Fund name: Pax World Global Green Fund

Objective: The Global Green Fund seeks long term capital appreciation by investing in the equity securities of companies whose businesses and technologies focus on mitigating the environmental impacts of commerce. At least 40% will be outside the U.S., and it could in theory go to 100%. Their primary focus is on such areas as alternative energy and energy efficiency; water treatment and pollution control; and waste technology and resource management. The managers build the portfolio through a company-by-company fundamental analysis. All of the Funds avoid investing in issuers that they determine are significantly involved in the manufacture of weapons or weapons-related products, manufacture tobacco products, or engage in unethical business practices.

Managers: The fund is co-managed by Bruce Jenkyn-Jones and Ian Simm, assisted by 10 analysts. Mr. Jenkyn-Jones is Impax’s chief investment officer and manager of their proprietary environmental market index. He has an MBA from the IESE (Barcelona – it tends to make those "ten best in the world" sorts of lists), an M.S. in Environmental Technology from Imperial College and a degree in chemistry from Oxford. Mr. Simm is the Chief Executive of Impax and has spent 11 years with the company. He holds a degree in physics from Cambridge and a Masters of Public Administration from Harvard’s Kennedy School of Government. According to Money Marketing profile (3/21/08), Mr. Simm’s turn-offs are "people who drive down the middle lane of the motorway" and his favorite pastimes include reading Bob the Builder stories with his son. His views on piña coladas and getting caught in the rain are not recorded. Together, Jenkyn-Jones and Simm manage eight other green funds.

Management’s Stake in the Fund: None, if only because the fund just opened and the managers are neither U.S. citizens nor U.S. residents. In general, Pax managers invest reasonable amounts in their funds.

Opening date: March 30, 2008.

Minimum investment: $250 for all account types.

Expense ratio: Expenses for the individual class are capped at 1.4% through at least December 31, 2011.

Comments: Pax has long been known for successful, shareholder-friendly socially-responsible investments. In March 2008, it made two strong moves to establish a presence in the world of global green, or sustainable, investments. Pax’s president, Joseph Keefe, argues that " the shift from SRI to sustainable investing is not only taking shape in the real world, but the interest in and uptake in sustainability is accelerating . . . sustainable investing has the potential to be a transformative investment strategy."

In mid-March, Pax entered into an agreement to manage investment products based on three KLD indexes: Global Sustainability Index (GSI), North America Sustainability Index (NASI) and Europe Asia Pacific Sustainability Index (EAPSI). Boston-based KLD (for Kinder, Lydenberg and Domini) has been doing environmental sustainability research and index construction (e.g., the Domini 400 index) since 1988 and their research is used by 60% of the country’s largest institutional investors. Their new indexes are interesting in that they take a softer (some would say, more rational) line on a firm’s environmental record: they promise to take into account "the challenges faced by businesses operating in different sectors of the global economy and rates companies on how they address ESG challenges specific to their industry and the regions in which they operate."

Pax plans to launch a suite of investment products based on the KLD indexes, which may include passive index, enhanced index and actively managed strategies. These strategies will likely be offered across different types of investment vehicles, and may include exchange-traded funds (ETFs), mutual funds and separately managed accounts.

In addition, Pax launched Global Green. The fund has three virtues which deserve special note:

• The fund taps into a strong secular growth story: while "do-good" investing is nice from a warm-and-fuzzy perspective, it’s compelling only if it also produces strong investment returns. Pax cites research in that direction in support for socially responsible investing, in general: "A 2004 study examined 52 individual research studies comprising over 33,800 individual observations and concluded that corporate "virtue" — social and environmental responsibility—is positively correlated with corporate financial performance. Other studies have found similar correlations between various measures of ESG [environmental, social, governance] performance and financial performance."

• The management team is stable, successful and experienced: Simm and Jenkyn-Jones run eight European funds together. Most of the folks on the management teams of those funds have between 15 – 20 years of experience in the field. At least for the funds whose information is available in English (those durn Luxembourg-domiciled funds are profiled in some sort of furrin’ jibber-jab), the styles seem consistent and sensible. They focus on companies which will benefit from increasing environmental requirements, potentially disruptive technologies, increased corporate activity and economic changes which driven changes in market dynamics. The funds tend to have a mid- to large-cap bias (typically 90% of the portfolios), are invested equally in Europe and North America (typically 90% of assets), and invest in profitable rather than speculative firms. The U.K. based funds hold about 100 stocks. In defense of the secular growth story, both funds are substantially outperformed the MSCI World Index:

• Pax World is a good investment adviser. They have maintained the industry’s lowest investment minimums for decades, their expenses are reasonable especially given the additional costs of SRI screens and the funds’ small asset bases. They have an emphasis on having "fewer downside surprises" (hello, Bear Stearns!) and modest portfolio turnover rates, which tend to correspond to relatively modest tax bills.