Pax World Funds are mutual funds that emphasize the shift to a sustainable global economy in their investment approach. They present an investment option for the environmentally savvy investor.
Learn how the mutual funds work and whether they're the right investment for you.
What Are Pax World Mutual Funds?
Pax World Funds is a family of 11 mutual funds advised by the London-based sustainable investment firm Impax Asset Management LLC and distributed by ALPS Distributors, Inc. The funds are assembled and managed with an eye toward the risks and opportunities presented by a transition to a sustainable economy.
How Pax World Mutual Funds Work
In 1971, the Pax Fund (now the Pax Sustainable Allocation Fund) launched as the first publicly available fund in the United States to invest with issues of sustainability in mind. Under the advisory of Impax Asset Management, formerly Pax World Management, the Pax World Funds family has maintained its mission to bolster risk-adjusted returns for investors amidst the transition to a more sustainable global economy.
To that end, all of the funds incorporate Environmental, Social, and Governance (ESG) factors alongside financial factors in their portfolio-building and fund-management approach to minimize the risks of such a transition (climate change and natural resource constraints, for example) and capitalize on the benefits (like increasing diversity and inclusion) to maximize medium- to long-term returns for shareholders. Funds offer both investor and institutional share classes (some also offer Class-A shares). And, as a boon to investors, the funds are no-load, and investor shares can be purchased for a minimum of $1,000.
But the investment objectives, asset allocation, underlying securities, fund management style, and ESG and financial factors that are emphasized in the allocation vary by fund. Investors should choose the fund with the mix of qualities that best suits their investment goals. For example, if you prize steady fixed income over long-term growth, consider the Pax Sustainable Allocation Fund, which maintains no more than 75% of its allocation in equities.
Unlike load funds, no-load funds don't charge a fee to purchase or sell them.
Types of Pax World Mutual Funds
Pax World Funds includes 11 mutual funds in total. The sections below provide a summary of each.
Pax Sustainable Allocation Fund
Formerly known as the Pax World Balanced Fund, this was the first fund to factor in social and financial criteria in its investment approach. The fund typically keeps 50–75% of its assets in equities and 25–50% in debt. The primary objective is to seek income and conserve principal. A secondary investment objective is the long-term growth of capital.
Pax World Large Cap Fund
This fund seeks the long-term growth of capital. With that aim in mind, it normally invests at least 80% of its net assets in equities (such as common stocks, preferred stocks, and securities convertible into common or preferred stocks) of companies with a market capitalization (or "cap") in the range of the S&P 500. As it's not limited to a particular type of equity, its holdings may include growth stocks, value stocks, or a combination of both.
The large-cap fund and other Pax World Funds are fossil-fuel-free; that is, they're not typically invested in firms involved in the extraction or refining of fossil fuels.
Pax World Small Cap Fund
This small-cap mutual fund meets its objective of long-term capital growth by investing in companies with market capitalizations within the range of the Russell 2000 Index. The managers normally place at least 80% of net assets in equities including common stocks, preferred stocks, and securities convertible into common or preferred stocks, including growth and value stocks.
Pax ESG Beta Quality Fund
To achieve its objective of long-term capital growth, this mutual fund uses a "smart beta" or factor investment strategy that considers both ESG and financial factors but emphasizes large-cap companies with a high perceived level of quality. The fund managers give more weight to companies with high ESG scores (as measured by a proprietary framework), profitability, and earnings, coupled with low risk.
Pax ESG Beta Dividend Fund
This mutual fund establishes income and capital appreciation as its primary goal and capital preservation as a secondary goal. As with the Pax ESG Beta Quality Fund, the dividend fund follows a "smart beta" investment strategy that incorporates both ESG and financial factors but overweights certain factors. In this case, the fund invests 80% of its net assets in dividend-paying equities of primarily large-cap domestic companies with high ESG scores and dividends.
Pax Global Opportunities Fund
This fund seeking long-term capital growth invests at least 80% of its net assets in firms that the fund manager believes will profit from the transition to a sustainable economy. As such, its holdings are primarily the equity securities of firms whose business models have positioned them to successfully weather upcoming economic shifts.
Pax Global Environmental Markets Fund
This fund seeks long-term capital growth by investing 80% of its net assets in companies focused on improving the environment through services and technologies in areas such as alternative energy and energy efficiency, pollution control, and waste management. The fund invests in both domestic and emerging markets and in both growth and value stocks.
Pax Ellevate Global Women's Index Fund
This fund attempts to track the returns of the Global Women’s Leadership Index and the risk profile of the Women’s Index. It uses a factor-based investment approach that overweights gender-leadership criteria. As such, it typically invests at least 80% of all assets in the individual securities of the Women’s Index and in American Depositary Receipts, Global Depositary Receipts, and Euro Depositary Receipts representing the individual securities of the index.
Pax MSCI EAFE ESG Leaders Index Fund
This passively managed mutual funds tracks the returns of the MSCI EAFE ESG Leaders Index, created by MSCI, Inc. It invests 80% of its total assets in the individual securities of that index, along with American Depositary Receipts, Global Depositary Receipts, and Euro Depositary Receipts representing the index's individual securities. The index mainly includes large- and medium-cap firms in the developing world.
Pax Core Bond Fund
This mutual fund seeks to generate income and conserve principal. At least 80% of its net assets are in bonds, including debt securities like mortgage securities, U.S. government securities, corporate bonds, and municipal bonds. Bonds are typically investment-grade, equating to a Standard and Poor's rating of BBB- or higher. The fund holds a low-percentage of high-yield ("junk") bonds.
Pax World High Yield Bond Fund
This high-yield bond fund's primary objective is to seek high current income; capital appreciation is its secondary objective. Typically, at least 80% of its assets are in junk bonds—high-yield fixed-income securities that are rated below BBB- by Standard & Poor’s Ratings Group or below Baa3 by Moody’s Investors Service.
Are Pax World Mutual Funds Worth It?
These funds are the most natural option for socially and environmentally conscious individuals who seek to maximize medium- to long-term returns by investing thoughtfully and sustainably.
But they hold broad appeal among investors as they cater to a variety of universal investment objectives. Whether you desire income or long-term capital growth, there's a fund in the family that will likely fit your goals. And the relatively low minimum investment and lack of loads mean that you don't have to pay substantial sums to profit from the sustainable economic evolution to come.
- Pax World Funds are a family of mutual funds that invest with the shift to a sustainable economy in mind.
- The funds come with no load and a $1,000 minimum investment.
- The 11 funds in the family range from growth-oriented funds to income funds.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.