Market Insights


April 2018

By: Tony Minopoli, CIO of the Knights of Columbus

As I mentioned last month, KOCAA has celebrated our third anniversary and this quarter represents the first time our three year record ends on a calendar quarter. We have noticed an uptick in incoming inquiries from investors and consultants. We are proud of what we have accomplished thus far and are looking forward to growing this business as a further service to the Catholic marketplace.

The first quarter of 2018 was certainly one of volatility both in the markets and in politics. Let’s first digest the markets and then we will spend a few minutes focused on the political landscape. The upward move in the stock market that began in March 2009 has largely been characterized as occurring with very low volatility. In other words, stocks just kept going up. Until they didn’t. The volatility of the market as measured by the VIX Index ranged from 9.1 to 16.0 with an average of 11.0 during 2017. This was a fairly tight band, but suddenly in 2018, volatility began to creep back into the stock market as the VIX has ranged from 9.2 to 37.3 and has averaged 17.3, an average higher than the high point of 2017.

The stock market, as measured by the Standard and Poor’s 500 Index (S&P 500), rode this wave of volatility hitting a high of 2,873 on January 26th which represented a positive price change of nearly 7.5% from the start of 2018. The S&P 500 hit a low of 2,581 on February 8th and traded back up to 2,642 by quarter end. For the first quarter, the S&P 500 saw a total price change of -1.2%, but this was truly a bumpy road. The stock market wanted to grind higher on the heels of the tax cuts and generally positive economic news. However, concerns from geopolitical issues, the continuing saga of the Trump Presidency and real concerns over a trade war have brought volatility back into the capital markets.

During this same time, we saw the bond market experience its own bout with volatility. We started the year with the 10 year Treasury yielding 2.41% and that has been the low for the year. Yields for the 10-year Treasury peaked at 2.95% in late February stand at 2.74% as I pen this on March 30th. During 2018, the 10 year has averaged 2.75% and this is mainly driven by the confluence of positive economic activity, a belief that tax reform would continue to propel economic gains, continuing tightness in the labor market and a general belief we would see sustained wage growth. The more recent pull back in bonds has had much more to do with concerns over growth if a trade war begins and a little safety seeking as tech stocks have rolled over a bit led by questions over the profitability, if not the viability, of Tesla and concerns over Facebook and their protection of personal data. The Facebook issue will remain center stage because of the connectivity of some of their data through a vendor that performed data analysis for the Trump presidential campaign.

The thought of inflation induced by the significant tax cut program that only passed by providing additional spending began to weigh on the market. The concept of “hey let’s lower incoming revenue and increase our spending” can only exist where you own the printing press, the paper and the ink. Don’t try this at home, it doesn’t generally turn out positive. Beyond this, general concerns over the tariff proposal for steel and the potential trade war with China and others has also weighed on the economy. We have discussed in the past how Smoot Hawley Tariff didn’t work and we would not expect it to work this time either. As of right now, it appears that cooler heads are prevailing led by Treasury Secretary Mnuchin.

On the political front, I think it is an understatement to say the President has had a pretty tough few weeks. On a personal basis, the focus on his alleged affairs by certain media outlets makes it difficult to get behind, what is real versus what is salacious. In our view, the key focus should be on whether President Trump or Michael Cohen violated campaign finance rules. Of all the things swirling, this is the only one that could have teeth, but we need to see the end of the investigative work. Geopolitics are also front and center. A former Russian double agent was poisoned in Great Britain and the event has all of the seeming finger prints of a Russian centered attempt to end the life of the Russian agent and his daughter. British Prime Minister Theresa May called out Vladimir Putin and the U.S. acted by announcing we are expelling 60 Russian diplomats, most thought to be intelligence agents. Many of our allies are also following suit.

We have an upcoming summit planned between President Trump and Kim Jong Un; however, Kim Jong Un and his mystery train first needed a side visit to China. This has injected China back onto the world stage for the Korean peninsula discussions. Our challenges with Russia persist and I believe it is only media fatigue that has quieted discussions over issues with Syria and Iran. Perhaps we need an index to measure political volatility like the VIX measures market volatility. Indeed, the volatility of the capital markets has correlated highly with the continued volatility of the geopolitical arena.

