Market Insights


April 2019

By: Tony Minopoli, CIO of the Knights of Columbus

Tuesdays are very busy days around the Knights of Columbus Asset Advisors (“KoCAA”) offices. Each Tuesday, our senior investment staff gets together to review all of the portfolios to discuss performance attribution and strategy. Prior to that Tuesday meeting, I have lunch with my two senior portfolio managers Neill Jordan and Gil Marchand to discuss our macro view with respect to the Federal Reserve (“Fed”) and other macroeconomic factors that we believe could have implications for the portfolios.

During our lunch this week, our discussion centered around inflation and what action this could cause the Fed to take, or not to take. In February, according to the Bureau of Economic Analysis, the Consumer Price Index (“CPI”) grew by 0.2% to an annualized rate of 1.5%, far below the 2.0% Fed target and well below the 2.9% annualized rate we saw in June and July 2018. When you factor out food and energy, it is a fairly similar picture. February core inflation increased by 0.1% to an annualized rate of 2.1%. Our bottom line is that inflation does not seem to be a front burner issue.

The other two data series I have been watching closely are wage growth and the Leading Indicators Index1. Wage growth has been fairly robust with an annualized growth rate of 3.4% as of the end of February. I have been spending time evaluating the potential scenario where wages outstrip the general level of inflation, creating demand and a wage driven bout of inflation; the result of people’s real wages increasing faster than the rate of inflation. Gil made a quick point that we have not had any real demand-pull inflation2 over the past 20 years. We certainly should see if there is a further breakdown in the relationship between wages and inflation, but this is likely not an issue either.

With respect to forward looking economic activity, we have been acutely watching the Leading Indicators Index. This index is a compilation of ten underlying indices that measures stocks, bonds, unemployment, inflation and other factors. The index has had very good predictive capability for forecasting economic activity on a forward 6 to 12-month basis. The index is essentially built to take the composite of underlying indices to provide a sense of the general direction of the economy. In the fourth quarter, we had negative months in October and December and a flat month in November. However, the index was flat in January and then up in February. We believe if this index trends positive it should bode well for continued economic growth.

Shifting gears, I wanted to take a look at how markets fared during the first quarter. After a weak end to 2018, the U.S. stock market saw a solid rebound during the first quarter 2019. On the basis of price change, the S&P 500 increased 13.1% during the first quarter. There was both a technical rebound in that stocks became oversold from the decline in the fourth quarter, and earnings that came in line with expectations. The bond market was also accommodative to the stock rally because many market participants believe that the Fed is largely on hold unless there is a resurgence of inflation. The 10-year Treasury ended 2018 at yield of 2.69% and rallied in the first quarter to a low of 2.37% and ended the quarter at 2.41%.

United States Gross Domestic Product (“GDP”) as measured by the U.S. Bureau of Economic Analysis, grew by 2.2% in the fourth quarter and 3.0% for 2018. We are looking to see how first quarter economic growth shapes up given the general weakness we have seen during the first quarter of the past few years. We are watching inflation closely because the Fed battled against deflation following the financial crisis. In 2018, headline CPI reached 2.9% in June and July and retreated to 1.9% by year end and has fallen to 1.5% as of the end of February. Core Inflation followed the same path, peaking at 2.4% and declining to 2.2% at year end, with a reading of 2.1% as February ended. The decline in inflation is a significant reason why the Fed may be on hold and it is likely we may not see any rate increases in 2019 unless we see a resurgence in GDP.

Initial jobless claims and continuing claims, as measured by the U.S. Department of Labor, continue to be low and we saw robust job growth throughout 2018. Of some note is the continued level of job openings that illustrates both a need for people and a skills mismatch between the jobs open and the people looking. Also, wage growth accelerated throughout the year and reached 3.5% by year end. We are watching to see if the pace of wage increases continues and how this feeds both inflation and economic growth.

In terms of economic releases by the Fed, Industrial Production was mainly positive throughout the year and illustrated 3.6% growth for the year ended February 2018 while Durable Goods, ex transportation, also grew at a growth rate of 3.3% for the year. Factory Capacity Utilization has been hovering around 79% so we are not seeing a breakdown within the factory segment of the economy.

