Purpose Best Ideas Fund October Commentary

Fund Commentary

The Fund seeks to provide shareholders with attractive long-term capital appreciation by investing in a high conviction portfolio of North American equities. The Fund invests in a portfolio of North American equities held by some of world’s most renowned investment managers.

The Fund was positive in October. The top performing sectors were consumer discretionary, tech and staples, while industrials, financials and healthcare saw lagging performance.

The best performing stocks were Baidu, Liberty Global and Apple, while the worst performers were Hertz, Ebay and Micron.

Baidu jumped to new all-time highs after reporting a 29% operating profit margin over the quarter. Accelerating mobile traffic was the main driver for an increase in total sales. Liberty Global rose after receiving approval to acquire Ziggo the largest multi-service operator in the Netherlands. Takeover rumours also circulated with Vodafone as a possible suitor. Apple surged to new highs after net income rose 13% to $8.47 billion exceeding most earnings expectations.

Hertz continued to slide despite being the focus of much activist interest notably from Icahn and Jana partners. A potential delay to the spin-off of its equipment rental unit due to operational missteps could negatively affect its value going forward. Ebay’s earnings were in line with expectations, however the stock sank after management guided lower for the fourth quarter citing disappointing sales and slowing revenue growth. Micron was dragged lower by general selling pressure across chipmakers after competitor Microchip declared that “an industry correction had begun” during its quarterly earnings report.

The portfolio continues to hedge USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

Market Commentary

October was a bit of a roller coaster ride as markets sold off heavily in the first half of the month before bouncing back rapidly in the second half. Stock markets were initially dragged lower on fears of global slowdown as the IMF cut the global growth outlook while poor European economic data pointed towards a shaky recovery. Cyclical commodity sectors were hit hardest with energy and materials leading the sell-off. However, momentum shifted mid-month as the beginning of the ECB’s bond buying stimulus program combined with dovish Fed comments seemed to turn around the negative sentiment. Expectations of solid U.S. corporate earnings coupled with a strong GDP print helped drive a rebound in stocks. To close out the month, the Bank of Japan unexpectedly boosted its own stimulus measures accelerating purchases of bonds and domestic stocks, which gave a further lift to global markets.

This month commodities performance was mixed. The energy complex continued to see downward pressure from supply overhang. Gold broke lower as safe haven trades were exited and the dollar rallied. Grains bucked the trend and saw a squeeze higher on concerns that poor weather would negatively affect the harvest.

The U.S. dollar saw some initial weakness in October before rallying back later to close out the month strong. The loonie ended slightly weaker versus the dollar at 1.1260.

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