Market Insights


March 2018

By: Tony Minopoli, CIO of the Knights of Columbus

February 27 was a pretty big day around the office. That day marked the third anniversary of our mutual fund family. By now, I imagine you have seen the announcement that the Knights of Columbus Funds have been rebranded Catholic Investor Funds. The name change was mainly driven by our desire to differentiate the market-based products offered and managed by KOCAA versus the protection products of life insurance, annuities, long-term care and disability insurance that are offered by the dedicated life insurance agents of the Knights of Columbus. We also believe that this name change will help our potential clients understand that these funds are Catholic in identity and focus.

At KOCAA, we are extremely proud of our three-year anniversary and the approximately 200 clients that have entrusted us with their assets. We take our responsibilities very seriously and are committed to providing a high level of professional money management expertise on the portfolios under our care. We hope to have this be one of many anniversary milestones in our corporate lifespan.

Volatility has certainly returned to the market with concerns over inflation and the relative levels of activity that can be expected from the Federal Reserve. Uniformly, many of the major market segments saw negative returns in February. Growth stocks, as measured by the Russell 1000 Growth Index, were down 2.6% during the month while the large cap value index published by Russell was down 4.8%. Small cap stocks were not saved from the downdraft as the Russell 2000 returned -3.9% during the month and international equities also had a rough go of it with a February return of -4.6% as measured by the FTSE All World ex U.S. Equity Index.

The bond market was rattled by the potential for inflation and we saw the Bloomberg Barclays Aggregate Bond Index decline 1% in February while shorter duration bonds, as measured by the Bloomberg Barclays 1-3 year Government Credit Index, were down slightly at only -0.1% for the month.

I think this recent market action illustrates the sensitivity to the level of interest rates and also the continuing uncertainty over what the withdrawal of unconventional monetary tools will mean for the economy. Regular readers will remember that we have discussed several times our general concern of how the Fed can step out of the market without upsetting the applecart too much.

As February gave way to March, we had the president decide to place a tariff of 25% on steel and 10% on aluminum imports in order to protect domestic industry. This idea was uniformly panned by both sides of the aisle and I will weigh in on this as well. When the protectionist measures of the Smoot-Hawley Tariff Act were enacted in 1930, the authors were well intentioned, if not misinformed, that these tariffs would create demand for domestic products. They were wrong, just as President Trump will be wrong. The end result of the Smoot-Hawley tariffs was a deepening of the Great Depression. Ultimately, there were retaliatory tariffs enacted by America’s trading partners and these tariffs are often considered a major factor in the reduction of American exports and imports by more than half during this time frame. It is very difficult to say what the overall impact of Smoot-Hawley was on economic aggregate economic output, but at a minimum it exacerbated the economic downturn.

Even those who were skeptical at the start of the Trump administration were somewhat buoyed by the experienced financial people whom he brought into his immediate orbit. As I pen this column on March 6, one of those experienced hands has resigned. Gary Cohn, former president of Goldman Sachs, could not support these tariffs and, as a result, resigned as director of the National Economic Council. As reported in numerous media outlets, Cohn is a free-trade advocate and these tariffs cut across the very essence of that belief. I have two thoughts on his resignation. I applaud Cohn for standing firm on his beliefs and we believe the president will walk back either some or all of this tariff as other countries retaliate. Cohn was not a cabinet-level member, but given all of the turnover that has occurred in the Trump White House, his resignation was just the latest shoe to drop.

Generally, we are still seeing relatively strong economic activity. Headline CPI is still over 2.0% and the expectation is that the tightness in the labor market will push wages higher and ultimately drive inflation. The tariff activity, if it ignites a global trade war, could cause inflation to rise even faster. We are watching China and Europe to see if there are any threats of retaliation. Unemployment remains low at 4.1% and, although continuing claims for unemployment insurance has edged up, we are at the lowest level in this century. Average hourly earnings are up 2.4% year-over-year and we are waiting to see if there is any give back in the next release. Over the last 12 months, we had a decline of 0.1% in average hourly earnings, but other than that, we have largely seen 0.2% or greater increases per month.

