Purpose Best Ideas Fund July Commentary

Fund Highlights

  • The Fund fared well in July as all sectors were positive led by strength in technology, health care and consumer discretionary names.
  • The health care sector continued to outperform as Valeant Pharmaceuticals posted strong earnings and forecasted a positive outlook. The company’s strategy of growth through acquisitions helped it become Canada’s most valuable company this month. Mega cap growth names, such as Google, drove much of the performance across the broader fund this month. Google shares surged higher after reporting 11% year-over-year revenue growth, while also cutting back costs and expenses by 2%. SunEdison was the worst performer in the Fund. It declined sharply after investors expressed concerns over the company’s rapid pace of acquisitions and skepticism over the accretive value of their latest purchase Vivant Solar.
  • This month, the non-hedged long USD exposure was a tailwind as CAD declined over 5% against the U.S. dollar. The Fund continued to hedge USD currency exposure for the currency hedged shares and took the opportunity to reduce USD exposure from approximately 10% to 7% of the Fund’s NAV.
  • With respect to the non-currency hedged shares, the U.S. dollar exposure provided a significant boost that further increased the returns of non-currency hedged portion of the Fund.

Market Commentary

In July, global stocks ended higher with strength in the U.S and Europe contrasted by weakness in Canada and China. The Greece overhang was temporarily resolved as Greece voted “yes” to more austerity and in return the ECB provided a bridge loan to tide debtors over until a 3rd bailout could be negotiated. In the U.S jobs data was slightly softer, nonetheless the Fed retained faintly hawkish overtones in its statement preparing the market for the possibility of a rate hike into the end of the year. In Canada, sluggish economic data and falling energy prices prompted the BOC to unexpectedly cut interest rates for a second time this year. Poloz went on to suggest that there were more tools at his disposable to fend off a potential recession.
Commodities ended lower this month. The announcement of a historic U.S backed nuclear deal with Iran caused crude to plummet in anticipation of more Iranian oil coming online. Inventory builds and weakening demand exacerbated the move lower as WTI closed below $50 for the first time in months. Gold plummeted to new multi-year lows as geopolitical fears over Greece waned and the dollar strengthened. Grains also reversed course as prices stabilized after experiencing heavy short covering the previous month.
Currency markets continued to see volatility. The U.S dollar saw broad strength after the Fed indicated a possible rate hike by year end. CAD was one of the worst performers this month falling over 5%.

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