Market Insights


May 2021

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

As April ends, we are starting to see much better weather in Connecticut and this state is expected to fully open, with masks, by mid-May. Nationally, the Covid positivity rate continues to decline, and hospitalization data is also improving. We have had a somewhat binary view of the economic path for the U.S. that was based on the trajectory of the virus and vaccinations.

As we seem to be getting an upper hand on the virus, economic views now become focused on traditional measures. Before leaving the virus, there are two items that we do think are worth noting. First, we have heard growing anecdotal evidence that in the U.S., there is currently a surplus of vaccines because those that want to be vaccinated have done so and those that are skeptical are staying on the sidelines. Second, the continued rise of infection rates in India means that Covid is not done with the world yet and we must be ever vigilant on the continuing mutations that continue to evolve from this virus.

Economic Growth and First Quarter GDP

Putting aside Covid for the moment, first quarter Gross Domestic Product (“GDP”)1 was 6.4%2 versus a consensus estimate of 6.7%. This figure moved the rolling four quarter GDP growth rate to 0.4% and, in our view, this is significantly better than the -9.0% four quarter growth rate that we faced in June 20203 . The continued re-opening of the economy, fed by pent up demand, has caused a number of economic variables to show strength.

This renewed growth has stirred up many conversations around the when, if, and how we could see inflation. On the fundamental side, we as Americans had and continue to have massive stimulus and it doesn’t seem like the Democrats are finished with spending. We continue to see unemployment data improve, with the unemployment rate falling to 6.0% in March 2021 from the high of 14.8% last April. Last year, continuing claims for unemployment were 21.7 million and the most recent release in April 2021, it had dropped to 3.7 million, a very significant improvement. Between stimulus, the potential for an infrastructure package and the continued improvement of the employment market, we believe that there is a high likelihood of continued economic expansion.

Thus far, the manifestation of inflation, as evidenced in Consumer Price Index (“CPI”)4 statistics, measured headline inflation at 2.6% with the release of the latest March 2021 data. Last year, CPI bottomed in May with an annualized growth rate of just 0.1%. In our view, the next few months we will begin to see year over year comparisons with a slight acceleration in inflation that started in the third quarter of last year.

If these year over year comparisons show continued growth, the concern about potential inflation may be realized. We see evidence of the economic rebound with Industrial Production up 1.1% in March 2021, bringing the annual figure to 1.0%, the first positive year over year number since the onset of Covid during the first quarter of 2020. There are similar bright spots in Durable Goods, Capacity Utilization and ISM Manufacturing and Non-Manufacturing Indices.

Lastly, I have always tracked the Index of Leading Indicators closely because, I believe, this index has had solid predicative ability for economic growth six to twelve months out. The last print was the strongest positive number we have seen since June 2010, when our economy was emerging from the Great Financial Crisis.

Market Fundamentals, Interest Rates, and Inflation

So how could strong economic releases, an improved employment picture and strong current and planned government spending not lead to inflation? We have discussed market fundamentals supporting economic growth and inflation; however, we still have to deal with market technicals. The technical focus remains on Federal Reserve (“Fed”) activity, namely their continued purchase of $120 billion a month in Treasury securities.

If the Fed keeps providing this much liquidity to the market, this will likely limit any type of upward move on interest rates. The other area is taxes and how materially increasing taxes could lead to a lessening of the economic momentum. I do not believe for a moment, that the “tax the rich” rhetoric actually ends with “the rich”. In my view, the stimulus and spending plans will need a larger plurality to keep the punch bowl full so the government will likely seek other “revenue” opportunities. Yes, this means, in my opinion, that the ability to create new taxes that will be more widespread is very certain given the ambitions that President Biden has laid out for his term.

From an economic standpoint, we are at a very interesting inflection point for our government. The government is certainly getting larger with all of the new programs, but there is very little discussion about what the government does well versus areas where the government is significantly less efficient than the private sector. Anything the government can do to alleviate the recent pressures within the domestic and global supply chains are welcome. Supply chain issues are starting to have an impact both on growth and on inflation.

Last month, the ISM Manufacturing Index was reported at 64.7 and anything above 50 is considered to be expansionary. The ISM Index was expected to reach 65.0 in April 2021 based on consensus expectations but actually came in at 60.7. This means that manufacturing is growing at a decelerating rate and the main culprit of this deceleration, in my opinion, was supply chain shortages. We are concerned that these shortages can not only curb the upward economic momentum but could be inflationary as well as we see more price increases due to economic scarcity.

So, what we are looking for in the coming months? As we move through May, we are looking to see the rate of vaccinations increase and positivity rate decrease within the U.S., but we are also watching the progression of the virus through both the developed and developing markets. We are acutely watching changes in the supply chain and its impact on inflation. Similarly, we are keeping tabs on the employment market because as the supply of labor becomes tighter, wage led inflation could also become a factor. Other than that, what else could one be concerned about? We will keep an eye on it all and report back next month.

