Market Insights


January 2022

By: Tony Minopoli, President & CIO of Knights of Columbus Asset Advisors

Several months ago, I commented that there were no new dominant variants and we were hopefully turning a corner with respect to Covid. So, we now know that was a major swing and miss! The omicron variant has literally been sweeping across the country and I think I know more people that have been recently sick than at any time since the onset of Covid. I attended a wedding over the weekend for the son of a very good friend. Chris is a doctor, a rheumatologist to be specific, and we sat with a number of his doctor friends, all appropriately socially distanced, of course. One of the doctors at our table is both a surgeon and the chief operating officer of a significant hospital. He told us that while hospitalizations are increasing, the time in the hospital is less than what we experienced at the beginning of Covid and the vast majority of those hospitalized were in at least one major risk group.

In a January 2, 2022 article published in the International Business Times, entitled “Omicron Covid-19 Cases Already Declining in South Africa, 2 months After First Detection1, written by Danielle Ong, South Africa seems to have passed the peak of this omicron wave. Shortly after the discovery of the new variant, daily cases in South Africa reached a 7-day moving average of 23,437 from just 327 daily cases and by New Year’s Eve, the 7-day moving average dropped to 10,324 and showed signs of a continuing downward trend. This drop in the moving average of new cases is over 50% and hopefully is the path that we see here in the United States. I pray and look forward to the day when we no longer discuss the current events of Covid.

We are now at the time of year where all of the prognosticators come out of hibernation to provide their predictions for the capital markets. We come into 2022 very cautious because of the strength of the equity markets in 2021. The Bloomberg Barclays Aggregate Bond Index returned -1.54% in 2021 as the 10-Year Treasury ended the year at a yield of 1.51% and started the year at a yield of 0.92%. In general, we saw credit spreads tighten in the year and interest rates meandered higher mainly due to inflation concerns. We believe interest rates will move higher given current inflation of 6.80%2 as measured by the CPI or even a more muted inflation rate of 4.90%3 when food and energy are factored out of the index. Traditionally, bonds have traded with an inflation premium but are currently trading with a discount of 3.39% or 5.29%4, depending on your favorite inflation statistic. We do, however, believe that any upward rate move will be met with the large amount of cash sitting on the sidelines and looking for a home and some safety. The cash looking for a home may mute any significant upward move in rates and, in my opinion, this will be a benefit to both stocks and bonds.

The reason I bring up safety is the very strong move we have had in equities. We saw a return of about 29%5 for the S&P 500 for 2021 and an unannualized return of nearly 73%6 since May 2020. The index is currently trading at 21.3 times forward earnings, which is better than the 21.9 times forward earnings at the end of the third quarter7. We have enjoyed strong earnings and they have helped keep the stock market moving higher. With the potential for inflation, the likelihood of the Federal Reserve’s (“Fed”) bond buying program coming to an end and other issues, we think this year can be a high single digit type year for the market. We are not expecting a repeat of 2021.

What can go wrong? There are several things that cause concern as we move ahead. The kinks in the supply chain remain and there are still numerous ships outside the Los Angeles port waiting to be unloaded. This not only causes consumer anxiety, but this has also contributed to rising prices. Prices in general remain a concern because we have all become accustomed to the low-rate environment and that may not be the luxury we have over the short to intermediate term. We do not believe that 5-6% inflation will be with us persistently, but we also believe it will likely not abate until 2023. The impact on the financial markets will be the outcome of the progress in economy and we believe this starts with the consumer. First, consumer spending and activity needs to remain strong to drive economic growth. Secondly, we need to continue to see strength in the employment market as we transition away from the multiple rounds of stimulus and we get back to more normalized employment.

The phrase “new normal” has become trite, however, we will be working to some type of “new normal” for employment. How, when and where people work is a lot larger than the ability to manage home issues. I am concerned for the vibrancy of cities if remote work becomes even more prevalent or permanent. Nonetheless, as we meander to what the future of work looks like, this will have implications for consumer spending trends and will help provider a window to the segments of the economy that will outperform.

