Market Insights


July 2019

By: Tony Minopoli, CIO of the Knights of Columbus

Well election silly season has officially kicked off. I am fortunate in that the little television I do watch is fully indulged by my wife. While we both love movies, and will be officially glued to the tennis majors, Karen certainly humors me on my affinity to watch golf tournaments and debates for the aspiring future Presidents of our country. If I’m being honest, I think she enjoys the debates as well, or at least loves talking back to the television, I suppose real shock would ensue if one of the candidates answers her interjections!

What have we learned thus far? The candidates have gaps when it comes to health care, gun control, and the border crisis. Yes, the Democrats now consider illegal entry via our Southern border a crisis, while it was considered a manufactured crisis just a few weeks ago. The shame of it all is that the afflicted people are unfortunate pawns in a twisted political game but that is a rant for a different context. We also learned that Elizabeth Warren and Bill de Blasio are with Bernie Sanders on universal health care. My favorite line of the night came from Mayor de Blasio when he claimed, “…there’s plenty of money in this country, it’s just in the wrong hands” – that little beauty chilled this avowed capitalist to the bone! The thought of the government more involved in the economy, picking winners and losers, and deciding where capital should be best allocated will make us another Europe. I like to visit, but don’t really want to live there.

So, differences abounded while the universal theme unifying the candidates is that President Trump must go. My early prediction is that either Bernie Sanders, Elizabeth Warren or Joe Biden will be the nominee. I am acutely interested to see if a Democratic candidate has the wherewithal to survive the Democratic primary and sway independent voters to win a national election. Stay tuned, I think it will be interesting as we proceed.

Regular readers know that I have been concerned about the China trade spat and believe that while China may have suffered first, they certainly won’t suffer alone. Many articles have been written about the slowing of European economics and the pain being felt by the trade spat. A few weeks ago, I was quite optimistic that a deal would be crafted because it is in the best interest of both China and the U.S. to come to an agreement. As the weeks have progressed, I am less convinced of a short-term deal and more concerned that China may dig in and wait to see the chances of a President Trump reelection, with a possible view that a Democratic President might more pliable to meet a deal that is more palatable to China.

This past weekend, President Trump reconvened discussion with President Xi and met with Kim Jong Un to take a few steps into the hermit kingdom before returning to South Korea. Many pundits are writing about the interconnectedness of these two items. China does not want a refugee crisis of North Koreans flooding into China if the regime fell. This may be a lever that President Xi is using to bring the U.S. to the table to find a way forward. Multiple dimension chess indeed.

In the real world, we are considering the implications of a delayed trade deal. Companies are likely to be somewhat reluctant to make plans while not having clarity on the future of the trade rules. For the capital markets, I think the implications hit both markets and the economy. With respect to the markets, uncertainty leads to fear and I think fear leads to a greater demand for fixed income with a corresponding lower level of income available for yield starved investors. The equity market likely trades sideways to down based on either concern for a future real economic slowdown or a real recession. If the trade spat dissipates the growth we have been enjoying and the velocity of capital slows, the speculation of a recession will give way to one happening.

The markets have rebounded from the May lows and the S&P 500 ended June at 2,942 and this represents a price change of about 6.89% during June. During the month of June, we saw the 10-year Treasury yield start at 2.13% and end the month at 2.01%1. Further, we have witnessed the yield change fall from 2.41% since the end of the first quarter.

Looking at the real economy, we are waiting for the next revision of GDP to see if there are more slowing signs in the economy. Inflation remains essentially nonexistent while the employment picture retains a solid headline with an unemployment rate of 3.7% and underemployment of 3.9%2 at the end of June. Labor participation is still well below highs so there remains some slack in the labor market. Certain segments of the economy are experiencing labor shortages and there is certainly upward pressure on wages. Anecdotally, my son is a third-year apprentice electrician and the owner of his company said it is very difficult to find apprentices and all of the local trades are looking for people. At the same time, the lower to mid-tier manufacturing jobs remain somewhat difficult to find.

New job creation is slowing as we saw 75,0003 new jobs in May after a robust string of new job creation. We saw a slight uptick in Industrial Production and Factory Utilization, with continued weakness in Durable Goods. ISM Manufacturing fell to 51.74, and while anything above 50 is expansionary, we are decelerating for sure. The question remains if the cyclicality of the economy is starting to turn (I for one do not believe the business cycle is dead!) or if the resolution of the Chinese trade spat will be enough of a boost to continue positive economic momentum. Mr. Market still has plenty to worry about.

Until next month.


Core Bond Fund

One Month
(as of 06/30/19)
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 1.29% 7.83% 2.86% 2.94%
Bloomberg Barclays US Aggregate Bond Index 1.26% 7.87% 2.31% 2.68%
Lipper Core Bond Fund Average 1.28% 7.35% 2.37% 2.47%
Lipper Percentile Rank 31% 20%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 510 (1 Year) and 446 (3 Year).
Gross Expense Ratio 0.84%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 06/30/19)
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 0.65% 4.28% 1.79% 1.58%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.56% 4.27% 1.59% 1.55%
Lipper Short Investment Grade Debt Fund Average 0.56% 4.04% 2.06% 1.76%
Lipper Percentile Rank 44% 65%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 356 (1 Year) and 312 (3 Year).
Gross Expense Ratio 0.87%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 06/30/19)
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 6.99% 6.75% 15.15% 9.34%
Russell 1000 Growth Index 6.87% 11.56% 18.07% 12.67%
Lipper Multi-Cap Growth Fund Average 6.64% 10.23% 16.83% 10.21%
Lipper Percentile Rank 73% 66%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 545 (1 Year) and 488 (3 Year).
Gross Expense Ratio 1.10%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 06/30/19)
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 7.21% 5.87% 12.43% 7.34%
Russell 1000 Value Index 7.18% 8.46% 10.19% 7.32%
Lipper Multi-Cap Value Fund Average 7.10% 3.20% 9.76% 5.92%
Lipper Percentile Rank 27% 6%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 408 (1 Year) and 355 (3 Year).
Gross Expense Ratio 1.11%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 06/30/19)
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 8.13% -2.62% 10.70% 5.72%
Russell 2000 Index 7.07% -3.31% 12.30% 7.16%
Lipper Small Cap Fund Average 6.96% -3.34% 9.98% 6.01%
Lipper Percentile Rank 38% 41%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 951 (1 Year) and 831 (3 Year).
Gross Expense Ratio 1.17%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 06/30/19)
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 4.63% -1.44% 11.73% 5.18%
FTSE All World Ex US Index 5.91% 1.65% 9.75% 4.10%
Lipper International Multi-Cap Fund Average 5.70% -0.66% 7.76% 2.84%
Lipper Percentile Rank 61% 1%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 402 (1 Year) and 349 (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.