Market Insights


March 2020

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

February marked an important milestone for Knights of Columbus Asset Advisors as we reached the five-year anniversary of our six original mutual funds. With the assimilation of Boston Advisors into our company, we believe we are well positioned to achieve our goal of being the preeminent asset manager for Catholic investors. I had planned on using this month’s column to focus on our anniversary, and although we did have a celebration for this milestone, the markets require me to focus on reporting our current thinking.

When the Coronavirus, now Covid-19, first became part of our daily conversation it was originally thought to be well contained. In fact, the stock market reached several new all- time highs even after the virus became well known. I think many people thought this was going to be like SARS, but we have learned that this virus is a whole lot worse. SARS caused nearly 8,100 people to become sick and caused 774 of deaths1. The impact in the U.S. was mild as we had 8 cases and no deaths. This new virus has grown exponentially larger than SARS. On the front page of the February 28th Wall Street Journal, they noted World Health Organization statistics2 illustrating nearly 82,300 cases of Covid-19 in 46 countries and 2,804 deaths, since the virus was identified almost two months ago. In the U.S., as of February 28th, the Centers for Disease Control and Prevention (CDC) reported 14 confirmed cases, 12 due to travel related issued and 2 spread from person to person. Across our country, there have been 445 people tested thus far3.

Now for a little perspective, as I was speaking with Paul McMahon, Director of Marketing for KoCAA, he pointed me to an interesting statistic. He was reading an article on Medicinenet.com4 and they noted that the seasonal flu kills 291,000 to 646,000 people each year! Based on the seasonal flu numbers, I suppose we should have a market meltdown every year.

As an avowed free market guy and fan of free and public markets, I do not want to see any regulatory interference with the types of asset management styles in the markets. That said, the continued growth of systematic and algorithmic driven trading is exacerbating both positive and negative trends in the market. I first started working in finance in May of 1987 and it is obvious that we never learned any lessons from portfolio insurance! Based upon the trading this week, the stock market seems to be telling us this is never getting better. I do not want to downplay the severity of this virus, but the market action has been excessive. The virus impact could shave a tenth or two from GDP, unless it truly becomes like the Spanish Flu, but we believe medical technology and awareness will ultimately contain the spread of this disease.

The stock market, as measured by the S&P 500, saw the virus concerns erase all of the gains in 2020 and we now stand at a loss of 10.8% on the S&P through 11:00 AM on Friday, February 28th. As one would reasonably expect, investors have flocked to fixed income, and the 10 Year -Treasury declined from 1.51% at the end of January to 1.15% as I write this essay.

I have found it somewhat interesting that investors are looking for the Fed to cut rates. If people are concerned about the economy, and the 10-year is trading below 1.2%, does a 10-year at something below 1.0% provide confidence to resume borrowing, spending and consumption? The longer the Fed continues to manipulate the rates market, I believe, the less impactful each successive move will be on helping the Fed achieve their desired outcome. We continue to advise clients to be patient and not to panic. If one moves to cash as a result of fear, getting the reentry point right will be virtually impossible, and when the CDC signals that the virus is contained, it is reasonable to expect that the recovery rally will be steep and fast. Another significant concern is that if the Fed spends the precious few rate cuts it has left, there will be no rate cuts for the economy if we truly hit a recession. Sometimes markets just need to play out and we think this is one of those times.

In the same moment that we are trying to assess the virus and its impact, we have a Presidential election to evaluate as well. The Democrats are coalescing around the concept that the hard left will move the party to socialism versus the moderates arguing that if the broad electorate does not embrace socialism, the party risks losing the House along with assuring Donald Trump a second term. Bernie Sanders seems to embrace the concept of a Marxist eutopia. However, history has illustrated time and time again that the symphony of socialism leads to the sour notes of totalitarianism. For the young and the poor, free stuff and a nanny state sounds fabulous until the economy is destroyed, and poverty is widespread. One need not look any further than Cuba or Venezuela to see how this situation ends and to realize that socialism doesn’t lift people up to work hard for a common goal. Rather, it drags everyone down to the lowest common denominator and plenty of misery for everyone.

