Market Insights


June 2018

By: Tony Minopoli, CIO of the Knights of Columbus

As we are rapidly moving to midyear, the political season is heating up. The midterm elections are setting up to be a referendum on President Trump and his policy initiatives. There also seems to be an interesting angle to the Democrats’ push to regain power in the House, and perhaps even the Senate.

First, Nancy Pelosi, widely regarded as one of the most polarizing figures in the Democratic Party if not all of politics, has been vocal about her desire to regain Speaker of the House position. Second, the most liberal part of the Democratic Party’s base is adamant about filing articles of impeachment against the President. It seems that weaponizing procedures will be the left’s assault on the President if they can regain the house. This will all be a side show because while it takes a simple majority in the House to file the articles of impeachment, it takes 67 votes in the Senate to impeach the President.

In the history of our republic, only Andrew Johnson and Bill Clinton were impeached and neither was removed from office. In addition John Tyler and Richard Nixon faced charges but were never impeached. The reason I bring this up is the market’s eternal craving for stability will be severely tested if the House were to ratify Articles of Impeachment and send them to the Senate.

The interesting angle is whether there will be significant voter turnout to either underscore the economic growth, deregulation and “ you will get tired of winning” mantra of President Trump or the collusion and “he’s a bad guy” rhetoric from the left. The even bigger issue is the mood of the independent voters. Many years ago my father told me that all else being equal, people vote based on the perception of their pocketbook. If independent voters believe that the economy is tracking well or they are politically fatigued to the point of not wanting to live through an impeachment proceeding, the Democrats may have a hollow message. On the other hand, if the economy stumbles and the Muller investigation brings something of substance to the public’s attention, the Republicans may have a rough election season. Oh the intrigue!

The U.S. economy continue to perform fairly well with first quarter GDP of 2.2% and year over year posting 2.8% annualized growth, the best posting since the second quarter of 20151. Inflation continues to advance with the headline inflation figure standing at 2.5%2 as of the most recent reading and even the core inflation rate (which subtracts price changes in food and energy) has held at annual rate of 2.1% over the last two releases. It is often quoted that the Federal Reserve (Fed) likes to look at the Personal Consumption Expenditures (PCE) Index and that has also held at 2.0% for each of the last two months. At the same time, when food and energy are subtracted from the PCE Index, inflation growth is 1.8% and that is below the Fed’s 2.0% inflation target.

The employment market continues to be a source of great fascination for market participants. The unemployment rate stood at 3.8%3 at the end of May and the underemployment rate stood at 7.6% for the same measurement period. The 3.8% level of unemployment is the lowest reading in the last 20 years and the underemployment figure is the lowest reading since May 2001. The continual issue with the employment picture is that the US Labor Force Participation Rate is 62.7% and this is just slightly above the 62.2% low reached in September 2015 and well below the peak of 67.3% reached in January 2000.

The lack of participation is one of the items keeping aggregate wages low, however, some economists are citing the retirement of older Baby Boomers as being a depressant on wages and others indicating that in certain fields there are acute labor shortages and wages are increasing. Overall, there remains a number of job openings going unfilled and the primary reason for this is a skills mismatch between what employers need and what the unemployed are able to offer as a skill set. It might be in the best interest of companies to start considering training programs and find people with the right attitude and aptitude and train them to fill these open positions.

Where we turn to the production side of the economy we see continued growth in Industrial Production and Capacity Utilization with continued volatility in the Durable Goods index. The reason for the volatility in Durable Goods can be most often associated with orders in the transportation space. Lastly, one of my favorite indicators, the Conference Board U.S. Leading Index ten Economic Indicators continues to show strength and is at the highest level since the index was calculated in 1959. This index looks at average work week, jobless claims, factory orders, building permits, stock prices and other factors to illustrate the direction of the economy. The index has proven pretty reliable during my career and as it still points to solid economic activity, I remain constructive on our economy.

