May.
The Pax World Global Green Fund was down 0.10% for the quarter, versus a loss of 1.66% for the benchmark MSCI World Index. Overweight positions relative to the benchmark in electric utilities, electrical equipment, and machinery helped performance, while overweight positions in auto components and building products relative to the benchmark were the main deterrents to performance. The portfolio’s underweight (zero) portfolio exposure to commercial banks and diversified financial services also helped performance. Sector exposure and stock selection contributed to the Fund’s relative performance.
We aim to take a diversified approach to asset allocation, selecting companies with secular characteristics and geographical diversification across the three principal subsectors in which we invest. Given current market volatility, we favor companies with more defensive characteristics, and have attempted to identify businesses with annuity-like earnings visibility, such as those in the water utility space and water sector. We use themes to help us identify companies with the highest return on capital in the particular environmental subsectors that we analyze. Strong recent growth in the wind market and the metals recycling industry are examples of this.
During the period we continued to selectively and opportunistically add to existing positions and take profit when appropriate. We participated in the IPO of Portuguese wind IPP EDP Renovaveis (1.4%*) based on the upside that we perceive in its share price, and took a position in Baldor Electric (1.4%*), based on the growth in demand for energy efficient products in times of rising oil prices. We eliminated our position in Kyocera *, a Japanese solar silicon company, due to the first signs of margin contraction among polysilicon producers, and Spanish wind IPP Iberdrola Renovables*, preferring to take a position in EDP Renovaveis.
While the macro economic climate remains uncertain, we are encouraged by the continued strength of the fundamentals of our environmental subsectors. As discussed above, the portfolio has some exposure to weakening construction, automotive and semiconductor industries, but we remain confident that the secular nature of these companies and the continued spending patterns in the industrial and utilities sectors can underpin growth in the coming quarters. We believe that growth rates remain on track, and that the portfolio valuation is still attractive. We continue to look for and identify new opportunities with superior growth prospects.
*Portfolio holdings as of 6/30/08. Holdings are subject to change. Kyocera and Iberdrola are currently not held by the Fund.
An investment in the fund involves risk, including loss of principle. Foreign investing involves special risks such as currency fluctuations and political uncertainty. The fund’s exposure to the technology sector generally will cause fluctuation in the fund’s price, due to the volatile nature of the technology sector.Performance data quoted represents 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, click here. For standardized performance, click here.
Total annual Global Green Fund operating expenses, gross of any fee waivers or reimbursements, are 9.31%. The Global Green Fund’s investment adviser has contractually agreed to reimburse expenses (excluding Acquired Fund Fees and Expenses) allocable to Individual Classs shares of the Global Green Fund to the extent such expenses exceed 1.40% of the average daily net assets of Individual Investor Class. This reimbursement arrangement will remain in effect through at least December 31, 2011.
The Morgan Stanley Capital International (MSCI) World Index is a market capitalization weighted index composed of companies representative of the market structure of 22 developed market countries in North America, Europe, and the Asia/Pacific Region. The index is calculated without dividends, with net or with gross dividends reinvested, in both US dollars and local currencies.
PAX000157 (11/08)