Products March 13, 2008

Pax to Launch KLD-Index Oriented Investment Products

Pax World Management Corp., investment adviser to Pax World Funds (Pax), and KLD Research&Analytics, Inc. (KLD), have entered into a licensing agreement wherein Pax will manage investment products based on three KLD indexes.
Reported by

The three indexes involved are: the KLD Global Sustainability Index (GSI), KLD North America Sustainability Index (NASI) and KLD Europe Asia Pacific Sustainability Index (EAPSI).

As part of the agreement, Pax has licensed exclusive rights to use the three KLD indexes for managing ETFs. Pax has filed an application with the Securities and Exchange Commission (SEC), seeking exemption from certain provisions of the Investment Company Act of 1940, which would allow it to launch ETFs based upon the three sustainability indexes.

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Additionally, according to a press release, Pax is planning 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.

Index Basis

The KLD Global Sustainability Index series is broad, sector-neutral and based on rigorous sustainability standards, favoring companies that are:

  • strong stewards of the environment;
  • devoted to serving local communities and the broader society;
  • devoted to high labor and supply chain standards;
  • dedicated to producing high-quality, safe products; and
  • managing according to high ethical and governance standards.

When evaluating a company’s ESG performance, KLD takes 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.

The Markets March 13, 2008

401(k) Participants Still Fleeing Equities

In February, the weak stock market again led 401(k) participants to flee equity investments for fixed income funds, according to the results of the Hewitt 401(k) Index.
Reported by

By month end, nearly $219 million in balances transferred out of equities and into fixed income investments on a net basis, the Hewitt data showed. Approximately 80% of the net transfers flowed into GIC/stable value funds. Lifestyle funds received the second largest net inflow of $46 million.

U.S. equity funds took the biggest hit as a total of $80 million transferred out on a net basis during the month. However, the activity was much less significant than the $521 million net outflows experienced in January. International funds, which attracted nearly $1.2 billion in 2007, also experienced net outflows of $74 million in February, following January outflows of $489 million. Company stock funds had $68 million transferring out in February.

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Participants’ total equity allocation also declined slightly to 64.0% – the result of both market weakness and participant transfers. The equity allocation is now back to nearly the same level as in July 2004, Hewitt said. GIC/Stable Value held the largest portion of 401(k) assets among all asset classes at the end of February, followed by Large U.S. Equity (19.12%) and Company Stock (16.41%).

However, Large U.S. Equity was the winner of overall contributions to 401(k)s for the month (18.16%), followed by Company Stock (16.39%) and Lifestyle/Pre-mix funds (14.48%). Participant-only contributions also mostly were invested in Large U.S. Equity (21.03%). Lifestyle/Pre-mix funds gained 15.92% of participant-only contributions and GIC/Stable Value investments gained 15.04%.

Net transfers by 401(k) participants were fixed income oriented during 70% of the days in February, according to the Index. However, overall participant activity slowed down significantly compared to January. Only 0.04% of plan balances transferred on a daily basis in February, which was in line with the twelve month trailing average, and much lower than the 0.09% daily transfer experienced during January 2008. For the month, transfer activity was above normal on two days.

The Hewitt data is here.

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