A final word on geopolitics. All eyes will be on the U.S. summit with North Korea on June 12th and whether or not there is a peaceful path forward. Europe is watching to see if Italy can avoid an even greater political crisis and the Mideast remains difficult to say the least. Right now, the strength of our markets and the still relatively low level of interest rates indicates that market participants believe these issues, though important, can be handled and will not lead to contagion. Until they do. It is always for this reason that we believe in long term views and an asset allocation structure that meets the long term view. When do you change? We believe you change when your investment objectives or circumstances change and thus require a review of positioning. We are always here to answer your questions and review these situation with you.

Until next month.



1Bureau of Economic Analysis US Department of Commerce, May 30, 2018

2Bureau of Labor Statistics, Department of Labor, May 10, 2018

3Department of Labor, Bureau of Labor Statistics June 1, 2018

Core Bond Fund

One Month
(as of 5/31/18)
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 0.51% 1.94% 1.72% 1.78%
Bloomberg Barclays US Aggregate Bond Index 0.71% 1.20% 1.20% 1.32%
Lipper Core Bond Fund Average 0.55% 1.15% 1.12% 1.21%
Lipper Percentile Rank 12% 14%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 512 (1 Year) and 444 (3 Year).
Gross Expense Ratio 1.04%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 5/31/18)
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 0.41% 0.64% 0.74% 0.77%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.37% 0.24% 0.66% 0.72%
Lipper Short Investment Grade Debt Fund Average 0.26% 0.85% 1.03% 1.06%
Lipper Percentile Rank 57% 65%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 325 (1 Year) and 282 (3 Year).
Gross Expense Ratio 1.01%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 5/31/18)
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-I Shares 4.26% 19.74% 9.50% 9.08%
Russell 1000 Growth Index 4.38% 21.25% 12.90% 12.08%
Lipper Multi-Cap Growth Fund Average 4.21% 20.92% 9.92% 9.52%
Lipper Percentile Rank 58% 57%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 486 (1 Year) and 440 (3 Year).
Gross Expense Ratio 1.34%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 5/31/18)
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 1.84% 11.55% 8.69% 7.91%
Russell 1000 Value Index 0.59% 6.95% 7.88% 7.16%
Lipper Multi-Cap Value Fund Average 0.75% 8.57% 7.04% 6.56%
Lipper Percentile Rank 17% 20%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 350 (1 Year) and 302 (3 Year).
Gross Expense Ratio 1.33%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 5/31/18)
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 6.28% 12.56% 6.25% 6.98%
Russell 2000 Index 6.07% 11.79% 8.39% 8.74%
Lipper Small Cap Fund Average 4.78% 9.31% 7.24% 7.61%
Lipper Percentile Rank 16% 72%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 991 (1 Year) and 812 (3 Year).
Gross Expense Ratio 1.33%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 5/31/18)
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 -0.08% 21.75% 9.21% 8.13%
FTSE All World Ex US Index -2.29% 16.77% 6.84% 6.12%
Lipper International Multi-Cap Fund Average -1.68% 15.29% 5.81% 5.24%
Lipper Percentile Rank 1% 3%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 420 (1 Year) and 330 (3 Year).
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, 2018.

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 184 out of 325 funds measured for the one year ranking period and ranked 184 out of 282 funds measured for the three year ranking period as of March 31, 2018.

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 63 out of 512 funds measured for the one year ranking period and ranked 60 out of 444 funds measured for the three year ranking period as of March 31, 2018.

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 281 out of 486 funds measured for the one year ranking period ranked and 252 out of 440 funds measured for the three year ranking period as of March 31, 2018.

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 60 out of 350 funds measured for the one year ranking period and ranked 59 out of 302 funds measured for the three year ranking period as of March 31, 2018.

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 159 out of 991 funds measured for the one year ranking period and ranked 585 out of 812 funds measured for the three year ranking period as of March 31, 2018.

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.