1 Gross Domestics Product – The total value of goods produced and services provided in a country in one year.

2 https://www.bea.gov/data/gdp/gross-domestic-product

3 https://www.bea.gov/sites/default/files/2021-04/gdp1q21_adv.pdf (page 13)

4 Consumer Price Index – An index of the variation in prices paid by typical consumers for retail goods and other items.



Core Bond Fund

One Month
(as of 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/20)
5 Years
(as of 3/31/20)
Since Inception
(as of 3/30/20)
Core Bond Fund-I Shares 1.07% -1.78% 4.87% 3.57% 3.26%
Bloomberg Barclays US Aggregate Bond Index 0.79% -2.61% 0.71% 3.10% 2.95%
Lipper Core Bond Fund Average 0.82% -2.13% 4.70% 3.43% 3.01%
Lipper Percentile Rank 42% 41%

*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 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/20)
5 Years
(as of 3/31/20)
Since Inception
(as of 3/31/20)
Limited Duration Fund-I Shares 0.20% 0.20% 5.14% 2.13% 1.86%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.08% 0.03% 1.57% 2.00% 1.85%
Lipper Short Investment Grade Debt Fund Average 0.25% 0.27% 6.48% 2.43% 2.05%
Lipper Percentile Rank 67% 68%

*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 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/21)
5 Years
(as of 3/31/21)
Since Inception
(as of 3/31/21)
Large Cap Growth Fund-I Shares 5.35% 6.43% 59.03% 17.30% 13.48%
Russell 1000 Growth Index 6.80% 7.81% 62.74% 21.05% 17.23%
Lipper Multi-Cap Growth Fund Average 5.77% 7.14% 71.60% 20.08% 15.51%
Lipper Percentile Rank 75% 71%

*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 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/20)
5 Years
(as of 3/31/20)
Since Inception
(as of 3/31/20)
Large Cap Value Fund-I Shares 4.20% 18.63% 58.29% 12.20% 9.10%
Russell 1000 Value Index 4.00% 15.70% 56.09% 11.74% 9.01%
Lipper Multi-Cap Value Fund Average 4.06% 17.18% 63.68% 11.47% 8.52%
Lipper Percentile Rank 58% 33%

*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 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/20)
5 Years
(as of 3/31/20)
Since Inception
(as of 3/31/20)
Small Cap Equity Fund-I Shares 3.33% 15.99% 89.40% 12.62% 8.96%
Russell 2000 Index 2.10% 15.07% 94.85% 16.35% 11.66%
Lipper Small Cap Fund Average 3.44% 19.84% 89.09% 12.95% 9.62%
Lipper Percentile Rank 49% 52%

*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 4/30/21)
YTD
(as of 4/30/21)
1 Year
(as of 3/31/21)
5 Years
(as of 3/31/21)
Since Inception
(as of 3/31/21)
International Equity-I Shares 5.26% 11.07% 59.26% 11.81% 7.77%
FTSE All World Ex US Index 3.01% 6.89% 50.97% 10.37% 6.65%
Lipper International Multi-Cap Fund Average 2.84% 7.07% 47.76% 8.51% 5.36%
Lipper Percentile Rank 11% 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 4/30/21)
YTD
(as of 4/30/21)
QTD
(as of 3/31/21)
1 Year
(as of 3/31/21)
Since Inception
(as of 3/31/21)
Real Estate-I Shares 4.62% 10.77% 5.88% 41.23% 6.66%
FTSE Nareit Equity REITs Index 8.06% 17.64% 8.87% 37.78% -0.40%
Lipper Real Estate Average 6.49% 12.99% 7.74% 37.05% 2.92%
Lipper Percentile Rank 18%

*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 4/30/21)
YTD
(as of 4/30/21)
QTD
(as of 3/31/21)
1 Year
(as of 3/31/21)
Since Inception
(as of 3/31/21)
Long-Short Equity – I Shares 0.95% 7.89% 6.97% 5.31% -3.54%
HFRX Equity Market Neutral Developed Index 0.56% 3.09% 2.52% 6.83 -1.64%
Lipper Long-Short Average 0.74% -1.47% -2.19% 8.54% 4.30%
Lipper Percentile rank 86%

*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 4/30/21)
YTD
(as of 4/30/21)
QTD
(as of 3/31/21)
1 Year
(as of 3/31/21)
Since Inception
(as of 3/31/21)
U.S. All Cap Index – I Shares 5.17% 12.50% 6.96% 65.32% 23.34%
Knights of Columbus U.S. All Cap Index 5.20% 12.70% 7.13% 67.02% 24.16%
Lipper Large Blend Average 4.82% 11.95% 6.87% 59.90% 19.34%
Lipper Percentile rank 22%

*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.

HFRX Equity Market Neutral Index – benchmark for Long/Short Equity Fund HFRX Equity Market Neutral Index The HFRX Equity Market Neutral Index employs sophisticated quantitative techniques of analyzing price data to ascertain information about future price movement and relationships between securities, select securities for purchase and sale. These can include both Factor-based and Statistical Arbitrage/Trading Strategies.

Knights of Columbus U.S. All Cap Index – benchmark for U.S. All Cap Index Fund Knights of Columbus U.S. All Cap Index Adheres to the United States Conference of Catholic Bishops’ Socially Responsible Investment Guidelines. Consists of all common stocks and real estate investment trusts in the Solactive US Broad Market Index excluding companies that are determined by Institutional Shareholder.

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.