A final word on indexing. LinkedIn is the only social media platform I utilize, and I saw a post from someone that was a bit snarky with respect to active management and how so many funds underperformed last year. The top five holdings in the S&P 500 (Apple, Microsoft, Amazon Alphabet and Tesla) represent nearly 24.5% of the index and the other 495 holding represent the remaining 75.5%8. I suppose it may even be a little more concentrated in that the top 10 names represent over 29% of the index. We have been in a liquidity driven rally and the prevalence of indexing has made this strategy a self-fulfilling prophecy as more dollars flow into the largest stocks and, can you imagine, they get even larger in terms of market capitalization! I am not calling for indexing to fail, however, keep in mind it is a strategy and adopting that strategy essentially means your investment thesis to put more money in the biggest stocks and the stocks that have the greatest recent outperformance with no regard as to why they are performing the way that they are performing. Indexing is a valid strategy; you simply need to accept the entire premise.

Finally, KoCAA hit some milestones in 2021, with the most important being our having eclipsed $1.0 billion in fund family assets for the first time. We finished the year with fund family assets slightly in excess of $1.1 billion and we will reach our 6-year track record at the end of February 2022. Thank you to all of our clients for entrusting us with your assets. Please know that we work hard for you each and every day. I wish you and all of your families a healthy and Happy New Year!

Until next month.



[1] https://www.ibtimes.com/omicron-covid-19-cases-already-declining-south-africa-2-months-after-first-detection-3367508

[2]Bloomberg – as of November 30, 2021

[3]Bloomberg – as of November 30, 2021

[4]The discount rate is calculated by taking inflation of either 6.80% or 4.90% and deducting the 10-year Treasury yield

[5]For the one-year period ended December 31, 2021, the S&P 500 returned 26.89%, or 28.68% with dividends reinvested.

[6]During the period of May 1, 2020 through December 31, 2021, the unannualized return was 72.78% with dividends reinvested.

[7]https://ycharts.com/indicators/sp_500_pe_ratio_forward_estimate

[8]Bloomberg

Core Bond Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Core Bond Fund-I Shares -0.26% -0.58% -0.58% 3.96% 3.24%
Bloomberg Barclays US Aggregate Bond Index -0.26% -1.54% -1.54% 3.57% 2.90%
Lipper Core Bond Fund Average -0.19% -1.26% -1.26% 3.65% 2.93%
Lipper Percentile Rank 17% 30%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 511 (1 Year) and 430 (5 Year). Gross Expense Ratio 0.80%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Limited Duration Bond Fund-I Shares -0.09% -0.33% -0.33% 1.93% 1.61%
Bloomberg Government/Credit 1-3 Year Index -0.15% -0.47% -0.47% 1.85% 1.58%
Lipper Short Investment Grade Debt Fund Average 0.03% 0.07% 0.07% 2.13% 1.82%
Lipper Percentile Rank 66% 66%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 368 (1 Year) and 290 (5 Year). Gross Expense Ratio 0.80%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Large Cap Growth Fund-I Shares 1.94% 19.39% 19.39% 20.24% 14.68%
Russell 1000 Growth Index 2.11% 27.60% 27.60% 25.32% 19.21%
Lipper Multi-Cap Growth Fund Average 0.20% 15.25% 15.25% 21.90% 15.88%
Lipper Percentile Rank 40% 58%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 493 (1 Year) and 410 (5 Year). Gross Expense Ratio 1.00%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Large Cap Value Fund-I Shares 6.09% 28.82% 28.82% 11.77% 10.03%
Russell 1000 Value Index 6.31% 25.16% 25.16% 11.16% 9.86%
Lipper Multi-Cap Value Fund Average 6.24% 26.22% 26.22% 11.31% 9.43%
Lipper Percentile Rank 27% 39%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 637 (1 Year) and 538 (5 Year). Gross Expense Ratio 1.03%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Small Cap Equity Fund-I Shares 3.40% 23.80% 23.80% 11.21% 9.49%
Russell 2000 Index 2.23% 14.82% 14.82% 12.02% 10.61%
Lipper Small Cap Fund Average 4.71% 25.09% 25.09% 10.65% 9.75%
Lipper Percentile Rank 58% 40%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 842 (1 Year) and 722 (5 Year). Gross Expense Ratio 1.14%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
5 Years
( As of 12/31/21)
Since Inception
( As of 12/31/21)
International Equity-I Shares 3.99% 11.31% 11.31% 11.38% 7.73%
FTSE All World Ex US Index 4.28% 8.66% 8.66% 10.21% 6.61%
Lipper International Multi-Cap Fund Average 4.58% 10.18% 10.18% 8.96% 5.69%
Lipper Percentile Rank 36% 2%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 342 (1 Year) and 269 (5 Year). Gross Expense Ratio 1.33%, Net Expense Ratio 1.10%.

