Market Insights


January / February 2021

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

I cannot believe that I am about to type the following statement, but here we go! On Tuesday, December 22, 2020, I found myself in complete and utter agreement with Congresswoman Alexandria Ocascio Cortez. There, I said it. For the record, Ted Cruz agreed with the Congresswoman as well so maybe “Atlas did Shrug”, and the world is “Off Its’ Axis.” The reason for this agreement is because our elected leaders were given a SIX THOUSAND PAGE stimulus bill and a scant two hours to read it. I will save you the math, one would have to read 50 pages per minute for 2 hours to plow through the entire bill. For those of a certain age, you may remember the Evelyn Wood Speed Reading Course and the commercials on television that showed people running a finger under words on a page and reading a single-spaced page in a book in about 10 seconds. I’m not sure even good old Evelyn could have pulled off this feat of speed reading! For investors that have entrusted their assets to KoCAA, fear not, we do not practice this method, we actually read research and financial reports to comprehend the information so we can make informed investment decisions. But I digress.

From our perspective, most people focused on the economy and politics recognized the need for at least one more round of stimulus given the resurgence of the virus. The hope, and now reality, of the vaccine does mean that there is light at the end of the tunnel, but we need to get there via some combination of herd immunity and/or enough vaccinated people to limit the continued spread of this insidious virus. While the need for a stimulus bill has been debated in the hallowed halls of Congress for some time, I am not going to get into the politics of who dragged their feet and why because my normal 800-1,000 word essay might take on Tolstoy’s “War & Peace” in length. It seems our leaders could have been more economic with their words, but then again, I guess you can’t hide something in 25 pages or less. Although, in the words of Ayn Rand in “Atlas Shrugged”, “You can’t have your cake and let your neighbor eat it too”. In a perfect world, even our elected officials could avoid the siren song of news cameras long enough to read the amount of words that would actually be needed to pass the latest stimulus plan. Nevertheless, the bill passed and for people in need and struggling businesses, hopefully it came in time.

I wish the stimulus program had been more properly targeted, although I suppose that would be too herculean of a task. For example, both of my children, aged 23 and 21, received $600 stimulus deposits in their bank accounts. I am not sure they are really in need of these stimulus funds. I would have much preferred that the money be targeted to people who have lost jobs or to beef up longer term unemployment protection funds until the economy grabs footing. In my view, this stimulus feels more like helicopter money and, if I may be frank, reeks a little of true socialism. Ugh.

We are at a critical point in our economy with a continued mixed bag of economic releases. Recently, third quarter GDP was revised upward by 30 basis points to 33.4%1. We saw some weakness in housing with November 2020 Existing Home Sales declining for the first time in six months, even though housing has remained an economic bright spot this year. We also saw Consumer Confidence decline in the most recent reading for December 2020. Consumers have reacted to virus news with optimism or pessimism as different information becomes available. Currently, the virus is having a resurgence in various places around the country with Los Angeles being the largest city with the most negative issues at this time. The news about a new virus strain that apparently originated in Britain is also causing concern. Thus far, nothing has indicated that the new strain will be resistant to either the Pfizer or Moderna vaccines.

Ultimately, in my view, herd immunity and broad distribution of the vaccines will be the needed push to get the economy going. As we know, the rollout has been at a speed that does not approach warp, however, we are now seeing about 500,000 people a day being vaccinated and I am hopeful this will increase.

At this time of year there is no shortage of prognostications about what 2021 will bring. The eternal optimists look at the resurgent GDP statistics from the second and third quarters of 2020 and are extrapolating that growth into the future. The contrarians are looking at the weak parts of the economy, and positing that the mutated virus will pull the economy back and, perhaps, mostly just to say they were right. Our forward outlook is pretty straight forward. If we can get the virus under control through vaccination and herd immunity, we believe we will see stronger growth beginning to occur in the second half of the year and that this elevated economic activity could continue through the first half of 2022, particularly as the tremendous amount of pent up savings is brought into spending. To us, it is that simple, if the virus gets the upper hand, all of the crystal balls, prognostications and fancy charts, in our view will not be able to undue the negative economic impact of a massive second wave and increased lockdowns.