We are not in a shortage of concerns to keep front and center. The concerns remain on the political front with the end of the Mueller investigation igniting the beginning of the Democratic subpoena wave. We have still not finalized our tariff issue with China, border issues, the heating up of the election season and, of course, the next pronouncements from the Fed. Plenty to watch and keep us busy!

Until next month.



1 Leading Indicators are statistics that help predict changes in the economy.


2 Demand-pull inflation occurs when there is an increase in aggregate demand, categorized by four sections of the macro economy: households, businesses, government, and foreign buyers.

Core Bond Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
Core Bond Fund-I Shares 2.00% 3.93% 2.48% 2.30%
Bloomberg Barclays US Aggregate Bond Index 1.92% 4.48% 2.03% 2.08%
Lipper Core Bond Fund Average 1.81% 3.96% 2.18% 1.89%
Lipper Percentile Rank 59% 30%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 509 (1 Year) and 447 (3 Year).
Gross Expense Ratio 0.84%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
Limited Duration Fund-I Shares 0.71% 2.91% 1.53% 1.29%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.66% 3.03% 1.32% 1.28%
Lipper Short Investment Grade Debt Fund Average 0.64% 2.89% 1.95% 1.52%
Lipper Percentile Rank 54% 68%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 353 (1 Year) and 315 (3 Year).
Gross Expense Ratio 0.87%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
Large Cap Growth Fund-I Shares 1.43% 7.24% 12.99% 8.62%
Russell 1000 Growth Index 2.85% 12.75% 16.53% 12.24%
Lipper Multi-Cap Growth Fund Average 1.83% 10.38% 15.29% 9.60%
Lipper Percentile Rank 73% 74%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 530 (1 Year) and 487 (3 Year).
Gross Expense Ratio 1.10%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
Large Cap Value Fund-I Shares -0.25% 3.64% 11.11% 6.85%
Russell 1000 Value Index 0.64% 5.67% 10.45% 6.80%
Lipper Multi-Cap Value Fund Average -0.22% 1.78% 9.35% 5.45%
Lipper Percentile Rank 31% 11%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 393 (1 Year) and 363 (3 Year).
Gross Expense Ratio 1.11%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
Small Cap Equity Fund-I Shares -3.49% -0.91% 9.47% 4.99%
Russell 2000 Index -2.09% 2.05% 12.92% 7.06%
Lipper Small Cap Fund Average -2.17% 0.09% 10.06% 5.83%
Lipper Percentile Rank 59% 56%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 958 (1 Year) and 823 (3 Year).
Gross Expense Ratio 1.17%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 3/31/19)
1 Year
(as of 3/31/19)
3 Years
(as of 3/31/19)
Since Inception
(as of 3/31/19)
International Equity-I Shares 0.65% -2.44% 11.21% 5.44%
FTSE All World Ex US Index 0.68% -3.94% 8.49% 3.57%
Lipper International Multi-Cap Fund Average 0.55% -5.71% 6.42% 2.32%
Lipper Percentile Rank 12% 1%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 393 (1 Year) and 338 (3 Year).
Gross Expense Ratio 1.39%, 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. 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, 3 year, and Since Inception periods 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, 2020.

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.

Consumer Price Index – The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services.

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 191 out of 353 funds measured for the one year ranking period and ranked 215 out of 315 funds measured for the three year ranking period as of March 31, 2019.

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 300 out of 509 funds measured for the one year ranking period and ranked 133 out of 447 funds measured for the three year ranking period as of March 31, 2019.

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 385 out of 530 funds measured for the one year ranking period ranked and 356 out of 478 funds measured for the three year ranking period as of March 31, 2019.

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 122 out of 393 funds measured for the one year ranking period and ranked 37 out of 336 funds measured for the three year ranking period as of March 31, 2019.

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 561 out of 958 funds measured for the one year ranking period and ranked 466 out of 828 funds measured for the three year ranking period as of March 31, 2019.

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 46 out of 393 funds measured for the one year ranking period and ranked 4 out of 338 funds measured for the three year ranking period as of March 31, 2019.