Purpose Core Dividend Fund August Commentary

Fund Highlights

  • The Fund beat the broad equity markets in August but ended in red as a global sell-off ensued following weakness in China. In Canada, the S&P/TSX 60 Index fell over 4%, and in the U.S. the S&P 500 Index sank 6% – with the VIX fear gauge spiking to 50, which had not occurred since the crisis in 2009.
  • This month, all sectors experienced losses led by Real Estate, Consumer Discretionary and Financials sectors. Peyto Exploration was the best performer, as it reported strong Q2 earnings on the back of cost savings and improvements to its operating efficiency. It also confirmed its dividend, which appears attractive at these levels. The worst performer was Las Vegas Sands as Macau casino revenues fell 35% in August and investors reduced their China exposures.
  • The Fund completed a quarterly rebalance and increased its weight in Canadian names to 64% – indicating more attractive valuations in Canada relative to the U.S. . The Fund added Fortis, Peyto Exploration, Rogers, TransCanada and GM, and deleted Arc, Darden Restaurants, Lockheed Martin, Pembina and Reynolds. The Fund now holds 25 Canadian and 15 U.S. equities.
  • This month, CAD depreciated slightly against the USD providing tail-wind for the non-hedged long USD exposure of the Fund. The Fund continued to hedge USD currency exposure maintaining a net USD exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Markets experienced a tumultuous decline this month as concerns over a slowdown in global growth and persistent worries over deflation triggered a dramatic fall in global equity prices. The S&P sank 6%, the SPTSX fell over 4% and the VIX fear gauge spiked to levels not seen since the crisis back in 2009. China was in the headlines as worsening economic data and a volatile stock market decline proved unnerving to investors. A surprise devaluation in the Chinese yuan shocked markets and provoked suspicions that the world’s second largest economy was in more distress than official figures might suggest. In the U.S, GDP surprised to the upside with a growth rate of 3.7%, however mixed messages from various Fed officials caused uncertainty as to the timing of potential interest rate hikes. Crude oil was extremely volatile, initially falling below $40 before spiking 25% in 3 days after OPEC suggested that they might be willing to discuss achieving “fair prices.” Currencies were mixed with most commodity and emerging currencies continuing to struggle vs the U.S dollar. CAD weakened off to new lows on the year, while euro and yen managed to rally.

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