Once we come through the other side of the virus and the initial economic surge, we will be acutely focused on the level of debt and what that means for inflation, government spending and policy (both monetary and fiscal). We have agreed that the need for stimulus was unquestioned. The human and economic toll would have been tremendous without government intervention. However, at some point, we believe the stimulus will need to be reviewed and we will need to reevaluate the economy. The other major factor we have been waiting on is the outcome of the Georgia Senate race. Results are in and the Democrats won both seats in the run-off election, and we have a 50-50 Senate with Vice President-elect Harris holding the tie breaking vote. This has been characterized more as blue ripple than a blue wave, but we need to decipher how much of Biden’s policy can make it through the senate as a small movement of votes from one side to the other will tilt the outcome of any Senate Bill.

For the year, the S&P 500 returned 18.4% with dividends reinvested and the Bloomberg Barclays Aggregate Bond Index returned 7.51% with income reinvested. The 10-Year Treasury had a yield range of 0.53% to 1.92% with an average yield of 0.90%. These equity returns did not seem possible in April or May and with equity valuations elevated we believe that we need to see earnings increase or stock prices are likely in a little peril.

For now, we wish everyone a safe, healthy and happy new year. We are optimistic about the vaccines and hopeful for a strong increase in vaccinated people.

A final word; I could not end this note without a comment about the riots of January 6, 2020, in Washington D.C. Peaceful protesting is an American tradition that is guaranteed by our freedoms of assembly and speech. Last year, we saw far left protesters/rioters in many major cities including New York, Chicago, Portland and Seattle. Yesterday, it was the far right that descended upon Washington with a truly scary and sad scene. This follows vandalism at the homes of both Nancy Pelosi and Mitch McConnell and, while we may disagree with political stances, I strongly believe that no one has the right to desecrate the home of an elected official simply because of a difference in views. The high ground cannot be claimed by anyone in Washington on this issue. I hope, and yes pray, that the incoming President does something to try and bind up the country. World leaders have denounced with sadness the actions that occurred yesterday. To me, the U.S. has always been a beacon of freedom, hope and democracy. It needs to be that as much now as ever before and as forward leaning as it has ever been during our country’s history.

Until next month.



Core Bond Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Core Bond Fund-I Shares 0.32% 7.20% 7.20% 4.72% 3.91%
Bloomberg Barclays US Aggregate Bond Index 0.14% 7.51% 7.51% 4.44% 3.68%
Lipper Core Bond Fund Average 0.37% 8.24% 8.24% 4.59% 3.66%
Lipper Percentile Rank 82% 43%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 505 (1 Year) and 414 (5 Year). Gross Expense Ratio 0.84%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Limited Duration Fund-I Shares 0.17% 3.17% 3.33% 2.29% 1.94%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.09% 3.33% 3.33% 2.21% 1.94%
Lipper Short Investment Grade Debt Fund Average 0.40% 3.57% 3.57% 2.58% 2.14%
Lipper Percentile Rank 67% 66%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 369 (1 Year) and 293 (5 Year). Gross Expense Ratio 0.82%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Large Cap Growth Fund-I Shares 4.92% 33.32% 33.32% 16.72% 13.90%
Russell 1000 Growth Index 4.60% 38.49% 38.49% 21.00% 17.83%
Lipper Multi-Cap Growth Fund Average 4.83% 42.83% 42.83% 18.84% 15.69%
Lipper Percentile Rank 58% 65%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 507 (1 Year) and 406 (5 Year). Gross Expense Ratio 1.05%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Large Cap Value Fund-I Shares 3.18% -0.28% -0.28% 9.13% 7.10%
Russell 1000 Value Index 3.83% 2.80% 2.80% 9.74% 7.43%
Lipper Multi-Cap Value Fund Average 4.21% 2.72% 2.72% 8.91% 6.51%
Lipper Percentile Rank 68% 43%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 581 (1 Year) and 462 (5 Year). Gross Expense Ratio 1.06%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Small Cap Equity Fund-I Shares 8.74% 13.65% 13.65% 9.69% 7.21%
Russell 2000 Index 8.65% 19.96% 19.96% 13.26% 9.91%
Lipper Small Cap Fund Average 7.82% 9.24% 9.24% 9.89% 7.23%
Lipper Percentile Rank 28% 51%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 899 (1 Year) and 726 (5 Year). Gross Expense Ratio 1.14%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
5 Years
(as of 12/31/20)
Since Inception
(as of 12/31/20)
International Equity-I Shares 6.11% 13.79% 13.79% 10.39% 7.13%
FTSE All World Ex US Index 5.50% 11.52% 11.52% 9.48% 6.26%
Lipper International Multi-Cap Fund Average 5.16% 8.09% 8.09% 7.08% 4.71%
Lipper Percentile Rank 9% 1%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 370 (1 Year) and 280 (5 Year). Gross Expense Ratio 1.39%, Net Expense Ratio 1.10%.

