Q:  How would you describe your investment philosophy and the core beliefs that guide your process?

A: We run a balanced fund and we allocate the portfolio between equities, fixed income, and cash. We look at both domestic and international economies, and approximately 19% of our assets are invested outside the United States.

We invest in forward-thinking companies with sustainable business models. An important part of our philosophy is that, along with the rigorous financial analysis, we apply environmental, social and governance, or ESG criteria. Those two perspectives and the increased level of scrutiny help us to find companies with proper governance that are likely to outperform financially.

On the equity side, we're thematic and sector-oriented investors, looking for themes that will outperform the broader markets. On the bond side, we are very conservative and we invest primarily in government securities and investment grade corporate bonds.

Q:  What's your investment strategy and process?

A: The process starts with a top-down approach of analyzing economies that could offer better opportunities. And while in the U.S. the growth is slowing down, there are still pockets of growth abroad.

To allocate the portfolio, we analyze GDPs, interest rate levels, macro environments, and equity valuations both in the U.S. and abroad. We evaluate if stocks or bonds offer better total return to make the allocation. Typically, we look at the earnings yield in various markets versus the 10-year Treasury yield, and it has to make sense for us.

When we get down to the stock selection, we employ a growth-at-reasonableprice, or GARP approach, and relative value analysis. Our portfolio is composed primarily of large-cap growth companies that are industry leaders. We look for strong management teams, strong balance sheets, and consistent earnings growth.

One of the most important metrics that we use is the PEG ratio, which shows what we pay for this growth. We compare the companies to their peers to find the most attractive ones, and we look at return on equity, return on assets. When applicable, the discounted cash flow analysis derives another price target to back up the PEG ratio analysis.

Regarding the bond selection, the fund has been very conservative, which is quite fortunate in this environment. We primarily invest in government agency bonds with short duration, so we don't take big interest rate bets. We also invest in corporate bonds of investment grade or higher. To a lesser extent, we own mortgage-backed securities, so the impact of the sub-prime crisis has been minimal.

In terms of cash and equivalents, I have never viewed them as a long-term investment strategy. We would raise cash only when we feel that things are getting a little frothy in the market. But, typically, we use our own Pax World Money Market Fund, which is screened for ESG criteria. We also invest in two community development banks, which provide loans to under-served markets.

Q:  How do you decide on your international exposure? In which markets do you invest?

A: We have been long-term investors in foreign markets. When I became a portfolio manager about ten years ago, the portfolio had zero exposure overseas, and one of my first decisions was to change that. Now our international exposure stands at about 19%, and it has helped us in more than one way.

First, it helped us with the weak dollar and, second, it provided us better growth opportunities, particularly in emerging markets like Brazil. We have large exposure to Europe and smaller exposure to Japan and China. To play the weak dollar theme, we focused the portfolio on large-cap growth companies with high international sales because the weak dollar made their products more attractive. Cisco Systems, for example, has been a core holding for quite a few years. John Deere is our largest holding as of the end of 2007.

Q:  What other major themes do you explore, besides the weak dollar?

A: Agriculture and commodity prices, particularly food, have been a long-term theme of ours, as food crop prices have had a tremendous run. John Deere is a good example of a stock related to that theme; the company sells equipment to farmers. It has very strong management and has been a stellar performer.

More recently, we have been utilizing our commodity ETFs to get more exposure to the sector. Mining companies typically have many environmental issues and it is difficult for us to get exposure. We have focused on Deutsche Bank Agriculture Fund ETF, which represents the top four commodity food crops. We also invest in GLD, which is the StreetTracks Gold ETF. So, we have a basket approach towards commodities, but John Deere is our major investment.

Another theme is infrastructure throughout the world, not just in the U.S. An example would be ABB, a Swiss engineering and construction company, focused on rebuilding power grid infrastructure in places with rolling blackouts like South Africa. Even in the U.S. we've had issues in California, so that's definitely a theme that merits investment.

Because of our ESG criteria, the alternative energy would be an obvious choice, but many of those companies are too small. However, we have found largecap companies with exposure to solar production. We hold Applied Materials, for example, which has a solar division that has helped to offset the slowdown in the semiconductor business. Another company we own is MEMC Electronics, a semiconductor company that manufactures silicon wafers, a primary component in solar panels.