The January releases of industrial production, capacity utilization and durable goods orders were all weaker than their previous releases. One month does not a trend make, but we are watching to see if these were monthly slips or something bigger. We suspect it is the former and not the latter.  At this point, we are interested in the economic releases and to see if there are more policy jolts to come from the White House. Whatever else the president might do, he certainly keeps us on our toes.

As I close out this month’s column, I want to thank all of my colleagues at Knights of Columbus Asset Advisors who have worked very diligently to build this organization during these first three years. I am so appreciative of their efforts and so proud to work with them each and every day.

Until next month.



Core Bond Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
Core Bond Fund-I Shares -0.91% -1.90% 4.55% 2.43%
Bloomberg Barclays US Aggregate Bond Index 0.64% 1.20% 1.20% 1.32%
Lipper Core Bond Fund Average -0.94% -1.88% 3.56% 1.83%
Lipper Percentile Rank 11%

Gross Expense Ratio 1.04%, Net Expense Ratio 0.50%.

Limited Duration Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
Limited Duration Fund-I Shares -0.20% -0.40% 1.37% 0.95%
Bloomberg Barclays Government/Credit 1-3 Year Index -0.09% -0.36% 0.84% 0.85%
Lipper Short Investment Grade Debt Fund Average 0.07% 0.85% 1.03% 1.06%
Lipper Percentile Rank 60%

Gross Expense Ratio 1.01%, Net Expense Ratio 0.50%

Large Cap Growth Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
Large Cap Growth Fund -2.44% 3.86% 26.71% 9.28%
Russell 1000 Growth Index -2.62% 4.27% 30.21% 12.64%
Lipper Multi-Cap Growth Fund Average -2.47% 4.49% 28.04% 9.29%
Lipper Percentile Rank 60%

Gross Expense Ratio 1.34%, Net Expense Ratio 0.90%.

Large Cap Value Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
Large Cap Value Fund-I Shares -4.30% -0.25% 15.79% 8.98%
Russell 1000 Value Index -4.78% -1.09% 13.66% 8.90%
Lipper Multi-Cap Value Fund Average -4.68% -0.81% 15.28% 8.09%
Lipper Percentile Rank 41%

Gross Expense Ratio 1.33%, Net Expense Ratio 0.90%.

Small Cap Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
Small Cap Equity Fund-I Shares -5.93% -2.01% 15.38% 8.51%
Russell 2000 Index -3.87% -1.36% 14.65% 9.56%
Lipper Small Cap Fund Average -4.27% -1.94% 12.56% 8.65%
Lipper Percentile Rank 20%

Gross Expense Ratio 1.33%, Net Expense Ratio 1.05%.

International Equity Fund

Information as of 02/28/17 One Month
YTD One Year
(as of 12/31/17)
Since Inception
(as of 12/31/17)
International Equity-I Shares -4.53% 0.66% 30.98% 8.82%
FTSE All World Ex US Index -4.64% 0.58% 27.47% 7.10%
Lipper International Multi-Cap Fund Average -4.85% -0.11% 25.23% 6.07%
Lipper Percentile Rank 3%

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, 2019.

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.

Labor Market Conditions Index – The Labor Market Conditions Index is derived from a dynamic factor model that extracts the primary common variation from 19 labor market indicators.

Quantitative Easing – Defined as a policy strategy of seeking to reduce long-term interest rates by buying large quantities of financial assets when the overnight rate is zero.

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 192 out of 332 funds measured for the one year ranking period as of September, 30, 2017.

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 78 out of 493 funds measured for the one year ranking period as of September, 30, 2017.

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 35 out of 421 funds measured for the one year ranking period as of September, 30, 2017.

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 384 out of 532 funds measured for the one year ranking period as of September, 30, 2017.

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 69 out of 370 funds measured for the one year ranking period as of September, 30, 2017.

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 183 out of 1007 funds measured for the one year ranking period as of September, 30, 2017.

Tilt Fund: A fund developed when an institution compiles a core holding of stocks that mimic a benchmark type index such as the S&P 500 to which additional securities are added to help tilt the fund toward outperforming the market.

Smart Beta: A set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization based indices. Emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.