Market Insights


October 2021

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

Another month, and quarter, in the books and many of the concerns we have been focusing on are still with us today. Last month, I discussed our concerns that “transitory” might not be the best term to use when describing the current state of inflation. As we have noted in this column numerous times, the U.S. economy is driven by consumer spending. To ensure we did not subside into a deep recession or depression after the onset of Covid, the government flooded the economy with stimulus. Also, as we have noted, the economy was in pretty good shape going into Covid and has generally proven to be fairly resilient. So now we have a lot of people with money to spend but the kinks in the supply chain remain.

As someone that has a good facility with numbers, I know that 61 is less than 73. That is a universal truth and not just “my” truth. If you don’t believe that, then that is a rant for another day and in another forum! Back to my math theorem, the relationship of 61 to 73 is the number of cargo vessels offshore in Southern California according to an article published in the New York Times on September 23rd[1] . There were an additional 29 ships floating sufficiently far enough offshore that they could not drop anchor because the water is too deep. This number is down from a record of 37 and that was set very recently. Charter rates on container ships and containers are also spiking. Companies in the supply chain are raising prices because they have the leverage to do so, and this is putting upward pressure on inflation. Retailers that have a lack of product because it is floating in containers are also raising prices and this is kindling the flames of inflation.

These items are pieces of my mosaic on where we are in the economic cycle. I am looking at wages, the cost of goods, and energy prices. I see them rising and am less inclined to believe that these are short term in nature, at least under the current structure of political power in Washington. For example, as a result of President Biden cancelling the pipeline from Canada and fracking being tremendously reduced, we have seen the price of natural gas increase tremendously from a low of $2.75 per cubic foot in April to $5.80[2] as I type this at 8:30 AM on October 4th. This price increase represents a change of 110% and natural gas is used in the production of electricity, the manufacturing of fertilizer and a whole host of other industrial processes. Natural gas is also a byproduct of drilling for oil and, I believe, we have just made natural gas a whole lot scarcer by making oil production in the U.S. a whole lot harder.

When a key input to economic activity doubles in price, it is reasonable to question if that price increase will subside quickly. Energy analysts are forecasting that these elevated prices are likely to continue because the natural gas shortage is a global issue with European countries buying as much gas as they can find to try and ensure adequate supplies for the winter. In my opinion, this is a man-made shortage that is being exacerbated by a green movement that simply does not have the capacity to supply enough renewable energy to power the world. If their end game is to drive fossil fuel prices so high that green energy becomes competitive, it appears they are doing their level best to achieve that outcome. However, the lack of enough capacity of renewables will make energy prices only go higher and hurt the very people the green movement purports to be trying to help.

When I look at the combination of wage and price increases, it is hard to see inflation being transitory. While I do not believe we are heading for stagflation; the ugly economic scenario of a stagnating economy coupled with inflation, the current market status makes it difficult for a reasonable market analyst to dismiss the stagflation scenario. I continue to think that Federal Reserve (“Fed”) Chairman Powell is the right man for the job and if he is replaced as Senator Elizabeth Warren is hoping, the change in Fed leadership could also be a bit destabilizing for market, at least over the short term.

There are reasons to be positive on the economy, including continued improvement in unemployment and positive trends in Industrial Production, Capacity Utilization, Factory Orders and Leading Indicators. All these data sets continue to point to economic expansion. Further, as the percentage of Americans that have either had Covid or have been vaccinated increase, the headwind of Covid should lessen. We are starting to see the delta variant wane and it appears that there is no new dominant strain taking its place yet. Merck & Co.’s new oral therapy could be a significant game changer if it truly lessens severity, hospitalizations and deaths. Also, with the expiration of the enhanced unemployment benefits, we are hopeful to see the number of unfilled jobs decline and perhaps a smoothing out of some of the economic bumps that have been with us since the onset of Covid.

We remain constructive on the U.S. economy; however, we are concerned about inflation and the drivers of wages, energy, and supply problems. These three factors are all contributing to the current trend of inflation that we are experiencing and the Fed, as well as other central banks, are going to need to deftly deal with inflation and employment or we may risk a global recession. Thus far, it feels like economic growth is still winning. Stay tuned, things can change quickly!

Until next month.



