Purpose Best Ideas Fund April 2016 Commentary

Fund Highlights

  • The Fund was positive for the month with downside pressure coming from large-cap equities. The Russell Top 200 Index was up 0.33% for the month compared to the Russell Midcap Index up 1.1%.
  • The large-cap tilt of PBI was out of favour in the month as multiple tech giants disappointed on the downside with Alphabet, Apple, and Microsoft all declining significantly for the month.
  • Selection in energy and allocation to consumer discretionary provided the most positive contribution to the Fund.
  • Valeant Pharmaceuticals regained some steam as activist investor Carl Icahn took control of the board and replaced the management team in an attempt to overhaul the firm. The stock was up 27% for the month.
  • Manager holding updates (13-F) are due in the middle of May and the Fund will reconstitute and rebalance holdings in May.
  • With respect to the currency-hedged shares, the Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure of approximately 7% of the Fund’s NAV.

Market Commentary
Global markets grinded higher in April with Canadian and European equities outperforming the US. Although the IMF warned of further downside risks to growth, global economic data was largely positive this month spurring hopes for reflation. Manufacturing was stronger than expected while US payroll numbers continued to see strength. Canada surprised to the topside as retail sales and GDP figures came in better than expected. There was considerable focus on the energy meeting at Doha, however, no substantial agreement was reached on production cuts. Nonetheless, crude managed to rally almost 20% on lower inventories and a better growth outlook. Commodity cyclical and EM currencies saw significant strength vs the US dollar. The loonie rallied over 3.5% as the prospect of another BOC rate cut seeming to fade. The strength in the yen was a major focus signifying that the BOJ may have reached the limits of its monetary policy. Bonds in the US and Canada sold off from the highs, while corporate credit continued to tighten.

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