Purpose Core Dividend Fund April Commentary

Market Commentary

Price action across most assets was generally choppy and range bound, which resulted in volatility falling across the board. Geopolitical concerns in the Ukraine continued to weigh on risk sentiment causing a dip early in the month. However, markets shrugged off these concerns in the belief that prolonged tensions between Russia and the G7 would not escalate. The U.S. saw better ISM and PMI data supporting an outlook for accelerating growth. In addition, the Federal Reserve Board (Fed) and European Central Bank (ECB) both maintained a dovish outlook, with the Fed downplaying a specific path for tightening and promising that it would keep rates near zero for a “considerable time.” China data was still weak and served as an overhang on the EM complex. In commodities, crude and wheat prices rallied as Ukraine tensions escalated. Gold and silver initially saw a safe haven bid, but they eventually sold off on declining Chinese demand. Despite continued dovish comments from the Bank of Canada (BOC), the Canadian dollar strengthened last month on the back of better than expected economic data and a generally weaker U.S. dollar.

Fund Commentary

The best performing stocks were Lorillard, Suncor and Entergy. Lorillard continued to outperform on speculation of consolidation in the industry with Reynolds as a possible suitor. Suncor was up as Warren Buffet invested in the company, and was seen as a value play with the company’s integrated model allowing it to capture differentials across their lines of business. Entergy was a top performer as their Q1 earnings showed they were able to realize significantly higher energy prices due to the cold winter, northeast pipeline infrastructure limitations, as well as lower taxes.
The Fund’s worst performing stocks were Telus, Rogers and Finning. Telus was down after raising $750m in debt financing to fund its spectrum auction purchases, which triggered ratings cuts. Furthermore, its renewed bid for Mobilicity was viewed by the street as a dilutive acquisition. Rogers fell after missing earnings expectations, as concerns over softness across the wireless sector negatively impacted the revenue outlook. Finning was down after seeing a decline in South American equipment sales. In addition, Caterpillar lowering its mining outlook was a negative.
The portfolio held 18 U.S. equities and 22 Canadian equities, and continues to hedge USD currency with a residual net USD exposure of approximately 10% of the Fund’s NAV.

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