What Are Pax World Mutual Funds?

Low angle portrait of confidence young woman standing against highrise city buildings in city
••• d3sign / Getty Images
DEFINITION

Pax World Mutual 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.

Definition and Example of Pax World Mutual Funds

Pax World Funds is a group of 11 funds advised by the London-based sustainable investment firm Impax Asset Management LLC and distributed by ALPS Distributors, Inc. The funds are grouped and managed with an eye toward the risks and rewards brought by a move to a green economy and concern for modern social and governance issues.

The Pax Ellevate Global Women's Leadership Fund (PXWEX) is a mutual fund that attempts to track the Impax Global Women's Leadership Index. According to Impax, the index is the first broad-market index of companies promoting or working to advance women's leadership.

How Pax World Mutual Funds Work

In 1971, the Pax Fund (now the Pax Sustainable Allocation Fund) was launched as the first public fund in the U.S. to invest with sustainability issues in mind. Under the scope of Impax Asset Management, the Pax World Funds group has kept its mission to bolster risk-adjusted returns for people amidst the move to a more sustainable and equal world economy.

To that end, all of the funds have environmental, social, and governance (ESG) factors along with financial factors in their approach. This approach is focused on building portfolios and managing funds. Pax World Funds aim to lower the risks of ESG investing and make the most of the rewards to get the best medium- to long-term returns. To that end, the funds offer investor and institutional share classes, with some offering Class-A shares. The funds are generally no-load, and you can begin to invest with as little as $1,000.

Unlike load funds, no-load funds don't charge fees when you buy or sell them.

The goals, asset allocation, stocks and bonds that make up the fund, management style, and ESG and financial factors brought to each fund vary. Therefore, you should choose your fund with the mix of traits that best suits your goals. For instance, if you prize steady fixed income over long-term growth, look at the Pax Sustainable Allocation Fund, which maintains no more than 70% of its mix in equities.

Types of Pax World Mutual Funds

Pax World Funds includes 11 funds in total. Each one offers unique traits that appeal to a diverse group of investors.

Pax Sustainable Allocation Fund

Once known as the Pax World Balanced Fund, this was the first fund to factor in social and financial standards in its approach. The fund keeps 50% to 70% of its assets in equities and 30% to 50% in debt. The main goal is to seek income and conserve principal. A second goal is to see long-term growth of wealth.

Pax Large Cap Fund

This fund seeks the long-term growth of cash. With that aim in mind, it invests at least 80% of its net assets in the equities (such as common and preferred stocks) of firms with a large market capitalization. Because it doesn't stick to only one type of asset, its holdings may include growth stocks, value stocks, or both.

The large-cap fund and other Pax World Funds don't invest in firms whose business models and industries require unsustainable practices.

Pax Small Cap Fund

This small-cap fund strives to meet its goal of long-term growth by investing in firms that fall within the range of the Russell 2000 Index. The funds place at least 80% of net assets into common stocks, preferred stocks, and assets that convert into these types of stocks, including growth and value stocks.

Pax U.S. Sustainable Economy Fund

To meet its goal of long-term wealth growth, this fund uses a "smart beta" or factor investment plan that looks at both ESG and financial factors but gives weight to large-cap firms with a high level of quality. It gives more weight to firms with high ESG scores and profits, coupled with low risk.

Pax Global Sustainable Infrastructure Fund

This fund has income and wealth growth as its primary goal. As with the Pax U.S. Sustainable Economy Fund, this fund follows a "smart beta" plan that has both ESG and financial factors but adds more weight to certain factors. The fund invests 80% of its net assets in dividend-paying equities of mainly large-cap domestic firms with high ESG scores and dividends.

Pax Global Opportunities Fund

This fund seeks long-term cash growth by investing at least 80% of its net assets in firms that the fund manager believes will profit from the move to a green economy. Its holdings are mostly the stocks of firms whose business models have put them in place to avoid the risks inherent in transitioning to a greener global economy.