Real Estate Fund

One Month
( As of 12/31/21)
QTD
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Real Estate-I Shares 9.52% 14.56% 34.82% 34.82% 16.23%
FTSE Nareit Equity REITs Index 8.83% 16.31% 43.24% 43.24% 12.64%
Lipper Real Estate Average 8.70% 14.30% 38.42% 38.42% 13.76%
Lipper Percentile Rank 82%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Real Estate Number of Funds in Category: 251 (1 Year) Gross Expense Ratio 1.34%, Net Expense Ratio 1.00%.

Long-Short Equity Fund

One Month
( As of 12/31/21)
QTD
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
Since Inception
( As of 12/31/21)
Long-Short Equity – I Shares 4.00% 6.02% 16.74% 16.74% 1.93%
HFRX Equity Market Neutral Developed Index 1.18% -0.35% 0.97% 0.97% -1.77%
Lipper Alternative Long/Short Average 3.19% 5.00% 13.71% 13.71% 10.13%
Lipper Percentile rank 40%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Alternative Long/Short Equity Number of Funds in Category: 235 (1 Year) Gross Expense Ratio 2.17%, Net Expense Ratio 1.73%.

U.S. All Cap Index Fund

One Month
( As of 12/31/21)
QTD
( As of 12/31/21)
YTD
( As of 12/31/21)
1 Year
( As of 12/31/21)
Since Inception
( As of 12/31/21)
U.S. All Cap Index – I Shares 3.62% 9.26% 27.04% 27.04% 24.25%
Knights of Columbus U.S. All Cap Index 3.70% 9.23% 27.30% 27.30% 24.75%
Lipper Multi-Cap Core Average 4.22% 8.33% 23.80% 23.80% 20.36%
Lipper Percentile rank 30%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Core Number of Funds in Category: 641 (1 Year) Gross Expense Ratio 1.46%, Net Expense Ratio 0.25%.

The performance data quoted represents past performance. Past performance is not a guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth less than their original cost and current performance may be higher or lower than the performance quoted. Investment performance does not reflect the redemption fee; if it was reflected, the total return would be lower than shown. For performance data current to the most recent month end, please call 1-844-KC-FUNDS.

Fund performance for the 1 year, 5-year, and Since Inception periods are annualized. The inception date for Limited Duration, Core Bond, Large Cap Growth, Large Cap Value, Small Cap, and International are February 27, 2015. 1 year and 5-year fund performance is not available for the Real Estate Fund, Long/Short Equity, or the U.S. All Cap Index since the inception dates of the funds are September 30, 2019, December 21, 2019, and December 31, 2019, respectively. Lipper percentile rank is omitted for the Real Estate Fund, Long/Short Equity, and U.S. All Cap Fund given performance is not yet available.

Effective July 21, 2020, the Knights of Columbus Real Estate Fund underwent a change in its Investment Objective and a name change to reflect the new investment strategy as detailed in The Funds’ Prospectus update of July 20, 2020. The Fund was formerly known as Knights of Columbus Global Real Estate Fund. Results prior to July 20, 2020, reflect the performance of the Fund's previous strategy.

Knights of Columbus Asset Advisors LLC has contractually agreed to waive fees and/or to reimburse expenses to the extent necessary to keep Total Annual Fund Operating Expenses, (excluding interest, taxes, fund brokerage commissions, acquired fund fees and expenses and non-routine expenses) from exceeding the Net Expense Ratio for the respective Funds’ Institutional Shares average daily net assets until February 28, 2022.

Benchmark Definitions



Bloomberg Barclays Government/Credit 1-3 Year Index – benchmark for Limited Duration Fund
The U.S. Government/Credit Index is the non-securitized component of the U.S. Aggregate Index and was the first macro index launched by Barclays Capital. The U.S. Government/Credit Index includes Treasuries (i.e., public obligations of the U.S. Treasury that have remaining maturities of more than one year), government-related issues (i.e., agency, sovereign, supranational, and local authority debt), and corporates. The U.S. Government/Credit Index was launched on January 1, 1979 and is a subset of the U.S. Aggregate Index. The 1-3 year index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 3 years and are publicly issued.

Bloomberg Barclays US Aggregate Bond Index – benchmark for Core Bond Fund
The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Provided the necessary inclusion rules are met, US Aggregate eligible securities also contribute to the multi-currency Global Aggregate Index and the US Universal Index, which includes high yield and emerging markets debt. The US Aggregate Index was created in 1986.