I am not about to embrace Nixon, but I am hoping for a Nixonian defeat of socialism. To remind the readers, Nixon won 49 states with McGovern capturing Massachusetts and the District of Columbia, while not even carrying his home state of South Dakota. I never thought in my life that socialism would be an alternative for the United States, but here we are. Here is hoping the socialism movement in the U.S. follows the path of Jeremy Corbyn in the U.K. Capitalism might not be perfect, but it has raised the living standards of many millions of people while socialism has only brightened the lives of the “elite” that thrust the system upon the people of their country.

Until next month.



Core Bond Fund

One Month
(as of 2/29/20)
YTD
(as of 2/29/20)
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 1.72% 3.70% 9.78% 4.45% 3.24%
Bloomberg Barclays US Aggregate Bond Index 1.80% 3.76% 8.72% 4.03% 2.91%
Lipper Core Bond Fund Average 1.44% 3.36% 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 2/29/20)
YTD
(as of 2/29/20)
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% 1.20% 4.39% 2.29% 1.69%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.82% 1.37% 4.03% 2.15% 1.65%
Lipper Short Investment Grade Debt Fund Average 0.43% 1.06% 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 2/29/20)
YTD
(as of 2/29/20)
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 -6.82% -4.41% 30.68% 16.31% 10.16%
Russell 1000 Growth Index -6.81% -4.73% 36.39% 20.49% 13.97%
Lipper Multi-Cap Growth Fund Average -5.91% -3.96% 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 2/29/20)
YTD
(as of 2/29/20)
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 -9.28% -11.20% 28.44% 10.74% 8.70%
Russell 1000 Value Index -9.68% -11.63% 26.54% 9.68% 8.42%
Lipper Multi-Cap Value Fund Average -9.67% -12.53% 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 2/29/20)
YTD
(as of 2/29/20)
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 -9.67% -12.21% 24.19% 6.54% 5.93%
Russell 2000 Index -8.42% -11.36% 25.52% 8.59% 7.95%
Lipper Small Cap Fund Average -9.64% -12.88% 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 2/29/20)
YTD
(as of 2/29/20)
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 -7.61% -10.05% 18.02% 10.62% 5.80
FTSE All World Ex US Index -7.93% -10.43% 22.20% 10.29% 5.21%
Lipper International Multi-Cap Fund Average -7.64% -10.06% 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 2/29/20)
YTD
(as of 2/29/20)
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 -7.40% -6.15% - - -
FTSE EPRA/NAREIT Developed Index -8.19% -7.39% - - -
Lipper Real Estate Average -7.33% -5.80% - - -
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%.

Long-Short Equity Fund

One Month
(as of 2/29/20)
YTD
(as of 2/29/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
Long-Short Equity – I Shares -3.35% -7.98% - - -
HFRX Equity Market Neutral Developed Index -0.45% -1.98% - - -
Lipper Long-Short Average 0.99% 2.46% - - -
Lipper Percentile rank - -

*Lipper Percentile Rank is based on risk-adjusted performance.
Gross Expense Ratio 2.03%, Net Expense Ratio 1.70%.

U.S. All Cap Index Fund

One Month
(as of 2/29/20)
YTD
(as of 2/29/20)
1 Year
(as of 12/31/19)
3 Years
(as of 12/31/19)
Since Inception
(as of 12/31/19)
U.S. All Cap Index – I Shares -8.19% -8.10% - - -
Knights of Columbus U.S. All Cap Index -8.24% -8.11% - - -
Lipper Large Blend Average -8.04% -8.71% - - -
Lipper Percentile rank - -

*Lipper Percentile Rank is based on risk-adjusted performance.
Gross Expense 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, 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.

FTSE EPRA/Nareit Developed Index – benchmark for Global Real Estate Fund – The FTSE EPRA/Nareit Developed Index is a free-float adjusted, market capitalization-weighted index designed to track the performance of listed real estate companies in developed countries worldwide. Constituents of the index are screened on liquidity, size, and revenue.

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.

Lipper Real Estate Classification – peer group for Global Real Estate
Funds that invest at least 25%, but less than 75%, of the equity portfolios in shares of companies engaged in the real estate industry that are strictly outside of the U.S. or whose securities are principally traded outside of the U.S.