Market Insights


May 2019

By: Tony Minopoli, CIO of the Knights of Columbus

Every month I sit down to consider the topic for my monthly essay and I typically can figure out a topic in very short order. Last week, I took some time for vacation and Joe Novak reminded me that I needed to pen this essay as soon as I got back. Yes, Joe can be a real task master! Fortunately, the topic of the trade tiff with China has come back to life and this is something that I viscerally believe will have a long-lasting impact on both bilateral trade between the U.S. and China, as well as China and the rest of the world.Regular readers know that the China trade spat has been top of mind for me since it began. We all should recall that both President Bush and President Obama attempted to cajole China into appreciating the role of the World Trade Organization and that free trade or fair trade among nations is a strong enabler of a rising tide lifting all boats. It has been well chronicled that China has acted in its self-interest since their emergence on the global trade scene. Two former U.S. Presidents hoped, and failed, to get China to really come to the table.

Regular readers know that the China trade spat has been top of mind for me since it began. We all should recall that both President Bush and President Obama attempted to cajole China into appreciating the role of the World Trade Organization and that free trade or fair trade among nations is a strong enabler of a rising tide lifting all boats. It has been well chronicled that China has acted in its self-interest since their emergence on the global trade scene. Two former U.S. Presidents hoped, and failed, to get China to really come to the table.

It is equally well chronicled that President Trump can be impetuous and shoot from the hip with his Twitter account. Over the weekend, the President let China and the world know that the U.S. would be increasing the 25% tariff currently imposed on $50 billion of imports to $200 billion if a trade agreement is not finalized. China is now questioning whether or not their Vice Premier will participate in the trade talks. Surprisingly, President Trump received encouragement to stand strong on this issue from Senator Chuck Schumer. The Democrat from New York is typically opposed to virtually everything that is suggested by the President but is encouraging him to continue this fight. We also agree that this is a fight worth having and needs to happen in order to craft a fair trade deal between our two countries. It will now be a matter of who blinks first, my money and my hope are both with our President standing firm.

Last week also saw the drumbeat of continuing positive news for the U.S. economy1. Both first quarter and year-over year United States Gross Domestic Product (“GDP”) came in at 3.2% growth, as measured by the U.S. Bureau of Economic Analysis. Inflation is remaining tame with headline Consumer Price Index (“CPI”) rising 1.9% and core CPI increasing 2.0% on an annualized basis. The unemployment rate, as measured by the U.S. Department of Labor for April, dipped to 3.6%, while underemployment held steady at 7.3%. The participation rate did slip by 0.2%, falling back to 62.8%, and illustrating that there is still some slack in the labor market. Initial jobless claims and continuing claims are also pointing toward a healthy labor market. Average hourly earnings picked up 0.3% for the month and grew at an annualized rate of 3.3%.

Someone many years ago referred to the beginning of the Presidential election cycle as “silly season” and I am only sorry I didn’t come up with that moniker on my own. We now have over 20 candidates vying for the Democratic nomination and watching them all fumble for an economic message has been amusing. It would be more amusing if the likes of Bernie Sanders, Elizabeth Warren and others were not flirting with socialism. The old adage, you can’t be “a little bit pregnant” seems to be apropos in this circumstance in that you can’t be a little bit socialist. I am hoping that this election becomes a referendum on socialist ideals and puts them to bed once and for all. Free stuff sounds great, but one only needs to see what happened when Hugo Chavez ran out of other people’s money and Nicolas Maduro attempted to print his way to prosperity. I hope we come down on the right side of history and our citizenry recognizes that while a rising tide may not lift all boats equally, a socialist ideal will always drag all boats down.

As we move through the second quarter, we are acutely watching growth indicators in the economy. Yes, there have been strong earnings, however, those wins have been against severely lowered forecasts. We are also looking at economic indicators such as Industrial Production, Capacity Utilization, Factory Orders, Durable Goods Orders and Leading Indicators. Over the past year, these indices have been growing at a decelerating rate2. The growing part is good, it is the decelerating aspect that is worrisome. We are also not fans of the President or members of his team haranguing the Federal Reserve (“Fed”) to lower interest rates to fuel the economy. The Fed correctly used the cover of a growing economy to increase the Fed Funds rate. They correctly understood that one could not cut rates that were not there to cut. We believe that the Fed Funds rate is at an appropriate level and gives the Fed ammunition for rate cuts when the next economic slowdown occurs.

This has certainly been an interesting month with the rebound of the markets, the Mueller report, the Attorney General Barr testimony and the reheating of the U.S.-China trade spat. As we move through May and June we should get some further clarity on whether the key economic indicators are pointing to slowing growth or a slowdown.

Until next month.



1 Source: Bloomberg


2 Source: Bloomberg

Core Bond Fund

One Month
(as of 4/30/19)
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 0.20% 3.93% 2.48% 2.30%
Bloomberg Barclays US Aggregate Bond Index 0.03% 4.48% 2.03% 2.08%
Lipper Core Bond Fund Average 0.15% 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 4/30/19)
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 0.30% 2.91% 1.53% 1.29%
Bloomberg Barclays Government/Credit 1-3 Year Index 0.23% 3.03% 1.32% 1.28%
Lipper Short Investment Grade Debt Fund Average 0.32% 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 4/30/19)
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 4.70% 7.24% 12.99% 8.62%
Russell 1000 Growth Index 4.52% 12.75% 16.53% 12.24%
Lipper Multi-Cap Growth Fund Average 4.12% 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 4/30/19)
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 4.11% 3.64% 11.11% 6.85%
Russell 1000 Value Index 3.55% 5.67% 10.45% 6.80%
Lipper Multi-Cap Value Fund Average 3.82% 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 4/30/19)
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 4.70% -0.91% 9.47% 4.99%
Russell 2000 Index 3.40% 2.05% 12.92% 7.06%
Lipper Small Cap Fund Average 3.97% 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 4/30/19)
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 1.59% -2.44% 11.21% 5.44%
FTSE All World Ex US Index 2.67% -3.94% 8.49% 3.57%
Lipper International Multi-Cap Fund Average 2.59% -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.