When the going gets tough, fund advisers get creative.
In the case of the Pax World Growth Fund, which was at a virtual asset standstill with less than $17 million in its portfolio in September, creativity took the form of eliminating the fund's front-end sales charge of 2.5 percent. The fund became a no-load fund Nov. 1, joining the three other no-load funds which make up the Pax World family of funds.
Pax World Management Corp. is the adviser to the four Pax World Funds which are sub-advised by H.G. Welling & Company in New York. The fund group includes the flagship Pax World Fund, a balanced fund which was introduced in August 1971, the Pax World Money Market Fund, the Pax World Growth Fund which opened in 1997 and the new Pax World High Yield Fund which began this past September. All of the Pax World Funds adhere to a socially-responsible investment mandate.
The Pax World Growth Fund has been having a hard time attracting assets, said Tim Grant, president of H. G. Wellington. The only logical solution was to drop the fund's already low sales charge, he said. The Pax World Growth Fund was the only fund in the Pax family to have a sales charge. The three other Pax World Funds have been no-load. The family began as a no-load fund group, then departed from that track, Grant said.
Asset inflows at The Pax World Growth Fund peaked in 1998, but it has been suffering from negligible inflows ever since, according to Wiesenberger, the fund tracking and research firm in Rockville, Md. In December 1997, the fund had less than $5 million under management. But, one year later, total fund assets had reached more than $12 million, according to Wiesenberger. At the end of September, assets had reached $16.8 million. In contrast, the fund group's flagship Pax World Fund has been pulling in assets at the rate of $50 million per quarter over the past several quarters, according to Wiesenberger.
When the Pax World Growth Fund started, it hoped to get a distribution boost from the broker/dealer network, said Grant.
"You can't be a no-load fund to a load channel, so we chose low load to attract help from the broker/dealer community," Grant said. Pax World Management had decided that if the low 2.5 percent load was not attractive to brokers, it would drop the sales charge altogether.
With sales lagging, and the appeal of the fund growing in the financial planner community where advisors prefer annual investor-paid fees over sales charges, Pax World chose to drop its sales charge.
The Pax World Fund was started by Luther E. Tyson and J. Eliott Corbett in 1971. It was the first to adopt broad standards for social responsibility in choosing portfolio investments. In August 1996, Pax World Management was sold to the Shadek family of New Jersey.