Market Insights


February 2020

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

The capital markets experienced an incredibly strong 2019 and rolled into 2020 trying to gain clarity on several items. First, the phase one of the trade deal with China has been signed. Is it perfect? I would not say the China trade deal is anywhere near perfect. However, this deal illustrates that both countries recognize the strong need to develop a trade pact and President Trump did outline the need to establish intellectual property protections and the need to cease the mandate of supplying technical plans on goods that are allowed into China from the U.S.

The second major item we have been watching is the impeachment theater. Even CNN and MSNBC would likely admit that a Trump impeachment is a low probability event. After a significant amount of back and forth, the Republicans successfully fended off introducing witnesses into the Senate trial. The senate candidates running for President must be breathing a sigh of relief as they will be able to get back on the campaign trail. The financial markets have largely discounted the likelihood of no conviction. A reverse outcome would likely have a pretty negative effect on the markets.

No current consideration of the markets and global economy would be complete without a discussion of the coronavirus. On January 30th, we had the first reported human to human transmission of the coronavirus in the U.S. Also, as of January 30th, the virus had killed 170 people in China and infected nearly 8,000 people. The Centers for Disease Control and Prevention (“CDC”) reported that the first person to person case in the U.S. came as a woman visited Wuhan, China and passed the virus to her husband upon returning to her home in Chicago. Of course, you could be one of the unlucky folks on the cruise ship off the coast of Rome that is being quarantined. I have not been on a large cruise ship in many years and as excited as I was to get on, I was usually more excited to get off! For those poor souls that are sort of in Italy, I can’t imagine being that close to amatriciana sauce and not being able to have it. Sorry for the digression, however, if you travel to Rome, amatriciana sauce is a native Roman red sauce that has pancetta and a bit of spice. Really fabulous!

From an economic standpoint, 2019 was a continuation of the tepid to moderate recovery we have been in since the end of the Great Recession. In my view,the coronavirus will most assuredly have a negative effect on the economy as it will impact both travel and trade with China. This may also likely be met with the global impact of Boeing as they reel from the super max problem.

Looking at the markets, we have witnessed the 10-Year Treasury yield (GT10 GOVT HP) fall from 1.92% at the end of December 2019 to 1.51% as of January 31st. The closing low for 2019 in 10-Year rates was 1.46% set on September 3rd. We are not that far away. In terms of Boeing (BA Equity HP), the stock closed at $318.27 on January 31st, down from its’ all time high of $440.62 set March 1, 2019. This fall of about 28%, while meaningful, could be the start of continued bad news for the company if there is not both a solution and acceptance of their product by plane buyers. The potential for greater negative economic impact is associated with the spillover of Boeing to their suppliers if the plane remains sidelined and the production halt lasts significantly longer. Since year-end, the S&P 500 (SPX Index HP), is down on a price basis by about 0.16% through January 31st. The market, as measured by the S&P 500, reached an all-time high of 3,330 on January 17th, but then started wobbling as the coronavirus became a global “thing”.

We had the first print of fourth quarter GDP (GDP CYOY) and this illustrated 2019 growth at 2.3%, while comfortably over 2.0%, this is a slowdown form the 2.7% annualized growth reported in March 2019. Consumer Prices are growing at 2.3% as measured by both the headline number (CPI YOY) and ex food and energy (CPI XYOY). The Federal Reserve (“Fed’s”) preferred inflation barometer, the Core Personal Consumption Expenditures Index (PCE CYOY), is only up 1.6% and this is a major reason why we believe the Fed will be on the sidelines. Unless there is significant wage led inflation, which we do not currently see in the system, we believe the Fed is going to stand and watch unless their dot plot coalesces in such a way as to cause them to act. If the coronavirus was to become a global pandemic, we could see the Fed seek to cut rates and inject liquidity into the system in order to spur economic activity. I don’t want to get too far ahead of ourselves, but this is emblematic of what we think will need to take place to spur Fed activity.

For now, as of February 3rd, we are waiting to see a resolution in Washington regarding impeachment (as of February 5th, the Senate acquitted President Trump in the impeachment trial), observe the coronavirus situation and wait on earnings (and Boeing too!) to assess the remainder of the year. For those that use our model portfolios, we are putting the final touches on our forward 10-year asset class projections and will be publishing them soon.

