Market Insights


June 2019

By: Tony Minopoli, CIO of the Knights of Columbus

There is nothing like a clogged pipe to get you focused on the important things in life! My wife and I were sitting in the kitchen when we heard the telltale “glug, glug, glug” from the sink and I thought maybe there was some air in the vent stack. I live on the 12th floor so one doesn’t expect a substantial water back up! When water was coming up the drain we knew this was a little more than a vent problem. Alas, something was caught up somewhere and about 80 feet of plumbing snake later we had free flowing drains. The metaphor that hit me wasn’t “water down the drain” as much as “clogged pipes”.

I have written extensively in this column about keeping the “pipes” in Washington as clean and free flowing as possible. The current administration has attempted to keep the economic pipes flowing with a pledge to reduce regulation and cut taxes. While these factors certainly helped propel economic growth and add cash flow to the economy, we are suddenly getting a little clogged. First, the ongoing trade spat with China continues and the recent news has been more blockage than free flow. In our view, both countries, and indeed the world, need the trade tariff issue to be resolved as well as a firm move away from protectionist activities that can certainly harm the global economy. We believe it is concern over what the future looks like and the current market uncertainty that is having a negative impact on market sentiment.

The other significant “clog” , in my opinion, is the political rancor that just seems to keep getting worse. I need to find a better word than “rancor” because this situation is now becoming enormously inflamed. Each side is accusing the other of using Federal agencies as weapons. The Democrats have not gone full “Kavanaugh” on Attorney General Bill Barr yet, but hang on, I think it’s coming. The Republicans are wanting to fully expose the “how” part of the Steele dossier allowing FISA warrants to be issued to allow an investigation of Carter Page. None of this is good and it certainly keeps our government from working towards any sort of bipartisanship, particularly at a time when both sides could certainly agree on an infrastructure bill.

In general, the last month has seen significant weakness in the stock market as equities, characterized by the S&P 500, have traded down from 2,946 at the end of April to 2,752 at the end of May, representing a 6.6% decline based on index prices. We believe this has reengaged the “fear trade”1 as we have seen more significant demand for the safety of U.S. Treasuries. During the month of May, we saw the yield on the 10-year Treasury Note decline from 2.50% at the end of April to 2.14% at the end of May. We also noticed that the “2s 10s”2 spread also changed from 27 basis points at the end of April to 6 basis points at the end of May.

The yield differential between 2-year issues and 10-year issues is often analyzed to gauge the interest rate expectations of the market in general. A positive wide spread between these two issues can indicate an expectation of rising rates or inflation. A flat spread between the two issues can indicate economic stagnation, while a negative spread can indicate recessionary concerns. We are pretty flat at the moment and we see the concerns over economic stagnation due to the China trade spat and political issues creating concern over future economic growth.

As I am writing this on June 3, 2019, President Trump has escalated the border issue with Mexico by indicating that there will be tariffs levied on Mexican exports to the United States if Mexico does not help with the border crisis. In my view, it appears that the President may have found his new lever of choice. While we agree that a sovereign nation needs to have well defined and protected borders, the use of tariffs will have an economic impact. We will be watching to see how this evolves and if the economic impact is transient or becomes more systemic.

During the month we saw economic activity continue to show some life as first quarter GDP was stated at 3.1% for the quarter and 0.2% for trailing 12-month growth. Inflation remains moderate with the CPI at 2.0% for headline and 2.1% ex food and energy3. PCE remains well below 2.0% with headline PCE at 1.5% and core PCE at 1.6%4 as of the last release which captured data through April. During the same period, unemployment remains tame with a 3.6% unemployment level and 7.3% in the underemployed category. Labor participation rates in April have waned slightly as we stand at 62.8% versus the near-term peak of 63.2% reached in February5.

