Manager Commentary
Portfolio Manager
Christopher H. Brown is the Chief Investment Officer of Pax World Management Corp. He has over 20 years of investment experience. He joined Pax World in April 1998 as co-manager of the Pax World Balanced Fund and has served as its sole manager since October 2001. He is also the co-manager of the Pax World Growth Fund. Prior to joining Pax World, Mr. Brown was an Investment Consultant at Fahnestock & Co., Inc., a New York Stock Exchange brokerage firm, from 1987 to 1998, and a First Vice President from 1994 to 1998. He is a graduate of the Boston University School of Management with a concentration in finance.
View Q1 Market Commentary
As of March 31, 2009
How did the Fund perform for the period?
For the three-month period ended March 31, 2009, the Pax World Balanced Fund returned -3.82%, outperforming the -6.56% return of the benchmark Blended Index1 and the -5.84% return of the Lipper Balanced Funds Index2.
What factors contributed to the Fund’s performance?
A significant underweight in the financial services sector was the main contributor to the Fund’s relative outperformance. Financial services companies continued to underperform most sectors as their toxic assets weighed heavily on balance sheets. Stock selection in the energy sector also contributed to performance as oil prices began to stabilize toward the end of the quarter. The Fund’s underweight in industrials was a factor in its strong relative performance as weak industrial data points pressured shares.
Can you discuss any significant changes in the Fund’s positioning throughout the period?
We decreased the Fund’s overweight position in the consumer staples sector and focused on opportunities in less defensive sectors within the equity markets. Financials and industrial stocks were slowly added to the portfolio during the period. In the financials sector we added Goldman Sachs (0.2%*) and JPMorgan Chase (0.4%*), and in the industrials sector we added Deere & Co. (1.1%*), Emerson Electric (0.6%*) and Diana Shipping (0.1%*). We have also found some attractive yielding investment grade corporate bonds as well as Treasury Inflation Protected Securities (TIPS).
Which stocks contributed positively to performance?
The Fund’s positions in energy-related companies Suncor Energy (0.6%*) and Noble Corporation (1.2%*) contributed positively to performance for the period. Suncor is a Canadian-based oil sands company and Noble is an integrated oil services company. The Fund’s relative overweight position in CME Group (0.8%*), an electronic trading platform company, was a bright spot within the financials sector during the period.
Which stocks detracted from performance?
The consumer staples sector performed poorly during the period as many investors took profits after last year’s relative outperformance and shifted towards early cyclical industries. The Fund’s overweight position in Procter and Gamble (1.8%*), a U.S.-based branded consumer goods firm, negatively impacted performance during the period. H.J. Heinz Co. (0.9%*), a U.S.-based processed food manufacturer, was an overweight position which performed poorly. Stryker Corp*, a U.S.-based medical technology company, was also a large relative overweight position which declined during the period.
What is your market outlook, particularly with respect to how it will impact your Fund?
We feel the market is in a bottoming phase while realizing the economy still has quite a few issues to work through. We anticipate a modest economic rebound some time toward the end of 2009 into early 2010. Against this backdrop, we have been decreasing our holdings in defensive sectors such as consumer staples while slowly adding to more cyclical businesses like industrial and material companies. On the fixed income side of the portfolio we continue to believe investment grade corporate bonds still hold a significant yield advantage over Treasuries. Overall, we remain cautiously optimistic while maintaining our focus on seeking quality companies that meet both our financial and ESG criteria.
*Portfolio holdings as of 3/31/09. Holdings are subject to change. Stryker Corp is currently not held by the Fund.
An investment in the fund involves risk, including loss of principal. 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 Balanced Fund operating expenses were 0.95% as of 12/31/2008.
1The Blended index is comprised of 60% S&P 500 Index and 40% Barclays Capital Aggregate Bond Index. Investors cannot invest directly in any index. The S&P 500 Index is an unmanaged index of large capitalization common stocks. The Barclays Capital Aggregate Bond Index represents securities that are U.S. domestic, taxable and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities and asset-backed securities.
2The Lipper Balanced Fund Index tracks the results of the 30 largest mutual funds in the Lipper Balanced Fund Average, which is a total return performance average of mutual funds tracked by Lipper, Inc. whose primary objective is to conserve principal by maintaining, at all times, a balanced portfolio of both stocks and bonds. The Lipper Balanced Fund Index is not what is typically considered to be an “index” because it tracks the performance of other mutual funds rather than changes in the value of a group of securities, a securities index or some other traditional economic indicator.