We continue to believe that the global economy should enjoy growth and the 10 year Treasury yield will increase from here, although we don’t see it moving much over 3% without an exogenous inflation, wage, or commodity shock. Given how strong the stock market was in 2017, we think some of the 2018 return was pulled forward, but we still see a positive year for stocks, although the high single digits seems to be about the right level.

Until next month.



Core Bond Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
Core Bond Fund-I Shares 0.56% 1.94% 1.72% 1.78%
Bloomberg Barclays US Aggregate Bond Index 0.64% 1.20% 1.20% 1.32%
Lipper Core Bond Fund Average 0.45% 1.15% 1.12% 1.21%
Lipper Percentile Rank 12% 14%

Gross Expense Ratio 1.04%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
Limited Duration Fund-I Shares 0.08% 0.64% 0.74% 0.77%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.16% 0.24% 0.66% 0.72%
Lipper Short Investment Grade Debt Fund Average 0.07% 0.85% 1.03% 1.06%
Lipper Percentile Rank 57% 65%

Gross Expense Ratio 1.01%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
Large Cap Growth Fund -2.11% 19.74% 9.50% 9.08%
Russell 1000 Growth Index -2.74% 21.25% 12.90% 12.08%
Lipper Multi-Cap Growth Fund Average -1.55% 20.92% 9.92% 9.52%
Lipper Percentile Rank 58% 57%

Gross Expense Ratio 1.34%, Net Expense Ratio 0.90%.
Gross Expense Ratio 1.34%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
Large Cap Value Fund-I Shares -0.64% 11.55% 8.69% 7.91%
Russell 1000 Value Index -1.76% 6.95% 7.88% 7.16%
Lipper Multi-Cap Value Fund Average -1.71% 8.57% 7.04% 6.56%
Lipper Percentile Rank 17% 20%

Gross Expense Ratio 1.33%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
Small Cap Equity Fund-I Shares -0.32% 12.56% 6.25% 6.98%
Russell 2000 Index 1.29% 11.79% 8.39% 8.74%
Lipper Small Cap Fund Average 0.88% 9.31% 7.24% 7.61%
Lipper Percentile Rank 16% 72%

Gross Expense Ratio 1.33%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 3/31/18)
1 Year
(as of 3/31/18)
3 Years
(as of 3/31/18)
Since Inception
(as of 3/31/18)
International Equity-I Shares -0.52% 21.75% 9.21% 8.13%
FTSE All World Ex US Index -1.70% 16.77% 6.84% 6.12%
Lipper International Multi-Cap Fund Average -0.85% 15.29% 5.81% 5.24%
Lipper Percentile Rank 1% 3%

Gross Expense Ratio 1.56%, Net Expense Ratio 1.10%.

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. For performance data current to the most recent month end, please call 1-844-KC-FUNDS.

Fund performance for the 1 year and Inception to Date period are annualized. The inception date for each of the funds is February 27, 2015

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, 2019.

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.

Labor Market Conditions Index – The Labor Market Conditions Index is derived from a dynamic factor model that extracts the primary common variation from 19 labor market indicators.

Quantitative Easing – Defined as a policy strategy of seeking to reduce long-term interest rates by buying large quantities of financial assets when the overnight rate is zero.

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 – benchmark 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 192 out of 332 funds measured for the one year ranking period as of September, 30, 2017.

Lipper Core Bond Classification – benchmark 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 78 out of 493 funds measured for the one year ranking period as of September, 30, 2017.

Lipper International Multi-Cap Core Classification – benchmark 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 35 out of 421 funds measured for the one year ranking period as of September, 30, 2017.

Lipper Multi-Cap Growth Classification – benchmark 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 384 out of 532 funds measured for the one year ranking period as of September, 30, 2017.

Lipper Multi-Cap Value Classification – benchmark 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 69 out of 370 funds measured for the one year ranking period as of September, 30, 2017.

Lipper Small-Cap Core Classification – benchmark 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 183 out of 1007 funds measured for the one year ranking period as of September, 30, 2017.

Lipper International Multi-Cap Core Classification – benchmark 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 5 out of 420 funds measured for the one year ranking period and ranked 9 out of 330 funds measured for the three year ranking period as of March 31, 2018.