I wish everyone a profitable, safe and healthy year and until next month.



Core Bond Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Core Bond Fund-I Shares 1.95% 1.95% 9.78% 4.45% 3.24%
Bloomberg Barclays US Aggregate Bond Index 1.92% 1.92% 8.72% 4.03% 2.91%
Lipper Core Bond Fund Average 1.89% 1.89% 8.69% 3.80% 2.70%
Lipper Percentile Rank 17% 12%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 512 (1 Year) and 452 (3 Year). Gross Expense Ratio 0.87%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Limited Duration Fund-I Shares 0.60% 0.60% 4.39% 2.29% 1.69%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.55% 0.55% 4.03% 2.15% 1.65%
Lipper Short Investment Grade Debt Fund Average 0.62% 0.62% 4.45% 2.38% 1.85%
Lipper Percentile Rank 54% 56%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 365 (1 Year) and 314 (3 Year). Gross Expense Ratio 0.84%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Large Cap Growth Fund-I Shares 2.59% 2.59% 30.68% 16.31% 10.16%
Russell 1000 Growth Index 2.24% 2.24% 36.39% 20.49% 13.97%
Lipper Multi-Cap Growth Fund Average 1.98% 1.98% 31.38% 17.67% 10.82%
Lipper Percentile Rank 55% 63%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 549 (1 Year) and 493 (3 Year). Gross Expense Ratio 1.10%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Large Cap Value Fund-I Shares -2.12% -2.12% 28.44% 10.74% 8.70%
Russell 1000 Value Index -2.15% -2.15% 26.54% 9.68% 8.42%
Lipper Multi-Cap Value Fund Average -3.17% -3.17% 24.84% 8.61% 7.08%
Lipper Percentile Rank 22% 17%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 463 (1 Year) and 397 (3 Year). Gross Expense Ratio 1.11%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Small Cap Equity Fund-I Shares -2.80% -2.80% 24.19% 6.54% 5.93%
Russell 2000 Index -3.21% -3.21% 25.52% 8.59% 7.95%
Lipper Small Cap Fund Average -3.59% -3.59% 23.70% 6.49% 6.72%
Lipper Percentile Rank 45% 49%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 922 (1 Year) and 832 (3 Year). Gross Expense Ratio 1.17%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
International Equity-I Shares -2.64% -2.64% 18.02% 10.62% 5.80
FTSE All World Ex US Index -2.72% -2.72% 22.20% 10.29% 5.21%
Lipper International Multi-Cap Fund Average -2.60% -2.60% 20.63% 8.43% 3.87%
Lipper Percentile Rank 80% 6%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 422 (1 Year) and 368 (3 Year). Gross Expense Ratio 1.39%, Net Expense Ratio 1.10%.

Global Real Estate

One Month
(as of 1/31/20)
YTD
(as of 1/31/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Global Real Estate-I Shares 1.35% 1.35% - - -
FTSE EPRA/NAREIT Developed Index 0.87% 0.87% - - -
Lipper Real Estate Average 1.33% 1.33% - - -
Lipper Percentile Rank - -

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Real Estate Classification. Number of Funds in Category: 254 (1 Year) and 224 (3 Year). Gross Expense Ratio 1.43%, Net Expense Ratio 1.00%.

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 29, 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 162 out of 364 funds measured for the one year ranking period and ranked 185 out of 315 funds measured for the three year ranking period as of September 30, 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 89 out of 512 funds measured for the one year ranking period and ranked 44 out of 451 funds measured for the three year ranking period as of September 30, 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 433 out of 566 funds measured for the one year ranking period ranked and 347 out of 508 funds measured for the three year ranking period as of September 30, 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 130 out of 448 funds measured for the one year ranking period and ranked 19 out of 387 funds measured for the three year ranking period as of September 30, 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 639 out of 953 funds measured for the one year ranking period and ranked 472 out of 844 funds measured for the three year ranking period as of September 30, 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 246 out of 415 funds measured for the one year ranking period and ranked 16 out of 359 funds measured for the three year ranking period as of September 30, 2019.