Real Estate Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
QTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Real Estate-I Shares 5.00% -0.91% 11.23% -0.91 3.22%
FTSE Nareit Equity REITs Index 3.29% -8.00% 11.57% -8.00 -7.00%
Lipper Real Estate Average 3.64% -8.18% 13.49% -8.18 -5.12%
Lipper Percentile Rank 15%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Real Estate Number of Funds in Category: 246 (1 Year) Gross Expense Ratio 1.43%, Net Expense Ratio 1.00%.

Long-Short Equity Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
QTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
Since Inception
(as of 12/31/20)
Long-Short Equity – I Shares 1.48% -11.05% 3.97% -11.05% -10.13%
HFRX Equity Market Neutral Developed Index 0.28% -3.92% 3.15% -3.92 -4.24%
Lipper Long-Short Average 0.52% 7.47% 1.76% 7.47% 7.48%
Lipper Percentile rank 89%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Alternative Long/Short Equity Number of Funds in Category: 241 (1 Year) Gross Expense Ratio 2.03%, Net Expense Ratio 1.70%.

U.S. All Cap Index Fund

One Month
(as of 12/31/20)
YTD
(as of 12/31/20)
QTD
(as of 12/31/20)
1 Year
(as of 12/31/20)
Since Inception
(as of 12/31/20)
U.S. All Cap Index – I Shares 4.81% 21.52% 15.50% 21.52% 21.52%
Knights of Columbus U.S. All Cap Index 4.93% 22.31% 15.76% 22.31% 22.25%
Lipper Large Blend Average 4.29% 16.56% 14.20% 16.56% 16.56%
Lipper Percentile rank 21%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Core Number of Funds in Category: 660 (1 Year) Gross Expense Ratio 1.22%, 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, 2021

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.

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 164 out of 371 funds measured for the one year ranking period and ranked 187 out of 296 funds measured for the five year ranking period as of September 30, 2020.

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 381 out of 505 funds measured for the one year ranking period and ranked 152 out of 411 funds measured for the five year ranking period as of September 30, 2020.

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 200 out of 502 funds measured for the one year ranking period ranked and 207 out of 395 funds measured for the five year ranking period as of September 30, 2020.

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 260 out of 574 funds measured for the one year ranking period and ranked 108 out of 449 funds measured for the five year ranking period as of September 30, 2020.

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 196 out of 882 funds measured for the one year ranking period and ranked 359 out of 704 funds measured for the five year ranking period as of September 30, 2020.

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 67 out of 361 funds measured for the one year ranking period and ranked 3 out of 267 funds measured for the five year ranking period as of September 30, 2020.

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.