FTSE All-World Ex-U.S. Index – benchmark for International Equity Fund
The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Russell 1000 Growth Index – benchmark for Large Cap Growth Fund
The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics.

Russell 1000 Value Index – benchmark for Large Cap Value Fund
The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The Russell 1000 Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics.

Russell 2000 Index – benchmark for Small Cap Fund
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.

FTSE Nareit Equity REITs Index – benchmark for Real Estate Fund – The FTSE Nareit Equity REITs Index contains all Equity REITs not designated as Timber REITs or Infrastructure REITs. Prior to December 2010, the index included Timber REITs and Infrastructure REITs.

HFRX Equity Market Neutral Index – benchmark for Long/Short Equity Fund HFRX Equity Market Neutral Index The HFRX Equity Market Neutral Index employs sophisticated quantitative techniques of analyzing price data to ascertain information about future price movement and relationships between securities, select securities for purchase and sale. These can include both Factor-based and Statistical Arbitrage/Trading Strategies.

Knights of Columbus U.S. All Cap Index – benchmark for U.S. All Cap Index Fund Knights of Columbus U.S. All Cap Index Adheres to the United States Conference of Catholic Bishops’ Socially Responsible Investment Guidelines. Consists of all common stocks and real estate investment trusts in the Solactive US Broad Market Index excluding companies that are determined by Institutional Shareholder.

Indices are unmanaged and do not reflect the effect of fees. One cannot invest directly in an index.

Lipper Peer Group Definitions



Lipper Short Investment Grade Debt Classification – peer group for Limited Duration Fund
Funds that invest primarily in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of less than three years. The Limited Duration Bond fund ranked 251 out of 374 funds measured for the one year ranking period and ranked 206 out of 293 funds measured for the five year ranking period as of June 30, 2021.

Lipper Core Bond Classification – peer group for Core Bond Fund
Funds that invest at least 85% in domestic investment-grade debt issues (rated in the top four grades) with any remaining investment in non-benchmark sectors such as high-yield, global and emerging market debt. These funds maintain dollar-weighted average maturities of five to ten years. The Core Bond fund ranked 112 out of 500 funds measured for the one year ranking period and ranked 143 out of 416 funds measured for the five year ranking period as of June 30, 2021.

Lipper Multi-Cap Growth Classification – peer group for Large Cap Growth Fund
Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap growth funds typically have above-average characteristics compared to the S&P SuperComposite 1500 Index. The Large Cap Growth fund ranked 434 out of 508 funds measured for the one year ranking period ranked and 280 out of 411 funds measured for the five year ranking period as of June 30, 2021.

Lipper Multi-Cap Value Classification – peer group for Large Cap Value Fund
Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap value funds typically have below-average characteristics compared to the S&P SuperComposite 1500 Index. The Large Cap Value fund ranked 375 out of 642 funds measured for the one year ranking period and ranked 151 out of 519 funds measured for the five year ranking period as of June 30, 2021.

Lipper Small-Cap Core Classification – peer group for Small Cap Fund
Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper’s USDE small-cap ceiling. Small cap core funds have more latitude in the companies in which they invest. These funds typically have average characteristics compared to the S&P SmallCap 600 Index. The Small Cap Equity fund ranked 496 out of 859 funds measured for the one year ranking period and ranked 337 out of 710 funds measured for the five year ranking period as of June 30, 2021.

Lipper International Multi-Cap Core Classification – peer group for International Equity Fund
Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. International multi-cap funds typically have characteristics compared to the MSCI EAFE Index. The International Equity fund ranked 9 out of 353 funds measured for the one year ranking period and ranked 4 out of 275 funds measured for the five year ranking period as of June 30, 2021.

Lipper Real Estate Classification – peer group for Real Estate Fund
Funds invest primarily in equity securities of domestic and foreign companies engaged in the real estate industry. The Real Estate fund ranked 161 out of 246 funds measured for the one year ranking period as of June 30, 2021.

Lipper Alternative Long/Short Equity Classification – peer group for Long/Short Equity Fund
Funds that employ portfolio strategies combining long holdings of equities with short sales of equities, equity options or equity index options. The funds may be either net long or net short, depending on the portfolio manager’s view of the market. The Long/Short fund ranked 196 out of 234 funds measured for the one year ranking period as of June 30, 2021.

Lipper Multi-Cap Core Classification – peer group for U.S. All Cap Index Fund
Funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. The U.S. All Cap Index fund ranked 117 out of 650 funds measured for the one year ranking period as of June 30, 2021.