Most of the Pax Mutual Funds have high turnover rates, which can lead to higher taxes—for example, the Global Sustainable Infrastructure Fund has a turnover rate of 93% of the average value of its portfolio.

Pax Global Environmental Markets Fund

This fund seeks long-term capital growth by putting 80% of its net assets in firms focused on improving the environment through alternative energy, energy efficiency, pollution control, and waste management. The fund invests in both domestic and emerging markets and growth and value stocks.

Pax Ellevate Global Women's Index Fund

This fund is set up to track the returns of the Global Women’s Leadership Index and the risk profile of the Women’s Index. It uses an approach that weighs gender and leadership values. It invests at least 80% of all assets in the securities of the Women’s Index and in American, Global, and Euro Depositary Receipts that comprise the stocks and bonds of the index.

Pax International Sustainable Economy Fund

This fund tracks the returns of the MSCI EAFE Index, created by MSCI, Inc. It invests 80% of its total assets in the stocks and bonds of that index, along with the American, Global, and Euro Depositary Receipts that make up the index's assets. The index mainly includes large- and medium-cap firms in emerging world markets.

While Pax World Mutual Funds are generally no-load funds, loads exist on Class A shares, and most management fees vary depending on the fund and shares you choose.

Pax Core Bond Fund

This fund seeks to create income and conserve principal. At least 80% of its net assets are in bonds, including debt securities like mortgages and bonds. Bonds are investment-grade, equal to a Standard and Poor's rating of BBB- or higher. The fund holds a small amount of high-yield ("junk") bonds, as well.

Pax High-Yield Bond Fund

This high-yield bond fund's primary goal is to seek higher current income. Capital gain is its other goal. At least 80% of its assets are in junk bonds. These bonds are rated below BBB- by Standard & Poor’s Ratings Group or below Baa3 by Moody’s. The fund is expected to keep no holdings of companies that profit from, explore, produce, refine, or process fossil fuels.

Are Pax World Mutual Funds Worth It?

These funds are good options for people who want to invest their money where it will aid in social and green progress.

They also hold broad appeal as they cater to a wide range of goals. So whether you desire income or long-term money growth, there's a fund in the group that should fit your goals. And the low amount of cash needed to start investing and a general lack of loads mean that you don't need to have a large bank account to profit from the sustainable boom which is upon us.

Key Takeaways

  • Pax World Funds are funds that invest with the shift to a green economy in mind.
  • Most of the funds come with no load, and you only need $1,000 to get started.
  • The 11 funds in the group range from growth 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.

Article Sources

  1. Impax Asset Management. "Pax World Funds."

  2. Impax Asset Management. "Impax Global Women's Leadership Index."

  3. Impax Asset Management. "Pax Sustainable Allocation Fund."

  4. Impax Asset Management. "Prospectus - Pax World Funds," Pages 87–94.

  5. Impax Asset Management. "Prospectus - Pax World Funds," Pages 9–15.

  6. Impax Asset Management. "Prospectus - Pax World Funds," Pages 16-23.

  7. Impax Asset Management. "Prospectus - Pax World Funds," Pages 24–31.

  8. Impax Asset Management. "Prospectus - Pax World Funds," Pages 32-39.

  9. Impax Asset Management. "Prospectus - Pax World Funds," Pages 40-46.

  10. Impax Asset Management. "Pax Global Sustainable Infrastructure Fund."

  11. Impax Asset Management. "Prospectus - Pax World Funds," Pages 47-54.

  12. Impax Asset Management. "Prospectus - Pax World Funds," Pages 55-63.

  13. Impax Asset Management. "Prospectus - Pax World Funds," Pages 64-71.

  14. Impax Asset Management. "Prospectus - Pax World Funds," Pages 72-78.

  15. Impax Asset Management. "Prospectus - Pax World Funds," Pages 79-86