NexC Partners Corp. June Commentary

Fund Highlights
Markets ended lower this month as global geopolitical risks weighed on risky assets. Greece was an overhang on the Eurozone as probability rose that it would default on IMF loans due at the end of the month. The Greek government also shut down local banks and called a surprise referendum which heightened uncertainty. In the U.S. , jobs data came in stronger than expected which put the U.S. Fed on a path to raise interest rates later this year. However, despite the dovish FOMC comments U.S. bond yields continued higher causing volatility across interest rate sensitive assets. In Canada, economic data was mixed as better than expected jobs numbers were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.

Commodities were mixed. Energy drifted lower led by Brent oil and heating oil. Grains saw a large move higher as wet weather conditions and bullish USDA reports drove short covering across the complex.

Currency markets were choppy this month as the U.S. dollar took a pause in its upward trajectory ending lower this month. Euro had large swings driven by the uncertainty in Greece, while the CAD dollar closed slightly higher.

Market Commentary
Markets ended lower this month as global geopolitical risks weighed on risky assets. Greece was an overhang on the Eurozone as probability rose that it would default on IMF loans due at the end of the month. The Greek government also shut down local banks and called a surprise referendum which heightened uncertainty. In the U.S. , jobs data came in stronger than expected which put the U.S. Fed on a path to raise interest rates later this year. However, despite the dovish FOMC comments U.S. bond yields continued higher causing volatility across interest rate sensitive assets. In Canada, economic data was mixed as better than expected jobs numbers were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.

This month consumer discretionary and materials names were the best performers. Darden finished the month higher after reporting strong earnings and announcing plans for a REIT spin-off. Oil and gas pipeline names saw a boost on speculation that consolidation was on the horizon for companies dealing with the recent plunge in energy prices. Interest rate sensitive names across Utilities and Real estate were the worst performers as U.S. yields rallied higher in anticipation of Fed hikes later this year.

The portfolio now holds 17 U.S. equities and 23 Canadian equities. The Fund replaced Lorillard, which closed its deal with Reynolds this month, with National Bank of Canada. The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 10% of the Fund’s NAV. The Fund sold calls on 20 names in the portfolio which had a notional total of approximately 10% of NAV. The Fund has not deployed any leverage.

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