Core Bond Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Core Bond Fund-I Shares -0.79% -0.51% 0.83% 3.45% 3.37%
Bloomberg Barclays US Aggregate Bond Index -0.87% -1.55% -0.90% 2.94% 3.01%
Lipper Core Bond Fund Average 0.81% -1.08% 0.35% 3.15% 3.07%
Lipper Percentile Rank 26% 29%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 500 (1 Year) and 416 (5 Year). Gross Expense Ratio 0.80%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Limited Duration Fund-I Shares -0.09% 0.26% 0.73% 1.98% 1.76%
Bloomberg Barclays Government/Credit 1-3 Year Index -0.08% 0.09% 0.30% 1.89% 1.73%
Lipper Short Investment Grade Debt Fund Average 0.05% 0.59% 1.76% 2.20% 1.98%
Lipper Percentile Rank 73% 41%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 374 (1 Year) and 293 (5 Year). Gross Expense Ratio 0.80%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Large Cap Growth Fund-I Shares -5.48% 9.91% 22.01% 18.39% 13.84%
Russell 1000 Growth Index -5.60% 14.30% 27.32% 22.84% 18.02%
Lipper Multi-Cap Growth Fund Average -5.06% 10.44% 27.37% 20.97% 15.97%
Lipper Percentile Rank 82% 72%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 508 (1 Year) and 411 (5 Year). Gross Expense Ratio 1.00%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Large Cap Value Fund-I Shares -3.06% 20.27% 38.71% 12.49% 9.29%
Russell 1000 Value Index -3.48% 16.14% 35.01% 10.94% 9.01%
Lipper Multi-Cap Value Fund Average -3.42% 17.51% 38.74% 11.08% 8.62%
Lipper Percentile Rank 45% 23%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 642 (1 Year) and 519 (5 Year). Gross Expense Ratio 1.03%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Small Cap Equity Fund-I Shares -1.73% 17.26% 47.25% 11.94% 8.97%
Russell 2000 Index -2.95% 12.41% 47.68% 13.45% 10.68%
Lipper Small Cap Fund Average -2.53% 17.87% 51.63% 11.37% 9.21%
Lipper Percentile Rank 68% 41%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 859 (1 Year) and 710 (5 Year). Gross Expense Ratio 1.14%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
5 Years
(as of 9/30/21)
Since Inception
(as of 9/30/21)
International Equity-I Shares -3.33% 8.04% 27.81% 10.89% 7.55%
FTSE All World Ex US Index -3.04% 6.72% 25.06% 9.59% 6.58%
Lipper International Multi-Cap Fund Average -3.43% 7.72% 24.70% 8.27% 5.59%
Lipper Percentile Rank 2% 5%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 353 (1 Year) and 275 (5 Year). Gross Expense Ratio 1.33%, Net Expense Ratio 1.01%.

Real Estate Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
QTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Real Estate-I Shares -3.73% 17.68% 1.35% 30.90% 10.65%
FTSE Nareit Equity REITs Index -5.40% 23.15% 0.98% 37.39% 6.03%
Lipper Real Estate Average -5.12% 20.96% 0.82% 32.98% 8.18%
Lipper Percentile Rank 64%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Real Estate Number of Funds in Category: 246 (1 Year) Gross Expense Ratio 1.34%, Net Expense Ratio 1.00%.

Long-Short Equity Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
QTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
Since Inception
(as of 9/30/21)
Long-Short Equity – I Shares 0.10% 10.11% 2.08% 14.49% -1.02%
HFRX Equity Market Neutral Developed Index 0.12% 1.33% -1.11% 4.52 -1.82%
Lipper Long-Short Average -2.53% 8.34% -0.86% 16.30% 8.52%
Lipper Percentile rank 53%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Alternative Long/Short Equity Number of Funds in Category: 234 (1 Year) Gross Expense Ratio 2.17%, Net Expense Ratio 1.73%.

U.S. All Cap Index Fund

One Month
(as of 9/30/21)
YTD
(as of 9/30/21)
QTD
(as of 9/30/21)
1 Year
(as of 9/30/21)
Since Inception
(as of 9/30/21)
U.S. All Cap Index – I Shares -4.52% 16.28% 0.03% 34.30% 21.84%
Knights of Columbus U.S. All Cap Index -4.51% 16.54% 0.10% 34.91% 22.45%
Lipper Multi-Cap Core Average -4.64% 14.18% -0.47% 30.07% 17.98%
Lipper Percentile rank 22%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Core Number of Funds in Category: 650 (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 is 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.