Purpose Best Ideas Fund February Commentary

Fund Highlights

  • The Fund ended marginally down this month as large-cap and growth stocks went out of favour in February with the S&P 500 Growth Index down -0.79%. Mid-caps found favour as the Russell Midcap Index rallied 1.13%.
  • Priceline and Cheniere were the best performing stocks this month as Priceline beat estimates and Cheniere fired off its first LNG shipment to Brazil.
  • SunEdison and Valeant were again the largest detractors from performance this month. On rebalance, the Fund sold its stake in SunEdison as most managers pulled out of the stock. Valeant shares dropped significantly towards the end of the month on the news that the company is planning to restate the 2014 and 2015 earnings and management revealed that the company is currently under investigation by the SEC.
  • The Fund replaced Soros Fund Management LLC from the manager universe with Ruane, Cunniff & Goldfarb. Soros’ move towards a family office and diversified holdings led to this replacement. Portfolio managers Robert Goldfarb and David Poppe operate the $30bn deep value “Benjamin Graham” style Sequoia Fund and are the newest members of PBI’s manager universe.
  • The Fund completed a quarterly rebalance this month replacing 5 securities.
  • 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.
  • The non-currency hedged shares faced strong headwinds as the Loonie appreciated ~3% against the U.S. dollar.

Market Commentary
Markets tested lower early in February driven by heightened risk aversion. Risk assets have seen a strong correlation with oil in recent months as WTI sank to multiyear lows. However, as things looked bleakest, sentiment seemed to shift after rumours emerged that the largest oil producing nations were intent on meeting in March to discuss possible production cuts. Crude rallied over 30% off the lows which had a positive transmission effect across equity and high yield markets. Canadian equities outperformed as cyclical sectors saw a sizeable bounce. Talks of increased fiscal stimulus and a waning need for further rate cuts helped the loonie recover over 3%. US GDP and jobs growth was better than expected, and the Fed reiterated its outlook for a gradual liftoff in 2016. Europe still produced sluggish IP and PMI’s, while the threat of a UK Brexit was a further overhang for the Eurozone.

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