Industrial Production is slowing just slightly year over year showing a growth of +0.9% while Capacity Utilization decreased 0.6% to 77.9%. The Durable Goods Order is known to be volatile and has been declining slightly. We remain in the camp of no recession in 2019, unless the exogenous factors have a more negative impact in the second half. This current economic expansion, as shallow and slow as it has been, has been running for a decade. Economic pull backs happen, but we are also in the group that is looking for a short and shallow recession with a modest growth rate thereafter. We believe the surprise to the upside will only come if we see further improvement in the wage environment, coupled with an increase of the labor force and productivity gains. This might be a lot to ask for, but hey, we are halfway to Christmas!

Until next month.



1 A phenomenon whereas investors divest from perceived riskier assets and invest in less volatile securities.


2 The yield spread between the two debt instruments.


3 Bureau of Labor Statistics


4 U.S. Bureau of Economic Analysis


5 Bureau of Labor Statistics

Core Bond Fund

One Month
(as of 05/31/19)
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 1.82% 3.93% 2.48% 2.30%
Bloomberg Barclays US Aggregate Bond Index 1.78% 4.48% 2.03% 2.08%
Lipper Core Bond Fund Average 1.54% 3.96% 2.18% 1.89%
Lipper Percentile Rank 59% 30%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Core Bond Funds. Number of Funds in Category: 509 (1 Year) and 447 (3 Year).
Gross Expense Ratio 0.84%, Net Expense Ratio 0.50%.

Limited Duration Fund

One Month
(as of 05/31/19)
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 0.61% 2.91% 1.53% 1.29%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.69% 3.03% 1.32% 1.28%
Lipper Short Investment Grade Debt Fund Average 0.52% 2.89% 1.95% 1.52%
Lipper Percentile Rank 54% 68%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Short Investment Grade Debt Funds. Number of Funds in Category: 353 (1 Year) and 315 (3 Year).
Gross Expense Ratio 0.87%, Net Expense Ratio 0.50%

Large Cap Growth Fund

One Month
(as of 05/31/19)
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 -6.22% 7.24% 12.99% 8.62%
Russell 1000 Growth Index -6.32% 12.75% 16.53% 12.24%
Lipper Multi-Cap Growth Fund Average -5.57% 10.38% 15.29% 9.60%
Lipper Percentile Rank 73% 74%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Growth Funds. Number of Funds in Category: 530 (1 Year) and 487 (3 Year).
Gross Expense Ratio 1.10%, Net Expense Ratio 0.90%.

Large Cap Value Fund

One Month
(as of 05/31/19)
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 -7.09% 3.64% 11.11% 6.85%
Russell 1000 Value Index -6.43% 5.67% 10.45% 6.80%
Lipper Multi-Cap Value Fund Average -7.42% 1.78% 9.35% 5.45%
Lipper Percentile Rank 31% 11%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Multi-Cap Value Funds. Number of Funds in Category: 393 (1 Year) and 363 (3 Year).
Gross Expense Ratio 1.11%, Net Expense Ratio 0.90%.

Small Cap Fund

One Month
(as of 05/31/19)
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 -7.85% -0.91% 9.47% 4.99%
Russell 2000 Index -7.78% 2.05% 12.92% 7.06%
Lipper Small Cap Fund Average -7.89% 0.09% 10.06% 5.83%
Lipper Percentile Rank 59% 56%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: Small-Cap Core Funds. Number of Funds in Category: 958 (1 Year) and 823 (3 Year).
Gross Expense Ratio 1.17%, Net Expense Ratio 1.05%.

International Equity Fund

One Month
(as of 05/31/19)
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 -5.66% -2.44% 11.21% 5.44%
FTSE All World Ex US Index -5.15% -3.94% 8.49% 3.57%
Lipper International Multi-Cap Fund Average -5.21% -5.71% 6.42% 2.32%
Lipper Percentile Rank 12% 1%

*Lipper Percentile Rank is based on risk-adjusted performance. Lipper Category: International Multi-Cap Core. Number of Funds in Category: 393 (1 Year) and 338 (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.