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Pax Core Bond Fund Commentary Q1 2018

By Anthony Trzcinka, CFA® | April 19, 2018
Categories
  • Fund Literature
  • Tony Trzcinka
  • Commentary
  • Pax Core Bond Fund Commentary
Tags
  • small cap commentary
  • Nathan Moser
  • Diederik Basch
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Performance and Portfolio Update

  • The Pax Core Bond Fund outperformed the Bloomberg Barclays U.S. Aggregate Index in the quarter. The main driver of outperformance was security selection within the corporate bond sector. The Fund is positioned more conservatively with less sensitivity to changes in corporate bond spreads, which helped relative performance as credit markets weakened.
  • Security selection within Treasury securities and taxable municipal bonds hurt relative performance. In general, these sectors have greater interest rate sensitivity than the benchmark and underperformed as rates increased.
  • The Fund continues to be positioned with a focus on high quality, which helped during the quarter as corporate spreads widened. We maintain the view that the risks to the credit market – including rising rates, tariffs, and late credit cycle dynamics – outweigh positive momentum in the economy. As such, we have conservatively positioned the Fund’s corporate bond allocation.
  • Over the period, we added non-agency mortgage backed securities and asset-backed-securities (ABS) to the portfolio. These spread products are one area of the fixed income market where we are still finding value.
  • During the quarter, we continued to add to a number of impact holdings, including a Tesla auto green bond and a Solar City securitized bond. Our impact holdings now stand at 15.9%.

Performance

(as of 3/31/18)
1-MonthQuarterYTD1 Year3 Year5 Year10 YearSince Inception1
Core Bond Fund - Individual Investor Class0.61-1.45-1.450.36---1.52
Core Bond Fund - Institutional Class0.63-1.39-1.390.61---1.79
Bloomberg Barclays US Aggregate Index0.64-1.46-1.461.20---2.46
Lipper Core Bond Funds Index0.47-1.46-1.461.34---2.67

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. 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 Core Bond Fund Institutional Class and Individual Investor Class is December 16, 2016.

As of 5/1/17 prospectus, total annual Core Bond Fund operating expenses, gross of any fee waivers or reimbursements (excluding Acquired Fund fees and expenses), for Individual Investor Class and Institutional Class shares are 0.74% and 0.49%, respectively.

Performance Attribution


(as of 3/31/18)
Sector: Average Active Weights (%)
Total 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 3/31/18)
FundBenchmark
Effective Duration)∱6.01%6.02%
Years to Maturity∼12.6812.95
30 Day SEC Yield∘
Individual2.53%
Institutional2.78%

 


Top Ten Holdings

(as of 3/31/18)
United States Treasury Note, 2.625%, 2/28/23 5.4%, United States Treasury Note, 2.375%, 08/15/24 5.1%, United States Treasury Note, 3.000%, 2/15/48 5.1%, United States Treasury Note, 2.375%, 3/15/21 3.2%, United States Treasury Note, 2.125%, 11/30/23 2.1%, United States Treasury Note, 1.375%, 1/15/20 1.7%, United States Treasury Note, 4.500%, 02/15/36 1.6%, United States Treasury Note, 0.375%, 7/15/27 1.4%, United States Treasury Note, 2.750%, 2/15/28 1.2% and United States Treasury Note, 2.125%, 3/31/24 1.1%. Holdings are subject to change.

Definitions

∱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.

PAX007861 (7/18)

Anthony Trzcinka, CFA®
Anthony Trzcinka, CFA®
Anthony Trzcinka, CFA® is Senior Vice President and Portfolio Manager of the Pax Core Bond Fund. He is also a member of the portfolio management team of the Pax Balanced Fund. CFA® is a trademark owned by the CFA Institute.

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Impax Asset Management LLC, formerly Pax World Management LLC, is investment adviser to Pax World Funds.

You should always consider Pax World Funds' investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please download a fund prospectus. Please read it carefully before investing.

Investments involve risk, including potential loss of principal.

Pax Core Bond Fund Footnotes and Disclosures

Holdings are subject to change.

Risks

Yield and share price will vary with changes in interest rates and market conditions. Investors should note that if interest rates rise significantly from current levels, bond fund total returns will decline and may even turn negative in the short term. Mortgage related securities tend to become more sensitive to interest rate changes as interest rates rise, increasing their volatility. There is also a chance that some of the fund’s holdings may have their credit rating downgraded or may default.

About the Indexes

The Bloomberg Barclays US Aggregate Bond Index is a broad base index, maintained by Bloomberg L.P. often used to represent investment grade bonds being traded in United States.

Lipper Core Bond Index tracks the results of the 30 largest mutual funds in the Lipper Core Bond Index Funds Average. The Lipper Core Bond Index Funds Average is a total return performance average of mutual funds tracked by Lipper, Inc. that invest at least 85% in domestic investment-grade debt issues (rated in the top four grades) with any remaining investment in non-benchmark sectors such as high-yield, global and emerging market debt. These funds maintain dollar-weighted average maturities of five to ten years.

One cannot invest directly in an index.

†Effective yield is the yield of a bond, assuming that you reinvest the coupon (interest payments) once you have received payment.

Calculation is shown "gross" of fees and expenses.

‡Current yield is a measure that looks at the current price of a bond instead of its face value and represents the return an investor would expect if he or she purchased the bond and held it for a year. This measure is not an accurate reflection of the actual return that an investor will receive in all cases because bond and stock prices are constantly changing due to market factors.

CFA® is a trademark owned by the CFA Institute.

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Pax World Funds are distributed by ALPS Distributors, Inc. ALPS Distributors is not affiliated with Impax Asset Management LLC.