Purpose Best Ideas Fund January Commentary

Fund Highlights

  • A tough month for the Fund as high P/E stocks took a beating. Price/Earnings ratio for the Fund fell from 16.4x to 12.9x in the month as investors pared down growth expectations.
  • Consumer discretionary, industrials, and technology names were hit the worst in the face of slowing global growth concerns.
  • After last month’s +59% return, SunEdison gave back gains, declining -39% for the month. Hertz Global also experienced downside (-36% in January), but activist investor Carl Icahn continued to build his position (up to 14% of firm’s value) identifying depressed value in the face of an operational turnaround.
  • 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
2016 had a tumultuous start as markets sold off in one of the worst January performances on record. China was a catalyst as markets became unnerved by the rapid devaluation of the yuan which potentially signalled a slowdown in world’s growth engine. Oil sold off to new cycle lows touching $26 which put further pressure on commodity producing nations and exacerbated concerns of global deflation. After the Fed move in December, the market digested the prospect of another series of hikes which led to further uncertainty. Safe haven assets saw inflows as US 10yr yields sank below 2% and gold rallied 5%.

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